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TMI Blog2013 (11) TMI 1542X X X X Extracts X X X X X X X X Extracts X X X X ..... default. (a)If the demand in dispute relates to the issues that have been decided in assessee’s favour by appellate authority or Court earlier; or (b)If the demand in dispute has arisen because the AO had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts or, the High Court ( not of the High Court under whose jurisdiction the AO is working); or (c)If the High Court having jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment. In a given case, the AO may exercise discretion in favour of assessee by granting reasonable installments. Even the AO may reserve the right to review the order passed after expiry of reasonable period, say upto six months and if the assessee has not cooperated in the early disposal of the appeal, or where a subsequent pronouncement by a higher appellate authority or Court alters the situation considered while passing under order under Section 220(6) of the Act, the AO may is a given case review the earlier order passed under Section 220(6) of the Act. It goes without saying that while exercising the powers under Section 220(6) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OCATE For The Respondent MR. MANISH R BHATT LD SR. ADV (s) MR SUDHIR M MEHTA, ADVOCATE JUDGMENT 1.0.As common question of law and facts arise in this group of petitions, they are disposed of by this common judgment and order. 2.0.Special Civil Application No.14746 of 2013 under Article 226 of the Constitution of India has been preferred by the petitionerassessee to quash and set aside the impugned order dated 19.08.2013 passed by the Deputy Commissioner of Income Tax, Gandhinagar Circle, Gandhinagar (Annexure A), by which, while considering the request for stay of demand for AY 2010 11, demand is stayed only to the extent of 50% of the demand and the balance 50% of the demand is directed to be paid in six equal installments. 2.1.Special Civil Application No.14747 of 2013 under Article 226 of the Constitution of India has been preferred by the petitioner assessee Gujarat State Energy Generation Limited to quash and set aside the impugned notice dated 19.08.2013, by which, against the outstanding demand of ₹ 322.35 lacs for the AY 2010 11, the petitioner is directed to pay 50% demand pending the decision of the First Appellate Authority, as per the instruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand during the pendency and final disposal of the appeal before the CIT(A), in exercise the powers under Section 220(6) of the Income Tax Act (hereinafter referred to as the Act ) and by impugned communication / order / notice 50% demand has been stayed on certain conditions and / or same may be rejected. Hence, respective petitioners have preferred present Special Civil Applications under Article 226 of the Constitution of India challenging the impugned orders passed by the appropriate authority / concerned officer under Section 220(6) of the Act and the respective petitioners are treated as assessee in default under Section 220 of the Act. 4.0. Shri S.N. Soparakar, learned Senior Advocate has appeared on behalf of the petitioner in Special Civil Application Nos. 14746 of 2013, 14698 of 2013, 14748 of 2013, 14747 of 2013 and 14751 of 2013 and Shri Manish Shah, learned advocate has appeared on behalf of the petitioner of Special Civil Application No.15075 of 2013. 5.0. Shri S.N. Soparkar, learned Senior Advocate for the respective assessee has vehemently submitted that the impugned action of the respondent in treating the petitioner as assessee in default under Section 220 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. In support is his above submission, Shri S.N. Soparkar, learned counsel for the respective assessee has relied upon the decision of the Hon ble Supreme Court in the case of Bachahan Devi and Another vs. Nagar Nigam, Gorakhpur and Another reported in (2008) 12 SCC 372. It is submitted that therefore, any contrary view would result into giving of wholly arbitrary and uncanalised powers to the AO. 5.2. It is submitted that in the case where the income determined on assessment is substantially higher than the returned income i.e. twice the latter amount or more, the collection of the tax in dispute should be kept in abeyance till the decision of the appeals. In support of his above submission, Shri S.N. Soparkar, learned counsel for the respective assessee has relied upon the decision of the Delhi High Court in the case of Soul vs. Deputy Commissioner of Income Tax reported in (2010) 323 ITR 305 and the decision of the Rajasthan High Court in the case of Urban Improvement Trust vs. Assistant Commissioner of Income Tax and Ors in Civil Writ Petition No.1169 of 2012. 