2022 (5) TMI 55 - HC - Income Tax

Stay of demand - Pre- deposits - Challenge to order passed by DCIT u/s 220(6) rejecting the petition for stay of demand filed by the appellant /assessee for the assessment year 2018-19 and directing to pay at least 20% of the total demand within 15 days from the date of receipt of the order to consider for stay of collection of remaining demand - HELD THAT - Once the court finds the assessment order to be illegal and decides to set aside the same, there cannot be imposition of any condition; and the levy and collection of tax must be under the four corners of law. Whereas, in this case at hand, the appellant challenged the assessment order by filing an appeal before the Appellate Authority. Pending the same, they sought an order of stay, which was rejected for want of deposit of 20% of the disputed tax. Therefore, it is apparent that the assessment order passed by the respondent is neither quashed nor stayed by the Appellate Authority. Considering the grievances of the appellant, the learned Judge, while granting interim protection, has shown some indulgence by directing them to pay 20% of the demand raised, by way of installment, which in the opinion of this court, seems to be reasonable and warrants no interference. Having regard to the bona fide contentions raised on the side of the appellant that the livelihood of about 3200 families of the farmers depends on the functioning of the company and the payment of huge sum on every month would severely affect the working capital of the appellant; and the appellant has already made payment of Rs.25,00,000/- and is prepared to pay Rs.10,00,000/- per month till 20% of the disputed demand is made, this court is inclined to modify the order impugned herein to the effect that the petitioner shall pay a sum of Rs.15,00,000/- per month, instead of Rs.30,00,000/- per month till the entire amount of Rs.2,98,81,885/- is paid and the same shall be paid by the petitioner by 5th of every month, with effect from 05.03.2022 . Except the same, the order of the learned Judge remains unaltered.

Summary

Issues:
Challenge to order rejecting stay of demand under Income Tax Act, 1961 and imposition of monthly payment obligations pending appeal.

Analysis:
The appellant challenged an order rejecting the stay of demand under the Income Tax Act, 1961, and imposing monthly payment obligations pending appeal. The appellant contended that the assessment order was illegal, violating section 144B of the Act, and thus should be quashed. Despite paying a significant amount and offering to pay monthly installments, the request for stay was denied. The court noted the appellant's financial concerns, affecting the livelihood of many families dependent on the appellant's operations.

The learned Judge directed the appellant to pay Rs.30,00,000 per month until the disputed demand was settled, causing financial strain on the appellant. The court, while acknowledging the appellant's plight, modified the payment amount to Rs.15,00,000 per month to alleviate the financial burden. The court emphasized the importance of balancing the payment obligations with the appellant's financial sustainability and the livelihoods of those dependent on the appellant's activities.

The court highlighted that once an assessment order is found to be illegal, no conditions should be imposed, and tax collection must adhere to legal provisions. In this case, the assessment order was challenged through an appeal, and the stay request was rejected due to non-payment of 20% of the disputed tax. The court found the interim payment arrangement reasonable and declined to interfere with the learned Judge's decision in granting interim protection while requiring installment payments.

In conclusion, the writ appeal was disposed of with the modified payment terms, ensuring a balance between the appellant's financial obligations and the impact on the livelihoods of numerous families dependent on the appellant's operations. The court's decision aimed to provide relief to the appellant while upholding the legal framework governing tax assessments and collections under the Income Tax Act, 1961.