2015 (1) TMI 92 - AT - Income Tax

Collection of tax during remand proceedings ignoring the order of Tribunal - Transfer Pricing adjustments - Determination of arm s length price - Despite a specific direction by the Bench the AO decided to adopt an innovative method of collecting the revenue by utter disregard of the Tribunal order and obtained a consent letter from the assessee and collected a sum of ₹ 16.64 crores during the subsistence of the said order - Held that - AO has followed an innovative method of collecting taxes despite specific directions of the Bench. Therefore we had called the AO who had collected the revenue by flouting the directions of the Bench. Shri Vishal Makawane, DDIT (Inv), Unit-VII(1), Mumbai appeared before us and tendered an unconditional apology for his conduct and submitted that it was collected with the consent given by the appellant vide letter dated 23.04.2014. The hapless Representative of the assessee had no other alternative but to admit that he has given the consent letter. It deserves to be clarified that neither the assessee nor the Revenue has the right to flout the decision of the Tribunal and being an officer functioning under the Government of India it is his obligation to follow the directions of the superior authority and even if there is consent he should not have collected the amount. We have recently come across in few other cases where similar consent letters were obtained or the Department has collected tax despite the stay order passed by the ITAT 2014 (3) TMI 254 - ITAT MUMBAI . We deplore this practice and direct the Chief Commissioner of Income Tax to issue a letter to all the concerned Assessing Officers not to adopt this kind of approach of obtaining consent letters and to respect the order passed by the Tribunal as otherwise the Tribunal would be constrained to view the conduct of the Department adversely. Collection of outstanding demand for a further period of six months is stayed - AO is directed to refund the amount collected along with interest contrary to the order passed by the ITAT within 15 days - Decided in favour of assesse.

Summary

Issues:
Stay of collection of outstanding demand under section 92C of the Act, Flouting of Tribunal directions by AO, Refund of collected amount contrary to Tribunal order.

Analysis:
The assessee sought a stay of collection of outstanding demand of Rs. 43,24,08,871 arising from Transfer Pricing adjustments under section 92C. The AO determined the income at Rs. 353.30 crores and raised an additional demand of Rs. 116.27 crores. The Tribunal noted that most issues were decided in favor of the assessee in previous years, justifying the stay except for an adjustment of Rs. 7.50 crores to be carried out by the AO. Despite specific directions, the AO collected Rs. 16.64 crores, reducing the outstanding amount. The AO's conduct was brought to light, and an apology was tendered for flouting Tribunal directions. The Tribunal emphasized that neither party has the right to disregard its decisions. The Tribunal deplored the practice of obtaining consent letters for collection and directed the Chief Commissioner to ensure compliance with Tribunal orders.

The Tribunal granted a further six-month stay of collection and directed the AO to refund the amount collected contrary to the Tribunal order in a specific case. The AO was instructed to refund the amount with interest within 15 days and provide proof of refund to the Bench. The Stay Application filed by the assessee was allowed, emphasizing the importance of adhering to Tribunal decisions and proper conduct by tax authorities. The order was pronounced on 31st October, 2014, concluding the judgment.