2021 (10) TMI 246 - HC - Income Tax

Validity of Notice of demand while stay order is in operation - willful breach of the interim order granted - contempt petition - interim stay is still in operation and in the meanwhile ACIT a issued notice of demand u/s 156 calling upon the petitioner to pay a sum of ₹ 1,33,57,360/- - HELD THAT - The interim order passed by this Court is in respect of the assessment years 2013-14, 2014-15 and 2015-16. The rectification petitions are in respect of the assessment years 2016-17 and 2017-18. There is contest between the petitioner and the assessing authority as regards the applicability of a particular provision. When the issue is yet to be decided, the authority can very well take a stand in the meanwhile. Grant of interim order of stay will not amount to handing out a final decision on the particular issue. This Court had taken only a prima facie view and passed an interim order of stay. That will not tie the hands of the authority in reiterating their stand in the rectification proceedings. Even while granting 100% deduction under Section 80-1B (11C) of the Act, the appellate authority had given a finding that the petitioner had accepted an undisclosed income at the time of search. He had also offered to pay tax for the same. The penalty to the tune of 10% on the said undisclosed income is also worked out under clause (a) of sub-section (1) of Section 271AAB. The issuance of notice of demand on 23.03.2020 has nothing to do with the interim order granted by this Court. There is no violation of the order passed by this Court, let alone willful violation. The contemnor is discharged.

Summary

Issues involved:
Violation of interim order by issuance of notice of demand before vacating stay petition, Contempt of court for filing appeal without disclosing pendency of writ petition, Dismissal of rectification petition as contempt, Justification of notice of demand by assessing authority.

Violation of interim order by issuance of notice of demand before vacating stay petition:
The petitioner challenged an income tax order for the assessment year 2015-16 and obtained an interim stay from the High Court. Subsequently, the assessing authority issued a notice of demand under Section 156 of the Income Tax Act, calling for payment of a substantial sum. The petitioner contended that this notice was a willful breach of the interim order. The Senior Counsel argued that the notice was issued before filing an application to vacate the stay order, and the subsequent appeal filed by the contemnor was contumacious. The Court noted that the vacate stay petition was filed after the contempt petition, allowing for the contempt matter to proceed. However, the Court found that the statutory right to appeal cannot be stifled by contempt threats, and filing an appeal did not violate the interim order.

Contempt of court for filing appeal without disclosing pendency of writ petition:
The petitioner alleged that the assessing authority filed an appeal before the Income Tax Appellate Tribunal without disclosing the pendency of the writ petition challenging the original order. The Senior Counsel argued that this act was contumacious and violated the interim stay granted by the High Court. The Court disagreed, stating that filing a statutory appeal does not constitute contempt of the High Court's order. The Court emphasized that the assessing authority has the right to appeal, and the petitioner can present arguments before the Tribunal without violating the interim order.

Dismissal of rectification petition as contempt:
The petitioner's rectification petition was summarily dismissed by the assessing authority, citing the applicability of a particular statutory provision. The Senior Counsel contended that this dismissal amounted to contempt as it contradicted the High Court's interim stay order. The Court clarified that the rectification petitions were for different assessment years not covered by the writ petition. The Court held that the assessing authority's stand on the statutory provision's applicability did not violate the interim order, as the issue was still pending before the Court.

Justification of notice of demand by assessing authority:
The assessing authority justified the issuance of the notice of demand by explaining the basis for the penalty imposed on the petitioner. The authority highlighted the findings of the appellate authority regarding undisclosed income and tax liabilities. The Court reviewed the justifications provided and concluded that the notice of demand was issued based on valid grounds and did not violate the High Court's interim order. The Court discharged the contemnor and allowed the petitioner to challenge the notice of demand through legal means.