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TMI Blog2019 (7) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... etition. Considering the conduct of the third respondent and the urgency of the matter, no fault can be found in the conduct of the petitioner in invoking the writ jurisdiction of this court. The third respondent, by his very conduct in not waiting for even three days in terms of the order passed by him and making coercive recovery, has created a situation which has compelled the petitioner to discard the remedy of review before the PCIT and approach this court for relief This petition under article 226 of the Constitution of India is maintainable. Exercise of discretion - Insofar as the contention that if the petitioner wants to avail of the benefit of the Instructions issued by the CBDT, it has to avail of the remedy before the PCIT and that the remedy under section 220(6) of the Act being discretionary, no jurisdictional question arises, is concerned, in the opinion of this court, when section 220(6) confers discretion upon AO while considering an application thereunder, it goes without saying that such discretion has to be exercised in a reasonable and proper manner. If the exercise of such discretion is arbitrary or capricious or suffers from the infirmity of non-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1478,92,93,304/- determined by the Transfer Pricing Officer to be receivable by the petitioner on transfer of options by virtue of a purported transfer pricing adjustment was upheld, and held taxable as capital gains after indexation benefit; b) Depreciation on goodwill claim of ₹ 19,53,97,454/- was remanded to Respondent No.3 for fresh adjudication; c) Disallowance under section 14A was deleted; d) Disallowance of certain club expenditure was allowed on amortized basis over the seven-year tenure of the membership; and e) Claim for other club expenditure was remanded to Respondent No.3 for verification whether membership expenditure was incurred in the relevant previous year in entirety. 2.2 The revenue had also filed cross objections contending that the purported compensation receivable on transfer of options was taxable as 'business income' (rather than under the head of 'capital gains') in the hands of the petitioner. By an order dated 24.7.2018, the said objections came to be disposed of as infructuous. Pursuant to the order dated 23.1.2018, the third re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.7 By a letter dated 26.10.2018, the third respondent intimated the petitioner regarding adjustment of refund due to the petitioner for assessment year 2013-14 of ₹ 8,27,80,220/- against the demand of ₹ 326.38 crores. 2.8 Being aggrieved, the petitioner has filed the present petition seeking the relief noted hereinabove. 3. In response to the averments made in the petition, the third respondent has filed an affidavit-in-reply wherein various decisions of the Supreme Court and High Courts have been cited and more particularly, the decisions of the Supreme Court in the case of Siliguri Municipality and others v. Amalendu Das and others , (1984) 146 ITR 624 and in the case of Assistant Collector of Central Excise v. Dunlop India Limited and others , (1985) 154 ITR 172 . It is averred that as the petitioner had multiple alternative remedies available, the writ petition should not be entertained and that on merits the case does not warrant stay without payment of 20% of demand till disposal of appeal. It is further stated that the condition of depositing 20% of the total demand for availing stay is reasonable inasmuch as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elines for staying demand, it was pointed out that clause (i) thereof gives illustrations of cases where demand can be stayed, and the illustrative situation provided under sub-clause (a) thereof is if the demand in dispute relates to issues that have been decided in the assessee's favour by an appellate authority or court earlier. Reference was made to clause (v) thereof which says that while considering an application under section 220(6) of the Act, the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. 4.1 Reference was also made to the instructions issued vide Office Memorandum dated 29.2.2016 wherein it has been observed that it has been reported that the field authorities often insist on payment of a very high proportion of the disputed demand before granting stay of the balance demand. This often results in hardship for the taxpayers seeking stay of demand. It is further provided therein that in case where the outstanding demand is disputed before CIT (A), the Assessing Officer shall grant stay of demand till final disposal of first appeal on payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Vodafone India Services Pvt. Ltd. v. Commissioner of Income Tax , [2016] 385 ITR 169 (Bom) . Referring to the order of the Tribunal in the quantum appeal, it was submitted that the Tribunal has not considered the issue in proper perspective. Reference was made to the order dated 21st March, 2018 passed by this court in the quantum appeal to submit that considering the nature of the issues in the quantum matter no penalty be recovered at this stage. 4.3 Reliance was placed upon the decision of this court in Commissioner of Income Tax v. Prakash S. Vyas , [2015] 232 Taxman 352 (Gujarat), wherein the court held that the sole ground on which the Tribunal was persuaded to delete the penalty was that the issue on which the penalty was based, was carried in appeal before the High Court and High Court had admitted the assessee's appeal and framed substantial questions of law. In the view of the Tribunal, this fact itself was sufficient to hold that the issue was debatable and, therefore, no penalty could be sustained under section 271(1)(c) of the Act. The court further held that unless there is any indication in the order of admission passed by the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the whole order is bad and is required to be quashed and set aside. 