2014 (7) TMI 802 - AT - Income Tax

Stay application Addition u/s 68 Held that - The merits of the various additions shall be appropriately examined only during the course of hearing of the appeal yet in so far as it is necessary to evaluate a prima facie case for the purposes of adjudicating the petition - the assessee company is facing financial difficulties as its net worth is eroded, having been referred to the BIFR - the assessed income is substantially in variance with income returned by the assessee - assessee returned a loss in its return of income whereas the assessment has been made at a positive figure which represents addition made u/s 68 of the Act and against such income the business loss carried forward has also not been allowed to be set-off - the balance outstanding demand deserves to be stayed Say granted.

Summary

Issues:
Stay on recovery of outstanding demand arising from assessment made by the Assessing Officer u/s 143(3) r.w.s. 144C(1) of the Income Tax Act, 1961 for assessment year 2009-10.

Analysis:
The assessee sought a stay on the recovery of an outstanding demand of Rs. 7,19,43,460 resulting from an assessment by the Assessing Officer. The total demand included various additions made by the AO, such as transfer pricing adjustment, disallowance of legal and professional fees, and addition on account of unverified sundry creditors under section 68 of the Act. The assessee had already deposited Rs. 2,50,00,000, leaving a balance outstanding of Rs. 4,69,43,460. The counsel argued that the additions were unjustified, emphasizing that the provisions created for specific expenses liabilities did not fall under section 68. The counsel cited relevant judgments to support the argument, contending that even if section 68 applied, the set-off of business loss carried forward should have been allowed. The counsel also challenged other additions made, asserting a strong prima facie case for success in the Tribunal.

The counsel highlighted the financial difficulties faced by the assessee, being a sick company referred to the BIFR. The assessed income significantly differed from the income returned, with the assessment showing a positive figure due to additions made under section 68, while the business loss carried forward was not allowed to be set-off. Considering these circumstances, the Tribunal found merit in the assessee's case and granted a stay on the outstanding demand of Rs. 7,19,43,460. The Revenue was directed not to take coercive measures for recovery until the appeal was disposed of or six months from the order date, whichever was earlier. The appeal of the assessee was scheduled for an out-of-turn hearing on 10th November, 2014, before the regular Bench. The Stay Application was disposed of accordingly on 10th July, 2014.