2023 (2) TMI 30 - HC - Income Tax

Stay of demand - order Proceeded on the lone erroneous basis that Instruction No.1914 dated 02.12.1993 as modified by two office memoranda dated 29.02.2016 and 31.07.2017 does not apply to the writ petitioner - AO had come to the conclusion that there is unaccounted capital drawings and unexplained interest credit both under Section 56 - this Court is informed that the appeal is under Section 246A of IT Act; that pending appeal, writ petitioner moved the first respondent (Assessing Officer) under Section 220(6) of IT Act with an interim prayer - HELD THAT - The impugned order has been made on one basis and that lone basis is that the writ petitioner's case is not covered under 'Instruction No.1914 dated 02.12.1993 as modified by two Office Memoranda dated 29.02.2016 and 31.07.2017' hereinafter collectively 'said instruction' for the sake of convenience and clarity . There is no disputation or disagreement as between the petitioner's counsel and the learned Revenue counsel that this is incorrect. This is evident and obvious from the first and second sentences in the first paragraph of impugned order. The first sentence says that stay of demand is governed by said instruction and second sentence says that writ petitioner is not covered by said instruction. As there is no disputation or disagreement that the writ petitioner's case i.e., writ petitioner's plea that interim order is covered by said instruction read with Section 220(6) of IT Act and as the only ground on which the prayer has been negatived is that the writ petitioner is not covered by said instruction, this Court deems it appropriate to interfere qua the impugned order. Following order is passed a) the impugned order i.e., order dated 12.12.2022 bearing reference ITBA/COM/F/17/2022-23/1047945987(1) made by the first respondent is set aside. The impugned order is set aside on the sole ground that it has proceeded on the lone erroneous basis that said instruction (Instruction No.1914 dated 02.12.1993 as modified by two office memoranda dated 29.02.2016 and 31.07.2017) does not apply to the writ petitioner; b) The petition of the writ petitioner seeking interim order is remitted back to the first respondent for consideration on its own merits and in accordance with law inter alia by applying said instruction; c) The above exercise shall be completed by the first respondent as expeditiously as his business would permit and in any event, within three weeks from today i.e., on or before 12.01.2023; d) Though obvious it is made clear that the writ petitioner's petition styled 'petition to keep the demand of tax in abeyance' before the first respondent now gets revived and the same will stand over for consideration by the first respondent as per the aforementioned directive within aforementioned time line.

Summary

Issues Involved:
Interpretation of Instruction No.1914 dated 02.12.1993 as modified by two Office Memoranda dated 29.02.2016 and 31.07.2017 in the context of a writ petition challenging an order under the Income Tax Act, 1961.

Analysis:

Issue 1: Interpretation of Instruction No.1914 and its applicability to the writ petitioner
The writ petitioner challenged an order under the Income Tax Act, claiming that their case should be covered under Instruction No.1914 dated 02.12.1993 as modified by two Office Memoranda dated 29.02.2016 and 31.07.2017. The impugned order negated this claim solely on the basis that the petitioner was not covered by said instruction. Both parties agreed that this basis was incorrect, as evident from the content of the impugned order. The court found that there was no dispute regarding the applicability of said instruction to the petitioner's case and decided to interfere with the impugned order based on this agreement.

Issue 2: Court's Decision and Directions
The court set aside the impugned order dated 12.12.2022, emphasizing that it was based on an erroneous understanding of the applicability of Instruction No.1914. The petition seeking an interim order was remitted back to the first respondent for reevaluation in light of said instruction and in accordance with the law. The first respondent was directed to complete this reevaluation within three weeks. The court clarified that it had not expressed any opinion on the merits of the case and that its directives were solely for the purpose of the current order. The writ petition was disposed of with the specified directives, and the associated Writ Miscellaneous Petition was closed without any order as to costs.

This comprehensive analysis highlights the court's interpretation of Instruction No.1914 and its decisive impact on the writ petitioner's challenge against the order under the Income Tax Act, ultimately leading to the court's specific directives and the disposal of the writ petition.