2023 (4) TMI 747 - HC - Income Tax

Stay of demand - request for stay was rejected on the lone 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 petitione r - 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 - 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. Order As 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:
Search operation under Section 132 of the Income Tax Act, issuance of notices under Sections 153C, 143(2), and 142(1), assessment order under Section 143(3) read with Section 153, demand raised, appeal to the Appellate Authority, interim prayer under Section 220(6), impugned order negating interim prayer based on Instruction No.1914 dated 02.12.1993, challenge to the impugned order.

Analysis:
The judgment by the High Court of Madras pertains to a writ petition challenging an order made by the Assessing Officer under the Income Tax Act, 1961. The petitioner's counsel argued that the search operation led to the issuance of various notices culminating in an assessment order determining unaccounted capital drawings and unexplained interest credit, resulting in a demand of Rs.48,24,923. The petitioner appealed this order to the Appellate Authority under Section 246A of the IT Act. During the appeal process, the petitioner moved the Assessing Officer under Section 220(6) with an interim prayer, which was denied through the impugned order dated 12.12.2022.

The impugned order was solely based on the premise that the petitioner's case was not covered under Instruction No.1914 dated 02.12.1993, as modified by two office memoranda. Both parties agreed that this basis was incorrect, as evident from the content of the impugned order itself. Since there was no disagreement that the petitioner's case fell under the said instruction, the High Court intervened to set aside the impugned order.

Consequently, the High Court passed specific directives: setting aside the impugned order, remitting the petitioner's interim prayer back to the Assessing Officer for reconsideration in line with the law and the said instruction, with a deadline of three weeks. The Court clarified that it did not express any opinion on the case's merits and revived the petitioner's petition for the Assessing Officer's review within the specified timeline. The writ petition was disposed of accordingly, with no costs awarded.

In conclusion, the judgment focused on the incorrect basis of the impugned order, emphasizing the applicability of the relevant instruction to the petitioner's case and directing a fresh consideration of the interim prayer by the Assessing Officer within a stipulated timeframe.