5.3. It is further submitted that even if the view is taken that instruction no. 96 dated 21.08.1969 is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to the additions made. It is submitted that only thereafter and upon quantification of the taxes, a demand under Section 156 would be issued. It is submitted that as per Section 220(1) of the Act the amount specified in the notice of demand under Section 156 shall be paid within 30 days of the service of the notice of demand. It is submitted that thus as per the statute, there is a mandate on the assessee to pay the demand within 30 days. It is submitted that however as per Section 220(6) of the Act, discretion is given to the AO to treat the assessee as not being in default, on such conditions as he may think fit to impose in the circumstances of the case. 7.2. It is submitted that in order to ensure that AO does not exercise discretion on his own whims, the board has therefore, issued instructions / circulars from time to time. It is submitted that instruction no.96 dated 21.08.1969 was issued in respect of the circumstances then prevailing. It is submitted that thereafter circular no.530 dated 6.3.1989 required the assesssee to be treated as not being in default in respect of circumstances (i) and (ii) as stated in para 2 of the said circular. It is submitted that in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y towards the disputed taxes . It is submitted that it would be also open to the AO to require the assessee to pay taxes in lump sum or in installments, as also require the assessee to give an undertaking to cooperate in early disposal of the appeal, reserving right, as also to adjust refunds arising from other assessment against the disputed demand. It is submitted that even to protect the interest of revenue, AO may pass an order to furnish the security to ensure that in the event in the further challenge to the order which is favourable to the assessee if the revenue succeeds, the recovery can be effected. It is submitted that as against the stipulated requirement of payment of taxes by 30 days from service of notice under Section 156, as per para 2C(iii), liberal installments are provided. It is submitted that speaking order contemplated/ provided in para 2C(v) is only with regard to ascertaining as to whether the demand arises out of covered issues or otherwise. It is submitted that as the instruction no. 1914 has been issued in supersession of all earlier instructions, including instruction no.96 dated 21.08.1969, the aspect high pitched assessment , i.e. twice the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the revenue that the same proceeds on incorrect reading of instruction no.1914. It is submitted that the Delhi High Court in the case of Volvaline Cummins Ltd (supra) has proceeded to read instruction no.96 dated 21.08.1969 as forming part of and imbibed in instruction no.1914. It is submitted that the Delhi High Court has not properly appreciated the fact that instruction no.1914 dated 2.12.1993 has been issued by the CBDT, New Delhi in supersession of all earlier instructions i.e. also including instruction no.96. It is further submitted that even the Delhi High Court placed undue reliance on para 2B(iii) of Instruction No.1914 which only gave powers to the superior officer to interfere only in case of unreasonably high pitched assessment or in the case of genuine hardship. It is submitted that the Delhi High Court read this powers which were to safeguard the interest of the assessee, though contained in para 2B(iii), also in para 2C i.e. guidelines for staying demand though instructions did not stipulate so. It is submitted that therefore, only the prevailing instructions no.1914 are required to be looked into for the purpose of Section 220(6) of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted. It is submitted that otherwise a return of income of ₹ 1 may result in an absurd situation of any addition above ₹ 1 to be unenforceable. It is submitted that similar is the case of NIL and Loss returns. It is submitted that even nature of assessee s business is also important. It is submitted that for example builders usually open one firm for each project and then dissolve the firm after completion of project. It is submitted that in such situation how can revenue recover the demand if the decision is subsequently reversed ? It is submitted that even whether any issue is covered by CIT(A) or ITAT or High Court would also be material, as its significance and certainty of finality varies. 7.10.It is submitted that in case of addition of unexplained cash credit cannot be compared with addition on ad hoc basis. It is submitted that in a given case PSU / government entity may have higher standing vis a vis private parties. However, if the PSU goes into losses, further recovery becomes difficult. 7.11.It is submitted that even past conduct of the assessee in payment of demand is also important. It is submitted that security offered by the assessee and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bound to pass an order in favour of the assessee and to treat the assessee as being not in default, during the pendency of the appeal before the First Appellate Authority. 8.2.The other question which is posed for consideration of this Court is whether while exercising the powers under Section 220(6) of the Act, AO is required to pass detailed speaking order? 8.3.The another question which is posed for consideration of this Court is whether the AO while exercising the powers under Section 220(6) of the Act and granting stay of the demand during the pendency of the appeal wholly or partly can impose condition either requiring assessee to offer suitable security or requiring the assessee to pay towards disputed taxes a reasonable amount in lump sum or in installment or requiring an undertaking from the assessee that he will cooperate in the early disposal of the appeal, failing which stay order will be cancelled ? 