2025 (1) TMI 966 - AT - Income Tax

Stay of demand - Partial payment already made - determination of 20% of the outstanding demand - HELD THAT - As considered the challan placed before us of Rs. 4.4 crores paid by the assessee for AY 2021-22 on 31.3.2024 against the addition made in the above assessment order. Admittedly though the amount outstanding is Rs. 20.34 crores had this information been provided to the AO naturally the outstanding demand would have been less by the above sum and interest would have also gone down substantially. We find that the assessee has paid tax of Rs. 4.4 crores for which credit has not been given to the assessee therefore naturally this amount can be considered towards 20% of the outstanding demand. Assessee has categorically shown that there is an error in the computation of margin with respect to trading manufacturing segment which is accepted by the ld. TPO in the remand report but as the ld. DRP did not comment on the same TPO/AO continued with the computational error. We are of the view that for such computational errors the ld. TPO/ld. DRP has failed to do their duty to make such corrections when it is so obvious. No doubt while computing interest on outstanding receivable from AE assessee did not give the invoices-wise information but that does not mean that the ld. TPO should have computed interest by taking figure for which there is no substantial evidence. The application made by the assessee u/s. 154 of the Act is also pending which clearly shows that if such arithmetical inaccuracy is removed the addition of Rs. 18 crores will come to half of that. As the assessee has already deposited Rs. 4.4 crores which is more than 20% of the outstanding demand the assessee deserves stay of demand on this ground. Accordingly we direct the ld. AO to verify the payment of Rs. 4.4 crores by the assessee and then to keep the balance demand in abeyance till disposal of the appeal or 180 days from the date of receipt of this order whichever is earlier.

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following core legal questions:

Whether the assessee is entitled to a stay of demand based on the partial payment already made and alleged computational errors in the assessment?
Whether the computation of interest on delayed receivables and the adjustments made in the international transaction segments were erroneous?
Whether the assessment order was time-barred, as claimed by the assessee?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Stay of Demand

Relevant Legal Framework and Precedents: The legal framework involves the provisions of the Income-tax Act, 1961, particularly Section 156 regarding the notice of demand and the conditions for granting a stay of demand.
Court's Interpretation and Reasoning: The Tribunal considered the payment of Rs. 4.4 crores made by the assessee, which was not credited. The court noted that this payment covers more than 20% of the outstanding demand, which is a significant factor in granting a stay.
Key Evidence and Findings: The assessee provided a challan for the payment of Rs. 4.4 crores. The Tribunal acknowledged this evidence and noted the lack of credit given for this payment.
Application of Law to Facts: The Tribunal applied the principle that a substantial payment towards the outstanding demand supports the case for granting a stay.
Treatment of Competing Arguments: The Revenue argued against the stay, citing non-compliance by the assessee. However, the Tribunal found the assessee's partial payment and computational error claims persuasive.
Conclusions: The Tribunal concluded that the assessee deserves a stay of demand, given the payment made and the computational errors identified.

Issue 2: Computational Errors in Assessment

Relevant Legal Framework and Precedents: The legal framework includes transfer pricing regulations and the computation of margins for international transactions.
Court's Interpretation and Reasoning: The Tribunal found that the Transfer Pricing Officer (TPO) accepted errors in margin computation for trading and manufacturing segments, but the Dispute Resolution Panel (DRP) failed to address these errors.
Key Evidence and Findings: The Tribunal noted the apparent errors in the TPO's margin computation and the pending application for rectification under Section 154 of the Act.
Application of Law to Facts: The Tribunal emphasized the need for accurate computation of margins and interest, which significantly affects the assessed demand.
Treatment of Competing Arguments: The Revenue acknowledged the possibility of correction in margin computation but insisted on the balance tax payment. The Tribunal found the assessee's arguments on computational errors credible.
Conclusions: The Tribunal concluded that the computational errors warranted a reassessment of the demand, supporting the case for a stay.

Issue 3: Time-barred Assessment Order

Relevant Legal Framework and Precedents: The legal framework involves the statutory timelines for passing assessment orders under the Income-tax Act, 1961.
Court's Interpretation and Reasoning: The Tribunal acknowledged the assessee's claim that the assessment order was time-barred, referencing a decision by the Hon'ble Madras High Court.
Key Evidence and Findings: The Tribunal noted the prima facie applicability of the time-barred argument in favor of the assessee.
Application of Law to Facts: The Tribunal considered the statutory timelines and the relevant case law, finding merit in the assessee's claim.
Treatment of Competing Arguments: The Tribunal did not detail the Revenue's counterarguments on this issue, focusing instead on the prima facie case presented by the assessee.
Conclusions: The Tribunal found that the time-barred argument further supports the stay of demand.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "We are of the view that for such computational errors, the ld. TPO/ld. DRP has failed to do their duty to make such corrections when it is so obvious."
Core Principles Established: The Tribunal emphasized the importance of accurate computation in tax assessments and the consideration of partial payments towards outstanding demands.
Final Determinations on Each Issue: The Tribunal directed the Assessing Officer to verify the payment of Rs. 4.4 crores and keep the balance demand in abeyance until the appeal is disposed of or 180 days from the order date, whichever is earlier. The stay petition was allowed.

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