4.6 It was pointed out that the initially against the impugned order, the petitioner had approached the Principal Commissioner of Income Tax in terms of the CBDT instructions, however, in view of the fact that by the impugned order dated 25.10.2018, the Assessing Officer rejected the stay petition granting three days time to make payment, and thereafter in undue haste, without even waiting for three days for the petitioner to make payment, on 26.10.2018, had recovered ₹ 8,27,80,220/- towards penalty by adjusting such amount from the refund due to the petitioner, the petitioner was constrained to approach this court by way of this petition. It was submitted that in view of the fact that an amount of ₹ 8,27,80,220/- already stands recovered, at this stage, no further amount be directed to be paid. 5. Vehemently opposing the petition, Mr. M. R. Bhatt, Senior Advocate, learned counsel for the respondent, submitted that in this case the order of the Transfer Pricing Officer has been confirmed by Disputes Resolution Panel as well as by the Tribunal because of which there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this writ petition. Therefore either the petitioner seeks the benefit of the circular or it wants to invoke the writ jurisdiction of this court under article 226 of the Constitution. If it seeks the benefit of the circular, it has to follow the spirit of the circular. It was submitted that the Assessing Officer has granted relief and the petitioner has gone to the PCIT and then abandoned that procedure and has come to this court. If the petitioner does not want the benefit of the circular then under section 220(6) of the Act, it would be the discretion of the Assessing Officer and would not be a jurisdictional issue as it would amount to supplementing the discretion exercised by the Assessing Officer. It was contended that if the petitioner wants the benefit of the circular it has to go to the PCIT and that the requirement of review before the PClT cannot be hived off and that for variation in the amount below the benchmark of 20%, the petitioner has to satisfy the requirements of clause (b) of paragraph 4B of the Instructions. According to the learned counsel, none of the requirements are satisfied in this case. 5.3 It was argued that when there is a remedy by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance upon the decision of this court in Jagdish Gandabhai Shah v. PCIT , [2017] 247 Taxman 414 (Gujarat) wherein the court has held thus: 8.2 In case, the Assessing Officer is of the view that any deviation from clause 4 [A] is warranted ie., if the Assessing Officer is of the opinion that case falls within parameters of Clause 4 [B](a) ie., the Assessing Officer is of the opinion that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted, in that case, the Assessing Officer is required to refer the matter to the administrative Principal CIT/CIT, who shall, after considering the relevant facts, decide the quantum/proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand. In case the Assessing Officer is of the opinion that the case falls within the parameters of Clause 4 [B](b) of the modified instruction dated 29th February 2016 ie., if the Assessing Officer is of the view that the nature of addition resulting in the disputed demand is such that payment of lump sum amount lower than 15% is warranted, in that case also, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was submitted that thus the court has safeguarded the interest of the revenue by providing a condition of security. It was submitted that if at all the court is inclined to interfere with the impugned order some reasonable amount may be ordered to be paid and the department may be put to terms that the amount be forthwith paid back in case the petitioner succeeds. In conclusion, it was submitted that the petitioner has sufficient liquidity and the three criteria for grant of relief, namely, prima facie case, balance of convenience and irreparable injury are not made out and hence, no case is made out for grant of any relief and that the petition deserves to be dismissed. 6. In rejoinder, Mr. Soparkar submitted that in the application under section 220(6) of the Act, the petitioner had pleaded hardship if it is directed to make payment of any amount under the penalty order. Reliance was placed upon the decision of the Delhi High Court in Taneja Developers Infrastructure Ltd. [2010] 324 ITR 247 (Delhi) as well as the decision of the Karnataka High Court in the case of Flipkart India (P) Ltd. (2017) 79 Taxman 159 (Kar), for the proposition that even wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valid reasons for doing so. Mere filing an appeal against the assessment order will not be 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 Assessing Officer 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 whose jurisdiction the Assessing Officer 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 cooperated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is found to be on the lower side and has decided the standard rate prescribed in OM dated 29.2.2016 be revised to 20% of the disputed demand, where the demand is contested before CIT(A). 11. The impugned order dated 25.10.2018 has been made by the third respondent Deputy Commissioner of Income tax, Circle-4(1)(2), Ahmedabad, on the application made by the petitioner requesting to stay demand of ₹ 326,38,45,396/- arising out of penalty order dated 27.9.2018 under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2012-13. By the said order, the application has been rejected on the ground that it is not accompanied by any scheme for payment of demand and no reasons other than pendency of appeal are mentioned in the same. Another reason is that the additions have been confirmed by the ITAT. However, keeping in view the CBDT s Office Memorandums dated 29.2.2016 and 31.7.2017, the Assessing Officer has directed the petitioner to pay 20% of the demand immediately and has further recorded that from the ITD system and record available it is seen that the petitioner has not made any payment of demand in dispute and has therefore, requested it to pay