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TMI Blog2023 (5) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The requirements of reasonableness, rationality, impartiality, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion. In the present case at hand, unfortunately, Respondent No. 3 has not considered anything and has just mechanically declined to grant stay by placing reliance upon Office Memorandum by recording, inter alia, that since the assessee has not deposited 20% of disputed demand as stipulated in the said Office Memorandum, stay is liable to be rejected. As noted here that under Section 246 which provides remedy of preferring an Appeal against the Assessment Order, there is no pre-deposit stipulated therein. AO has read the Office Memorandum dated 31st July, 2017, to mean that in each and every case, where an Assessment Order is passed and its appeal is preferred, 20% of pre-deposit is required for granting stay of the balance demand. This understanding is completely contrary to the provisions of Section 220(6) of the Act, itself. Thus the discretion to be exercised under Section 220(6) of the Act is to be exercised in a fair and judicious manner and in accordance with the principles laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer directing the Petitioner to make payment of 20% of the disputed demand, Petitioner has preferred an application before the Principal Commissioner of Income Tax, Patna (Respondent No. 1) (for short PCIT ) on 08.02.2022 for reviewing the said order, but no response was received by the Petitioner from Respondent No. 1. In view of the said pleadings made by the Petitioner in the writ application, this Court, vide order dated 16.02.2023, directed the counsel for the Revenue Mr. R.N. Sahay to seek instructions as to the timeline by which application filed by the Petitioner before Respondent No. 1 would be decided. Further, since the Petitioner also preferred an Appeal before Respondent No. 4, the Commissioner of Income-Tax (Appeal)-3, instructions were directed to be obtained as to the timeline by which Appeal would be decided by Respondent No. 4. 3. Consequently, vide order dated 21.02.2023, the statement of the counsel for Revenue Mr. R.N. Sahay was recorded and it was informed to this Court that learned PCIT has fixed the date of hearing on stay application. Further, it was also recorded that DGIT, Investigation, Patna fixed an outer limit of six months for deciding the said A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(3) of the Act and show cause notices were issued to the Petitioner to show cause as to why the amount of Rs. 202,18,60,671/- be not disallowed as expenditure and added to the income of the Petitioner for the Assessment Year 2020-21. Petitioner filed its reply precisely contending, inter alia, that the charges paid by the Petitioner to the Department of Mines and Geology, Government of Jharkhand is in the nature of compensation and is, thus, allowable expenditure under Section 37(1) of the Act and Explanation-1 of the aforesaid Section 37(1) would not get attracted. However, the Assessing Officer, vide order dated 30.09.2022, disallowed the claim of expenditure of the Petitioner of an amount of Rs. 202,27,28,081/- and determined the tax liability of the Petitioner for an amount of Rs. 96,99,29,760/-. The Petitioner, against the aforesaid order, preferred an Appeal in the online portal vide Acknowledgment No. 194608230081122 dated 08.11.2022, which is pending before Respondent No. 4 i.e., the Commissioner of Income Tax (Appeals)-3. 9. Petitioner even filed a Rectification Petition under Section 154 of the Act for rectification of the mistake in the Assessment Order on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order and has contended, inter alia, that the impugned order dated 31.01.2023 passed by the Assessing Officer clearly reflects that the Assessing Officer has not exercised the discretion vested in it in terms of Section 220(6) of the Act and merely relied upon Office Memorandum dated 31.07.2017 issued by CBDT, which is not sustainable in the eye of law. Reliance has also been placed by the Petitioner upon the provisions of Section 220(6) of the Act as well as the decision rendered by the High Court of Delhi dated 08.08.2017 passed in W.P.(C) No. 6778 of 2017 to contend, inter alia, that Office Memorandum issued by CBDT cannot curtail the discretion available to an Assessing Authority under the provisions of the Act for grant of stay. Further reliance was also placed upon the order of the Hon ble Supreme Court of India, being Order dated 20th July, 2017 passed in Civil Appeal No. 6850 of 2018, wherein Hon ble Apex Court, while considering the aforesaid Office Memorandum, clarified that aforesaid Circular issued by CBDT would not act as a fetter on the Assessing Authority who is a quasi-judicial authority to grant deposit orders of a lesser amount than 20% pending Appeal, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uoted herein-under:- 37. General. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assesse), laid out or expended wholly and exclusively for the purposes of business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession. [Explanation 1. For the removal of doubts, it is hereby declared that any expenditure incurred by an assesse for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.] [Explanation 2. For the removal of doubts, it is hereby declared that for the purposes of subsection (1), any expenditure incurred by an assesse on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (8 of 2013) shall not be deemed to be an expenditure incurred by the assesse for the purposes of the business or profession.] 14. Mr. Gadodia, further referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice: Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Deputy Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand. [(1A) Where any notice of demand has been served upon an assesse and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then, such demand shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings, as the case may be, and any such notice of demand shall have the effect as specified in section 3 of the Taxation Laws (Constitution and Validation of Recovery Proceedings) Act, 1964 (11 of 1964). (2) If the amount specified in any n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the application of the assesse, either in full of in part, shall be passed within a period of twelve months from the end of the month in which the application is received; Provided further that no order rejecting the application, either in full or in part, shall be passed unless the assesse has been given an opportunity of being heard; Provident also that where any application is pending as on the first day of June, 2016, the order shall be passed on or before the 31st day of May, 2017. [2(B) Notwithstanding anything contend in sub-section (2), where interest is charged under sub-section (1A) of section 201 on the amount of tax specified in the intimation issued under sub-section (1) of section 200A for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.] [2(C) Notwithstanding anything contend in sub-section (2), where interest is charged under sub-section (7) of section 206C on the amount of tax specified in the intimation issued under sub-section(1) of section 206CB for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.] (3) Without preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not paid within the time limit under Sub-section (1) or within the extended time under Sub-section (3), as the case may be, assessee would be deemed to be in default. The legal fiction of deemed to be in default has been provided in the Statute. 