2020 (8) TMI 729 - HC - Income Tax

Stay of demand - Recovery of outstanding tax demands - Demanded to remit 20% of the disputed taxes - HELD THAT - A perusal of the impugned orders would show that the orders are nonspeaking and merely call upon the petitioners to remit 20% of the disputed taxes without reference to the tri-fold aspects of prima facie case, financial stringency and balance of convenience. Evidently, the matter needs more application of mind than what is seen above. In the aforesaid circumstances, the impugned orders are set aside. Orders shall be passed afresh by the 2nd respondent after hearing the petitioners either virtually or by way of a physical hearing as may be mutually convenient to the parties within a period of six (6) weeks from date of uploading of this order. Till such time, recovery proceedings are kept in abeyance.

Issues Involved:
1. Challenge to the orders passed by the Assessing Officer and Principal Commissioner of Income Tax rejecting applications for stay of demand.
2. Examination of whether the impugned orders were non-speaking and lacked consideration of essential factors.
3. Adherence to CBDT Circulars and Instructions in the adjudication of stay petitions.
4. Requirement for a speaking order by the assessing authorities.

Issue-wise Detailed Analysis:

1. Challenge to the Orders Passed by the Assessing Officer and Principal Commissioner of Income Tax:
The petitioners challenged the orders issued by the Assessing Officer and the Principal Commissioner of Income Tax, which rejected their applications for a stay of demand arising from disputed orders of assessment under the Income Tax Act, 1961.

2. Examination of Whether the Impugned Orders Were Non-Speaking and Lacked Consideration of Essential Factors:
The court found that the impugned orders were non-speaking and failed to reference the tri-fold aspects of a prima facie case, financial stringency, and balance of convenience. The orders merely directed the petitioners to remit 20% of the disputed taxes without proper consideration of these factors. The court emphasized that the parameters for granting a stay of disputed demand are well-settled, including the existence of a prima facie case, financial stringency, and balance of convenience, which encompass irreparable injury and undue hardship.

3. Adherence to CBDT Circulars and Instructions in the Adjudication of Stay Petitions:
The court referred to various CBDT Circulars and Instructions, including Office Memorandum F.No.1/6/69/ITCC dated 21.08.1969, Instruction No.1914 dated 21.03.1996, and subsequent modifications by Office Memoranda dated 29.02.2016 and 31.07.2017. These guidelines outline the procedure for the recovery of outstanding tax demands and the conditions under which a stay may be granted. The court noted that these Circulars and Instructions are intended to assist assessing authorities in granting stays and cannot override the basic tenets of considering a prima facie case, financial stringency, and balance of convenience.

4. Requirement for a Speaking Order by the Assessing Authorities:
The court emphasized the necessity for assessing officers to pass speaking orders when disposing of stay petitions. The orders should reflect consideration of the relevant factors and guidelines issued by the CBDT. The court criticized the cursory manner in which the stay applications were disposed of in the present case, highlighting the need for a more thorough application of mind.

Conclusion:
The court set aside the impugned orders and directed the Assessing Officer to pass fresh orders on the stay applications filed by the petitioners, considering the discussion and guidelines provided. The court instructed that this should be done within four weeks from the date of receipt of the order, ensuring that recovery proceedings are kept in abeyance until then. The court consciously refrained from commenting on the merits of the assessment itself. The writ petitions were disposed of with no costs, and connected miscellaneous petitions were closed.

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