2018 (4) TMI 457 - HC - Income Tax

Stay the recovery of demand - second respondent confirming the order of the respondent No.1 demanding 50% of the demand amount for grant of stay - garnishee notice u/s 226(3) directing the bank to make the payment towards the demand of tax from the account of the petitioner - Held that - The order of the second respondent dated 14.02.2018 is a non-speaking order which cannot be sustained. Referring to the same, respondent No.3 has passed an order on 22.03.2018 that the request of the stay of demand cannot be considered in view of the decision taken by the second respondent which culminated in the issuance of garnishee notice dated 23.03.2018 at Annexure-Y in defiance with the order of this Court in not providing one week time before initiating coercive recovery action. Respondent No.3 referring to the same, failed to exercise the statutory powers vested with him. Statutory Appellate Authority ought to have adjudicated upon the Application for stay filed by the petitioner. The basis for declining to entertain the stay application is the order of the second respondent dated 14.02.2018 which goes to the root of the matter. Had the second respondent considered the request of the petitioner in accordance with law and passed the speaking order, it would have been appreciated. However, it is well settled principle that any order passed without assigning reasons is a nullity and not valid in the eye of law. Hence, the order of the second respondent is not in conformity with the well settled principles of law.

Summary

Issues:
Challenge to communication declining to adjudicate upon application for stay of recovery of balance demand, notice directing bank to pay amount, validity of orders passed by respondents, consideration of stay application, sufficiency of reasons in orders.

Analysis:

The petitioner challenged a communication declining to adjudicate upon the application for stay of recovery of a balance demand and a notice directing the petitioner's bank to pay a substantial amount from the petitioner's account. The petitioner, a company providing Managing Consultancy Services, faced scrutiny assessment for the financial year 2014-15, resulting in a significant addition to the total income due to unexplained funds. Despite filing an appeal and a stay application, the first respondent directed payment of 50% of the demand, which the petitioner partially complied with. The second respondent confirmed this order without providing reasons, leading to a subsequent order by the third respondent declining to entertain the stay application based on the second respondent's decision.

The High Court analyzed the situation in light of Circular No.1914 issued by the CBDT and previous judgments. It emphasized the importance of examining whether the assessment was unreasonably high-pitched or if genuine hardship would be caused to the assessee before directing payment of a specific amount. The Court found that the orders lacked sufficient reasoning, rendering them unsustainable. The second respondent's non-speaking order confirming the demand payment requirement was deemed invalid, leading to the third respondent's flawed decision not to consider the stay application.

Consequently, the Court allowed the writ petition, quashed the relevant orders, and remitted the matter to the second respondent for a reconsideration of the stay application. The Court directed the second respondent to provide a speaking order after hearing the petitioner and emphasized the need for expeditious resolution. The petitioner was instructed to appear before the second respondent without further notice, ensuring a fair opportunity for the petitioner to present their case and obtain a lawful decision promptly.