2023 (10) TMI 568 - HC - Income Tax

Stay of demand - order of payment of 20 percent out of the total outstanding demand - Immediately after the demand was raised against the petitioner, an application requesting for rectification was sent to the AO by e-mail u/s 154 - petitioner has been availing the exemption of payment of Income Tax on account of the fact that the petitioner is a charitable institution and the works executed by it again is with a charitable purpose - HED THAT - Since the petitioner availed the said benefits all along prior to the issuance of demand notice and even in the subsequent years as well, there does not seem to be any prejudice going to be caused if the stay application u/s 220(6) is decided in favour of the petitioner. Yet another fact which is more important to be appreciated is that though the appeal was filed as early as on 17.04.2021 and the rectification application also was filed on 20.03.2021, and both the rectification application and the appeal by now are still pending consideration or is undecided for more than 2 years. Under these circumstances, we are of the considered opinion that given the aforesaid factual matrix and also considering the status of the petitioner which is a charitable establishment with a charitable object and purpose, the Assessing Authority should have allowed the application under Section 220(6) of the Act.

Summary

Issues involved:
The judgment involves assessing the legality of an order passed by the Commissioner of Income Tax (Exemption) regarding a stay application during an appeal challenging an assessment order for the assessment year 2018-19.

Details:
The petitioner, an educational and charitable society registered under Section 12A of the Income Tax Act, had its return scrutinized, resulting in a tax liability of Rs.2,50,00,000. The petitioner moved an application under Section 220(6) seeking stay of the demand notice pending appeal, which was partially allowed, requiring a deposit of Rs.35,00,000. The petitioner had also filed applications for rectification, which remained pending for over 2 ½ years.

The High Court considered the petitioner's charitable status and the fact that it had been availing tax exemptions due to its charitable activities. The Court referred to a circular clarifying charitable purposes under the Act and noted that the petitioner's works were executed with a charitable intent. The Court emphasized the delay in deciding the rectification application and the appeal, both pending for more than 2 ½ years.

The Court highlighted the importance of considering whether a strong prima facie case for stay of demand had been made, as well as the undue hardship that a deposit requirement might cause. It expressed disapproval of the Revenue's dismissal of a binding decision on a stay for the previous year. Ultimately, the Court set aside the impugned order and ordered a stay of the entire demand until the appeal was disposed of, considering the petitioner's charitable nature and the prolonged pendency of the rectification application and appeal.

In conclusion, the Court allowed the Writ Petition, quashed the impugned order, and ordered a stay of the recovery of the demand until the appeal was resolved, with no costs imposed. Any pending miscellaneous petitions were to be closed as a result of the judgment.