2015 (12) TMI 116 - HC - Income Tax

Stay application - recovery proceedings - Held that - It is true that while considering an application for stay, it is neither expedient nor appropriate for the Court to initiate a detailed enquiry to find out whether the stand of the assessee is on solid ground, because expression of a final opinion on the merits at that stage, without examining the entire material and affording full opportunity of hearing, is likely to cause prejudice to either side. But, at the same time, the Court is required to consider whether, on the basis of the material placed before it, a prima facie case for grant of stay is made out or not. Similarly, the Court has to consider whether on the basis of the pleadings and the material placed before it, undue hardship is likely to be caused to the assessee in case the stay is declined or when a conditional stay is granted, the conditions imposed are so burdensome that the assessee is unable to comply with the same and, thus, rendering the right of appeal non-existent. Needless to point out that the power of stay by the Court is not likely to be exercised in a routine manner or as a matter of course in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the court will consider whether to stay the recovery proceedings and on what conditions and the stay will be granted in most deserving and appropriate cases where the court is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal. In the present case, applying the aforesaid guiding principles and keeping in view the totality of facts and circumstances of the case as noticed herein before, once the petitioner has already been granted opportunity to pay the outstanding demand in four installments as noted above and no prejudice has been demonstrated to be caused to the assessee on that account, there appears to be no error in the impugned order passed by respondent No.2. Further, learned counsel for the petitioner has also not been able to show that the order is unjustified. Consequently, finding no merit in the petition, the same is hereby dismissed.

Summary

Issues:
1. Quashing of order by Commissioner of Income Tax (Appeals) and recovery proceedings for assessment year 2008-09.
2. Stay application and disposal of appeal expeditiously.
3. Adjustment of Arm's Length price in international transactions.
4. Stay application for outstanding demand.
5. Rectification application under section 154 of the Act.
6. Stay against coercive steps by respondent No.1.

Analysis:
1. The petitioner sought to quash the order by the Commissioner of Income Tax (Appeals) and recovery proceedings for the assessment year 2008-09. The petitioner, a company engaged in manufacturing and sale of confectionary products, filed its return of income, which led to scrutiny by the Assessing Officer regarding international transactions. The Transfer Pricing Officer (TPO) determined the Arm's Length price, resulting in a demand raised by respondent No.1. Various appeals and applications were filed, leading to the Tribunal's decision to remand the matter back to the TPO. The High Court directed the petitioner to pay the outstanding demand partially, leading to subsequent disputes and rectification applications.

2. The petitioner filed a stay application for the outstanding demand, which was partially granted by the Tribunal. However, subsequent developments, including decisions by the Special Bench and Delhi High Court, led to revised assessment orders and rectification applications. The High Court directed the petitioner to file an appeal and application for interim relief before respondent No.2. The petitioner's rectification application was partially allowed, leading to a revised demand amount and subsequent rejection of the stay application by respondent No.2.

3. The issue of adjustment of Arm's Length price in international transactions, specifically regarding advertisement and marketing expenses, was a crucial aspect of the case. The TPO proposed adjustments, objections were filed, and subsequent orders led to revised demands. The Tribunal's directions and decisions by the High Court influenced the assessment orders and rectification applications, ultimately impacting the outstanding demand and stay applications.

4. The High Court emphasized the principles guiding the consideration of stay applications, highlighting the need for a prima facie case for grant of stay and avoidance of undue hardship to the assessee. The Court noted the specific circumstances of the case, including the opportunity already provided to the petitioner to pay the outstanding demand in installments. The Court concluded that no error was found in the impugned order by respondent No.2, leading to the dismissal of the petition.

5. The detailed analysis of the case highlighted the complex nature of the issues involved, including legal interpretations, procedural aspects, and the application of taxation and revenue laws. The Court's decision to dismiss the petition was based on a thorough examination of the facts and circumstances, ensuring a just and reasonable outcome in the context of the petitioner's claims and the respondent's actions.