2020 (6) TMI 269 - HC - Income Tax

Stay of demand - mandating the appellate authorities to ask for deposit 20% of the amount for the purpose of entertaining the adjudication of the appeal - HELD THAT - In Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax 2019 (3) TMI 1580 - KERALA HIGH COURT wherein for considering the appeal the demand of 20% as a condition precedent has been negated. Argument of the petitioner is in consonance with findings rendered in the judgment referred to above and reiterated by the Division Bench. AO or the appellate authority while exercising the power of appeal or stay of the assessment proceedings under section 226 of the Income Act 1961 are enjoined obligation to give regard and respect to the directions of the Hon'ble High Court. It would not be necessary that the payment of 20% can be dispensed with only if there is an order of the high court. The judgment of the Full Bench followed by the Division Bench has an enuring effect on all the authorities. There will be a direction to the 1st respondent to decide the appeal on merits within a period of six months, without asking for 20% of the demanded amount, after affording an opportunity of hearing to the petitioner and the revenue and pass a reasonable and speaking order.

Summary

Issues:
1. Failure to consider appeal and stay petition by the respondents.
2. Applicability of the demand of 20% for considering the appeal under Section 144 of the Income Tax Act.
3. Interpretation of the judgment of the Full Bench and Division Bench regarding the payment of 20% as a condition precedent for appeal.

The judgment addresses the case of a primary Co-operative Agricultural Credit Society, the petitioner, which received a notice under Section 156 of the Income Tax Act for the assessment year 2017-18 from the 2nd respondent. The petitioner, aggrieved by the assessment order, filed an appeal and stay application before the 1st respondent. However, the respondents did not consider these submissions, leading the petitioner to approach the High Court through a writ petition to prevent coercive action. The petitioner relied on a Division Bench judgment that negated the demand of 20% for appeal consideration based on a Full Bench decision in a related case.

The Court issues a notice before admission, and the representative of the income tax authorities accepts the notice, asserting that the demand of 20% aligns with Section 144 of the Income Tax Act and a Circular mandating the deposit for appeal adjudication. After hearing both parties and reviewing the case, the Court concurs with the petitioner's argument, emphasizing that the assessing officer or appellate authority must adhere to the High Court's directions when exercising appeal or stay powers under Section 226 of the Income Tax Act. The Court clarifies that the payment of 20% can be waived without a specific High Court order, as the Full Bench and Division Bench judgments have a lasting impact on all authorities.

The Court directs the 1st respondent to decide the appeal on merits within six months without requiring 20% of the demanded amount, following a proper hearing for both the petitioner and the revenue. The order should be reasonable and comprehensive. Consequently, the writ petition is disposed of, providing clarity on the application of the Full Bench and Division Bench judgments regarding the payment condition for appeal consideration under the Income Tax Act.