2019 (4) TMI 973 - HC - Income Tax

Stay of recoveries - reducing the condition of deposit 20% imposed by the department - Pr . CIT directed to deposit 20% of the disputed tax to enable the Petitioner to enjoy the stay against the recoveries - HELD THAT - We find that the Petitioner has some prima facie grounds against the order of assessment. The question would be, once the AO makes additions to the income of the Petitioner by applying formula of gross profit rate shown by the Petitioner in last few years, could the AO thereafter make further additions on individual grounds? Would such additions not to be telescoped in the gross profit rate adopted by the Assessing Officer? These are the grounds, which we are sure, the Petitioner would raise about before the Commissioner (Appeals) and the Commissioner (Appeals) would take a view in accordance with the law. Taking into account asking the Petitioner to deposit 10% of the disputed tax pending the Appeal, would serve the purpose of justice. Subject to Petitioner fulfilling such condition, further recoveries be stayed till the Appeal is disposed of by the Appellate authority. Petitioner shall deposit further amount before the Income Tax authorities latest by 15/04/2019, so as to make the total deposit with the department (inclusive of 4.5 lakhs already deposited) of 10% of the disputed tax demand.Upon the Petitioner fulfilling such condition, the further recoveries would be stayed. Petitioner stated that the Petitioner s Bank account has sufficient funds to fulfill said condition of deposit. We permit the department to withdraw such amount from the account that would meet with the above condition of deposit of 10% with intimation to the Petitioner and thereafter forthwith release both the bank accounts from the attachment.

Summary

Issues:
Challenge to orders of Assessing Officer and Principal Commissioner regarding deposit of disputed tax demand pending Appeal; Stay against further recoveries; Attachment of bank accounts; Prima facie grounds against order of assessment; Validity of deposit condition.

Analysis:
The Petitioner, a partnership firm, challenged the orders of the Assessing Officer and Principal Commissioner of Income Tax, which required the Petitioner to deposit 20% of the disputed tax demand pending an Appeal against the assessment order. The Assessing Officer had rejected the Petitioner's books of accounts due to discrepancies and made additions to the returned income. The Petitioner sought a stay on the demand during the Appeal process, but the Principal Commissioner insisted on the 20% deposit condition, leading to the attachment of two bank accounts belonging to the Petitioner.

The main contention of the Petitioner was twofold: firstly, seeking a stay against further recoveries and secondly, challenging the attachment of the bank accounts, arguing that they were overdraft accounts and should not have been attached. The Petitioner had already deposited a sum of ?4.5 lakhs and contended that the Assessing Officer had made substantial additions without sufficient evidence, questioning the validity of further additions under section 68 of the Income Tax Act.

The Court considered the arguments presented by both parties and acknowledged that the Petitioner had prima facie grounds against the order of assessment. The Court raised a pertinent question regarding the Assessing Officer's authority to make additional individual additions after applying the gross profit rate formula based on the Petitioner's business history. The Court opined that asking the Petitioner to deposit 10% of the disputed tax pending the Appeal would serve the interests of justice. Therefore, the Court directed the Petitioner to deposit the required amount with the Income Tax authorities by a specified date to stay further recoveries until the Appeal is resolved.

In conclusion, the Court disposed of the Petition with specific directions for the Petitioner to fulfill the deposit condition, allowing the department to withdraw the necessary amount from one of the Petitioner's bank accounts to meet the deposit requirement. Once the condition was met, both bank accounts were to be released from attachment, ensuring compliance with the deposit condition while providing relief to the Petitioner during the Appeal process.