8.4.While considering the aforesaid issues / questions few provisions of the Income Tax Act are required to be referred to and considered. On conclusion of the assessment proceedings after giving adequate opportunity to the assessee, order of assessment is passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions that no such direction can be issued to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner, or to interfere with the discretion of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the exercise of its appellate function. Therefore, under Section 119 of the Income Tax Act, the CBDT has been conferred with the powers to issue such orders, directions and instructions to the Income Tax Authority as it may deem fit for the proper administration of the Income Tax Act. 10.It appears that in exercise of powers under Section 119 of the Income Tax Act the CBDT had issued the circulars / instructions from time to time with respect to the discretion to be exercised by the AO under Section 220(6) of the Act. First Instruction being No. 96 dated 21.08.1969 came to be issued, which reads as under: Instruction No. 96 dated 21.08.1969: Income determined on assessment was substantially higher than returned income whether collection of tax in dispute is to be held in abeyance till decision on appeal. 1.One of the points that came up for consideration in the 8th meeting of the Informal Consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or Court alters the situation referred to in para 2 about, the Assessing Officer will no longer be bound by the instructions and will exercise his discretion independently . 4.In respect of other cases, not covered by para 2 above, the Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of speaking order. While exercising discretion under the provision, the financial capacity of the assessee to pay demand will not be relevant. 10.2.It appears that thereafter, Board in exercise of powers under Section 119 of the Act has issued a comprehensive instruction being instruction no.1914 dated 2.12.1993 which has been issued in supersession of all earlier instructions on the subject. Instruction no.1914 dated 2.12.1993 issued by the Board, reads as under: Instruction No.1914 dated 2.12.1993 The Board has felt the need for a comprehensive instruction on the subject of recovery of tax demand in order to streamline recovery procedures. This instruction is accordingly being issued in supersession of all earlier instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Guidelines for staying demand: (I). A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are: (a). If the demand in dispute relates to issues that have been decided in assessee s favour by an appellate authority or Court earlier; or (b). If the demand in dispute has arisen because the AO had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts (not of the High Court under Rules, jurisdiction the AO is working); or (c) if the High Court having jurisdiction has adopted a contrary interpretation but the department has not accepted that judgment. It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to such disputed points. Further where it is subsequently found that the assessee has not co operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be decided within 2 weeks of the receipt t hereof. Instances where there is undue delay in giving effect to appellate orders, or in deciding rectification applications, should be dealt with very strictly by the CCITs/CITs. 4.The Board desires that appropriate action is taken in the matter of recovery in accordance with the above procedure. The Assessing Officer or the TRO, as the case may be, and his immediate superior officer shall be held responsible for ensuring compliance with these instructions. 5.The procedure would apply mutatis mutandis to demands created under other Direct Taxes enactments also. 10.3.Thus from the aforesaid, it can be said that all earlier instructions inclusive of instruction no.96 dated 21.08.1969, circular no. 530 dated 6.3.1989 stood superseded by instruction no.1914 dated 2.12.1993 and the AO and all Income Tax Officers are bound to follow the comprehensive instruction no.1914 dated 2.12.1993. In other words, earlier instruction no.96 dated 21.08.1969 and circular no.530 dated 6.3.1989 cannot be made applicable while exercising the powers by the AO under Section 220(6) of the Act. 11.0.In backdrop of the above statutory provisions and inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount in dispute in appeal as long as appeal remained undisposed of, even though under the Act the time for payment of demand under the assessment has expired. The power being discretionary, the general guidelines laying down the circumstances in which the assessee may be treated not being in default has been issued by the Board in exercise of powers under Section 119 of the Act which have been reproduced herein above. As per the instruction contained in clause, it appears that where demand in dispute relates to the issue