at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Vodafone India Services Pvt. Ltd. v. Commissioner of Income Tax (supra) in favour of the petitioner and that the Tribunal has failed to appreciate the controversy in proper perspective while not following the said decisions, whereas the learned counsel for the revenue has taken pains to point out that the Tribunal has duly considered both the decisions and found that they are not applicable to the facts of the present case. 16. Insofar as the distinction sought to be drawn between the facts of the case before the Supreme Court in Vodafone International Holdings B.V. v. Union of India and another (supra) and before the Bombay High Court in Vodafone India Services Pvt. Ltd. v. Commissioner of Income Tax (supra), and the facts of the present case is concerned, all these questions arise in the quantum appeal wherein the court has admitted the appeal on substantial questions of law and has granted stay on the application for stay of recovery subject to the petitioner depositing a further amount of ₹ 23.13 crores so that the total amount comes to approximately 20% of the demand. This court after bipartite hearing, while granting stay against recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Bombay High Court was carried in appeal by the assessee. The Supreme Court in the case of Vodafone International Holdings B.V vs. Union of India Anr. [341 ITR 1], while reversing the judgment of the Bombay High Court had held that the controlling interest in the company is an incident of ownership of shares in a company, something which flows out of the holding of shares. A controlling interest is, therefore, not an identifiable or distinct capital asset independent of the holding of shares. The control and management is a facet of the holding of shares. The Court held that the case on hand concerns straightforward share sale. The Court further observed that the Bombay High Court failed to notice that till the date call options [which are not transferred in the present case] had remained unencashed, and therefore, even if it is assumed that such options under the frame work agreement could be considered to be property rights, there had been no transfer or assignment of options till the date. Even if, it is assumed that the High Court was right in holding that the options constitute capital assets, even then Section 9 [1](ii) of the Income-tax Act was not applicable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal was correct in assigning its market value on the basis of what the Revenue would refer to as comparable sale instance. The tax liability arising out of the judgment of the Tribunal is in the vicinity of ₹ 507.74 Crores. We are informed that the assessee has so far deposited ₹ 76.87 Crores. Under the circumstances, further coercive recovery arising out of the judgment of the Tribunal would be stayed on condition that the applicant deposits a further sum of ₹ 23.13 Crores with the Department latest by 20th April 2018. This would make the total deposit by the applicant including so far made, to ₹ 100 Crores which would be approximately 20% of the outstanding tax demand. Application stands disposed of accordingly. 17. In the opinion of this court, while considering the merits of the order of the third respondent on the stay application filed by the petitioner against the order imposing penalty under section 271(1) (c) of the Act, it may not be necessary to go into the merits of the order of the Tribunal in the quantum appeal for the reason that a co-ordinate bench of this court in the above order dated 21.3.2018 pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are not concerned with recovery of tax but recovery of penalty. In the opinion of this court, penalty cannot be equated with tax. Moreover, when in the quantum appeal which relates to recovery of tax, this court after hearing the parties has thought it fit to stay the recovery subject to payment of approximately 20% of the demand and has stayed recovery of more than ₹ 400 crores, in this case where the penalty order is based upon the orders made in the quantum appeal, and the appeal is pending at the stage of the first appellate authority, the petitioner has made out a strong case for grant of the relief as prayed for in the petition. Apart from the fact that in this case the petitioner seeks stay of recovery of penalty and not tax as was the case in the stay application filed in the quantum appeal, in that case the assessee had lost before three authorities, whereas in this case the petitioner has preferred appeal before the first appellate authority, and hence, on this count also this case cannot be considered on a par with the stay order granted in the quantum appeal. 20. On behalf of the respondents, it has been contended that the Assessing Officer havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction provides for review before the PCIT, sufficient time was not granted to the petitioner. Not only that, the Assessing Officer did not even wait for three days for the petitioner to comply with the directions issued by him and with undue haste, on the very next day that is, on 26.10.2018, recovered ₹ 8,27,80,220/- by way of adjustment from the refund payable to the petitioner while giving effect under section 254 of the Act in case of assessment year 2013- 14. Thus, since the Assessing Officer had started making recovery without giving any time till the application for review filed by the petitioner before the PCIT could be heard, the petitioner approached this court by way of this petition. 22. In the opinion of this court, considering the conduct of the third respondent and the urgency of the matter, no fault can be found in the conduct of the petitioner in invoking the writ jurisdiction of this court. The third respondent, by his very conduct in not waiting for even three days in terms of the order passed by him and making coercive recovery, has created a situation which has compelled the petitioner to discard the remedy of review before the PCIT and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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