2019 (1) TMI 858 - HC - Income Tax

Application of stay - applicability of ALP - Held that - As decided in Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. And Others 1984 (11) TMI 63 - SUPREME COURT it is apparent that the same arises out of a matter pertaining to indirect taxation. The parameters that are required to be considered by the courts and Tribunals while granting stay and thereby staying the recovery of the revenue is set out. In the instant case it is not in dispute that the matter is otherwise and is one concerning a direct tax. Be that as it may, the criteria as set out by the Hon ble Apex Court, could also be made applicable in matters arising out of direct taxes. Hence, the Appellate Tribunal was not only required to exercise its discretion but the exercise of the discretion ought to be judicious after taking into account the relevant factors and the exercise of discretionary power on irrelevant consideration, would render the order injudicious and unsustainable as stated supra. The Appellate Tribunal has proceeded to pass the impugned order contrary to the material on record. In that view of the matter, the order is rendered a non-speaking order and stands vitiated by non application of mind. In view of the above conclusion, the writ petition is partly allowed. The order dated 02.11.2018 is set aside. The writ petition is allowed subject to the petitioner depositing a sum equal to the 40% of the demand within a period of four weeks from today.

Summary

Issues:
Challenge to order passed by Income Tax Appellate Tribunal on Stay Petition No.255/Bang/2018.

Analysis:
The petitioner contested the order of the Appellate Tribunal, arguing that the Tribunal failed to consider the materials presented and wrongly concluded that the ALP contention was limited to international transactions. The petitioner referred to specific pleadings in Annexure-B and Annexure-C, highlighting the error in the Tribunal's reasoning regarding details of AE and Non-AE transactions. Additionally, the petitioner emphasized financial hardship in the stay application, supported by an office memorandum mandating a 20% deposit for safeguard.

The respondent's counsel relied on a previous ruling emphasizing financial hardship as the sole consideration for stay petitions. Citing a Supreme Court judgment, the counsel stressed the importance of circumspection in granting interim relief against public authorities, especially in tax matters. The judgment outlined key factors for granting stays, including balance of convenience, irreparable injury, and public interest, questioning the necessity of interim relief in indirect taxation cases.

The court acknowledged the applicability of the Supreme Court's criteria for granting stays in matters of direct taxation. Criticizing the Appellate Tribunal's order as non-speaking and lacking proper application of mind, the court partially allowed the writ petition. The court set aside the order and directed the petitioner to deposit 40% of the demand within four weeks for the petition to be fully allowed. The judgment emphasized the need for judicious exercise of discretion by tribunals, warning against decisions based on irrelevant considerations.