that have been decided in assessee s favour when Appellate Court or Court earlier; or if the demand in dispute has arisen because the AO had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts (not of the High Court under Rules, jurisdiction the AO is working); or if the High Court having jurisdiction has adopted a contrary interpretation but the department has not accepted that judgment, the assessee is not to be treated as being in default in respect of that amount in dispute in appeal. While laying down guideline it has been further clarified that in such situation the assessee will be treated as no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in default under certain circumstances and to protect the interest of the revenue, the Assessing Officer may impose such condition as he may think fit, more particular one of the following conditions may be imposed. a. require the assessee to offer suitable security to safeguard the interest of revenue; b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in installments; c. require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled. d. reserve the right to review the order passed after expiry of a reasonable period, say up to 6 months, or if the assessee has not co operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; e. reserve a right to adjust refunds arising, if any, against the demand. 14.2.While passing such order on the appropriate conditions as he may deem fit, the AO may reserve the right to review the order passed after expiry of reasonable period, say upto 6 months and if the assessee has not cooperated in the early disposal of appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Deputy CIT reported in (2008) 171 Taxman 241, in which, Delhi High Court considered instruction no.96 dated 21.8.1969 issued by the Board. However, as observed hereinabove, when the instruction no.1914 has been issued which has superseded all other instructions including instructions no.96 dated 21.08.1969, we are in not agreement with the view taken by the Delhi High Court taking the view that in every case the assessed income twice the returned income, it can be said where to be unreasonable high pitched and in such situation during the pendency of the appeal the assessee is not to be treated as being in default. 17.0.Now, so far as reliance placed upon the decision of the Rajasthan High Court in the case of Urban Improvement Trust (supra) by the learned counsel for the respective assessee is concerned, it is required to be noted that in the said decision Rajasthan High Court has considered the decision of the Delhi High Court in the case of Soul (supra), to which, as observed herein above, we are not in agreement with the view taken by the Delhi High Court. Now, so far as reliance placed upon the decision of this Court in the case of Madhu Silica Pvt. Ltd (supra) by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is required to be treated as not being in default, though the period to make the payment as provided under the Act has expired, the AO in following circumstances and eventualities is required to pass an order to treat the assessee as not being in default. (a).If the demand in dispute relates to the issues that have been decided in assessee s favour by appellate authority or Court earlier; or (b).If the demand in dispute has arisen because the AO had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts or, the High Court ( not of the High Court under whose jurisdiction the AO is working); or (c).If the High Court having jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment. 19.1.However, even to protect the interest of the revenue and by passing speaking order, the Assessing Officer may impose following conditions. a. require the assessee to offer suitable security to safeguard the interest of revenue; b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in installments; c. require an undertaking fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. 20.Now, so far as impugned orders passed by the AO impugned in the present petition are concerned, it appears that while passing the impugned order and exercise the discretion by the AO under Section 220(6) of the Act, it appears that the aforesaid criteria / principle and / or circumstance has not been appropriately considered by the respective AO s. Under the circumstances, impugned orders deserve to be quashed and set aside and the matters are required to be remanded to respective AO s to pass appropriate order afresh in accordance with law and on merits and considering the observations made by this Court herein above and after giving reasonable opportunity of being heard to the Assessee to the extent the assessee may point out that in their case ground exist to exercise discretion in favour of assessee to treat him as not being in default and / or with respect to suitable installments and / or reasonable time to him to make the payment of demand. The aforesaid exercise shall be completed by the concerned AO at the earliest and preferably within a period of four weeks from the date of receipt of the writ of the order and / or on production of the certified copy of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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