2021 (1) TMI 688 - HC - Income Tax

Stay of demand - Recovery proceedings - HELD THAT - Tribunal has substantially scaled down the condition imposed by respondent No. 2 by reducing the figure of ₹ 100 crores to ₹ 20 crores i.e. ₹ 5 crores for each assessment year to be paid in two installments, subject to which recovery of the balance outstanding demand would remain stayed. On perusal of the said order, it cannot be said that Tribunal did not consider or did not follow the guidelines laid down by this Court while passing the impugned order. Mr. Raichandani may be right in saying that petitioner being a government undertaking, revenue's demand is secured but we are also conscious of the fact that merely because the assessee is a government undertaking, it cannot be treated on a different footing or as a separate category of assessee. Mere fact that it is in a position to safeguard the interest of revenue cannot be a ground to stay the demand. Tribunal has exercised its discretion while passing the order dated 10.06.2020 whereunder reasons have been given as to why petitioner should pay a further amount of ₹ 20 crores against the outstanding demand of ₹ 269,96,26,079.00. The discretion exercised by the Tribunal does not suffer from any infirmity to justify interference by this Court under Articles 226 and 227 of the Constitution of India. Therefore, in the facts and circumstances of the case, we are not inclined to invoke our writ jurisdiction. While declining to interfere in the matter, we are however of the view that Tribunal should expedite hearing of the appeals of the petitioner including the one pertaining to cancellation of registration under section 12AA of the Act. If the petitioner files application for early hearing, the same shall be duly considered by the Tribunal so that the appeals can be decided expeditiously.

Issues Involved:
1. Quashing of the Income Tax Appellate Tribunal's order dated 10.06.2020.
2. Direction to the respondents to maintain status quo on tax recovery for assessment years 2011-12, 2012-13, 2013-14, and 2014-15.
3. Legitimacy of denial of exemption under Section 11 of the Income Tax Act, 1961.
4. Validity of the cancellation of registration under Section 12AA of the Income Tax Act.
5. Conditions imposed for stay of recovery of tax demand.

Issue-Wise Detailed Analysis:

1. Quashing of the Income Tax Appellate Tribunal's Order:
The petitioner sought to quash the Tribunal's order dated 10.06.2020, which directed the petitioner to deposit an amount of ?20 crores in two installments for the assessment years under consideration. The Tribunal had scaled down the figure from ?100 crores, as initially directed by respondent No. 2, to ?20 crores. The High Court found that the Tribunal had exercised its discretion appropriately and provided valid reasons for its decision. Therefore, the Court did not find any infirmity in the Tribunal's order to justify interference under Articles 226 and 227 of the Constitution of India.

2. Direction to Maintain Status Quo on Tax Recovery:
The petitioner requested a direction to the respondents to maintain status quo on the recovery of tax, interest, and penalty for the assessment years 2011-12, 2012-13, 2013-14, and 2014-15. The High Court noted that the petitioner had already paid ?116,09,20,000 against the total demand of ?386,05,46,079. The Court observed that the Tribunal's order was lenient and favorable to the petitioner, and the demand for an additional ?20 crores was reasonable. Therefore, the Court declined to interfere with the Tribunal's decision and dismissed the writ petition.

3. Legitimacy of Denial of Exemption Under Section 11:
The petitioner claimed exemption under Section 11 of the Income Tax Act for the assessment years under consideration. However, the exemption was denied on the grounds that the petitioner was not a valid trust and not entitled to the benefits under Section 11. The registration under Section 12AA was canceled, effective from 01.04.2002. The High Court noted that the appeal against the cancellation of registration was pending before the Tribunal. The Court did not delve into the merits of the exemption claim but focused on the procedural aspects of the stay of demand.

4. Validity of Cancellation of Registration Under Section 12AA:
The petitioner's registration under Section 12AA was canceled by the Director of Income Tax (Exemption) Mumbai on 27.03.2015, effective from 01.04.2002. The petitioner had appealed against this cancellation, and the appeal was pending before the Tribunal. The High Court acknowledged the pending appeal and emphasized the need for expeditious disposal of the appeal by the Tribunal. The Court directed the Tribunal to consider any application for early hearing filed by the petitioner.

5. Conditions Imposed for Stay of Recovery of Tax Demand:
The petitioner contested the conditions imposed by respondent No. 2 and the Tribunal for the stay of recovery of the tax demand. Initially, respondent No. 2 directed the petitioner to pay ?100 crores in three installments, which was later reduced by the Tribunal to ?20 crores payable in two installments. The High Court found that the Tribunal had considered all relevant factors, including the petitioner's status as a government undertaking, and had exercised its discretion appropriately. The Court held that the Tribunal's order did not suffer from any infirmity and declined to interfere with it.

Conclusion:
The High Court dismissed the writ petition, upholding the Tribunal's order directing the petitioner to deposit ?20 crores for the stay of recovery of the tax demand. The Court emphasized the need for expeditious disposal of the petitioner's appeals pending before the Tribunal, including the appeal against the cancellation of registration under Section 12AA. The Court found no grounds to interfere with the Tribunal's decision and directed all concerned parties to act on the digitally signed copy of the order.

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