2018 (11) TMI 1180 - HC - Income Tax

Stay petition - pre-deposit - petitioner to pay 15% of the demand as a pre-condition to having further proceedings stayed - CBI registered crimes on the Company s complaint and those crimes are in progress - Held that - As I see, a citizen has complained about a crime the crime of graft. An organisation like CBI has registered a crime after laying the trap. Perhaps accidentally, though, the company that complained has been in the departmental crosshairs ever since. As the learned Senior Counsel has put it, the conditional stay in an appeal is only an interim arrangement. The repeated assessments and the preconditions may have left the Company with the feeling of victimization. Its Directors have opened their mouth against the graft or alleged graft in the Department. Normally, it pays to complain. Here, the complainant is, it seems, made to pay. So the Department could have taken a lenient view to inspire confidence in the Company that it need not end up as a victim only because it has pointed out a flaw in the system, as it were. Therefore, first, I place on record that the pre-condition of the assessee s depositing 15% demanded tax can neither be termed perverse nor illegal. Yet, I also hold it is a peculiar case that deserves an exception. Thus set aside the Exts.P8, P14 and P13 to the extent of their requiring the Company to deposit 15% as a precondition. Instead, the amount stands reduced to 5% per each assessment year. Once the Company pays 5% of the demanded tax, the appellate authority will hear the appeals on merits.

Summary

Issues:
- High pitched assessment proceedings and conditional order to pay 15% of the demand before further proceedings stayed.
- Allegations of illegal gratification, CBI complaints, and subsequent scrutiny against the company.
- Dispute over the legality and necessity of the pre-condition imposed by the appellate authority.
- Argument regarding victimization of the company and lack of impartiality in the assessment process.
- Jurisdiction of the appellate authority to impose pre-conditions and the reasonableness of the 15% deposit requirement.
- Legal principle of non-interference with judicial discretion unless suffering from perversity or gross illegality.
- Exceptional circumstances warranting a reduction in the pre-deposit amount due to perceived victimization.

Analysis:
The petitioner, a company trading in Granite, challenged high pitched assessment proceedings for the years 2011-2012, 2013-2014, and 2014-2015, where the appellate authority imposed a pre-condition of paying 15% of the demand before further proceedings. The petitioner argued that the scrutiny and assessments were influenced by a complaint to the CBI regarding demands for illegal gratification by Income Tax officials. The company claimed victimization and sought relief from the pre-condition, emphasizing the need to encourage reporting of graft in public life.

The Standing Counsel for the Income Tax Department countered, stating that the scrutiny was not linked to the CBI complaints and was a routine random selection process. He defended the pre-condition as reasonable, citing departmental circulars allowing up to 20% pre-deposit. The judge acknowledged the legality of the 15% pre-deposit but noted the peculiar circumstances surrounding the case, including the perception of victimization and repeated assessments post the CBI complaints.

The judge highlighted the need for judicial discretion without interference unless there is perversity or gross illegality. Acknowledging the exceptional nature of the case, the judge set aside the previous orders requiring a 15% deposit and reduced it to 5% per assessment year. This reduction aimed to address the company's concerns of victimization and restore confidence in the assessment process. The appellate authority was directed to proceed with hearing the appeals on merits after the reduced pre-deposit was made, without any coercive actions until adjudication completion.