18. Further, plain reading of Sub-section (6) of Section 220 would indicate that if the assessee has presented an appeal against the final order of assessment under Section 246 of the Act, it would be within the discretion of the Assessing Officer subject to such conditions that he may deem fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal so long as the appeal remains undisposed of. What is discernible from the aforesaid is that once the final order of assessment is passed, determining the liability of the assessee to pay a particular amount and such amount is not paid within the time limit as prescribed under sub-section (1) to Section 220 or during the extended time period under sub-section (3) as the case may be, then the assessee, because of the deeming fiction, would be deemed to be in default. Therefore, even if the assessee prefers an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interests of the Revenue. 21. The question as to what are the matters relevant and what should go into the making of the decision by the Income-tax Officer in such circumstances has been explained in the case of Aluminium Corporation of India Ltd. v. C. Balakrishnan, (1959) 37 ITR 267 (Cal) in the context of the corresponding provisions of the Wealth-tax Act. It has been held as under: A judicial exercise of discretion involves a consideration of the facts and circumstances of the case in all its aspects. The difficulties involved in the issues raised in the case and the prospects of the appeal being successful is one such aspect. The position and economic circumstances of the assessee is another. If the officer feels that the stay would put the realisation of the amount in jeopardy, that would be a cogent factor to be taken into consideration. The amount involved is also a relevant factor. If it is a heavy amount, it should be presumed that immediate payment, pending an appeal in which there may be a reasonable chance of success, would constitute a hardship. If any point is involved which requires an authoritative decision, that is to say, a precedent, that is a poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as equally in error in directing the Corporation to offer alternative job to drivers who are found to be medically unfit before dispensing with their services. The court cannot dictate the decision of the statutory authority that ought to be made in the exercise of discretion in a given case. The court cannot direct the statutory authority to exercise the discretion in a particular manner not expressly required by law. The court could only command the statutory authority by a writ of mandamus to perform its duty by exercising the discretion according to law. Whether alternative job is to be offered or not is a matter left to the discretion of the competent authority of the Corporation and the Corporation has to exercise the discretion in individual cases. The court cannot command the Corporation to exercise discretion in a particular manner and in favour of a particular person. That would be beyond the jurisdiction of the court. 13. In the instant case, the Corporation has denied itself the discretion to offer an alternative job which the regulation requires it to exercise in individual cases of retrenchment It may be stated that the statutory discretion cannot be fettered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order far exceeds the returned income, the authority will consider whether the assessee has made out a case for unconditional stay. If not, whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order. (c) In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. (d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order. 27. In the present case at hand, unfortunately, Respondent No. 3 has not considered anything and has just mechanically declined to grant stay by placing reliance upon Office Memorandum dated 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant, and giving credence to the fact that he has argued before us that the administrative Circular will not operate as a fetter on the commissioner since it is a quasi judicial authority, we only need to clarify that in all cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal. 29. Thus, a bare reading of the aforesaid Judgment would reveal that, in fact, the Union of India before the Hon ble Apex Court itself stated that the administrative Circular would not operate as a fetter upon the Assessing Authority who is quasi-judicial authority to grant stay, and, it is in the said background, Hon ble Supreme Court clarified that it is open to the authorities on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal. 30. Interestingly, even the order passed by Reviewing Authority i.e., PCIT dated 24.02.2023 does not reveal any application of mind while deciding the application for stay of the Petitioner. The order of the Reviewing Authority, for the sake of ready reference, is quoted herein-under:- 2. As stated by the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order dated 31.01.2023 passed by Assistant Commissioner of Income Tax, Ranchi (Respondent No. 3) and the order bearing No. 4655 dated 24.02.2023 passed by PCIT, Patna, are hereby, quashed and set aside. The matter is remitted back to Respondent No. 3 to pass a fresh order on the application for stay of the Petitioner in view of the principles laid down above, after granting due opportunity of hearing to the Petitioner. 34. At this stage, we may note that Respondent-Department stated that the Appeal filed by the petitioner would be decided by Respondent No. 4 by an outer time line of six months subject to cooperation of the petitioner. Said fact has been recorded in the order dated 21.02.2023. Accordingly, we direct that Appeal of the petitioner should also be decided by Respondent No. 4 preferably within a period of six months from the date of passing of the instant order. It goes without saying that the petitioner shall fully cooperate in the appellate proceedings and no unnecessary adjournments shall be granted to the Assessee. 35. With the aforesaid observations and directions, the instant writ Petition stands allowed. Pending I.A. if any also stand disposed of. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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