2023 (2) TMI 88 - HC - Income Tax

Stay of Demand of tax raised u/s 143(3)/144B - HELD THAT - Since it is apparent that the demand raised is untenable, we find that the present petition is a fit case for staying the impugned demand in its entirety. We also consider it apposite to direct the Appellate Authority (through National Faceless Appeal Centre) to consider the petitioner s appeal and dispose of the same as expeditiously as possible, and in any event, within a period of four weeks from today.

Summary

Issues:
1. Stay of demand raised pursuant to an assessment order under the Income Tax Act, 1961 for the assessment year 2017-18.

Analysis:
The petitioner filed a petition seeking a stay on the demand of tax raised following an assessment order dated 30.09.2021 under Section 143(3)/144B of the Income Tax Act, 1961 for the assessment year 2017-18. The petitioner contended that the assessment order was erroneous and untenable in law. The High Court found merit in the petitioner's contention and issued a notice to the respondents. The petitioner had appealed the assessment order before the National Faceless Appeal Center and sought a stay on the demand of Rs. 54.78 crores until the appeal's disposal. The Jurisdictional Commissioner had ordered the petitioner to pay 20% of the outstanding demand for a stay, which the petitioner found unjust as the assessment order was allegedly erroneous.

The High Court examined the assessment order and the petitioner's submissions. The petitioner, engaged in running a training school, issued share capital against the acquisition of leasehold rights of a property valued at Rs. 46,07,78,600. The Assessing Officer raised a demand by treating this share capital as unexplained income under Section 68 of the Income Tax Act, stating that the valuation report submitted by the petitioner was insufficient and did not fulfill the criteria of merits. The Assessing Officer initiated penalty proceedings under Section 271AAC of the IT Act. The High Court noted that there were no unexplained cash credits and questioned the application of Section 68 to the transaction. The court found the assessment order to be without proper application of mind and stayed the impugned demand until the next hearing.

The respondent's counsel acknowledged the erroneous nature of the demand and suggested that the petitioner might be liable for tax on the difference in fair value of the property and the stated consideration. However, since the petitioner had appealed, the Appellate Authority was deemed appropriate to examine the challenge. The High Court, considering the demand as untenable, stayed the demand entirely and directed the Appellate Authority to expedite the appeal process within four weeks. The petition was disposed of accordingly, granting relief to the petitioner and ensuring a prompt resolution of the appeal through the National Faceless Appeal Centre.