9911796707
TMI Blog2024 (4) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... ond and first respondents respectively. The matter shall consequently stand remitted to the board of the AO which shall examine the applications for stay afresh and bearing in mind the legal position as enunciated in NASSCOM [ 2024 (3) TMI 773 - DELHI HIGH COURT] - HON'BLE MR. JUSTICE YASHWANT VARMA AND HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV For the Petitioner Through: Mr. Balbir Singh, Sr. Adv. with Mr. Sachit Jolly, Ms. Soumya Singh, Ms. Disha Jham Mr. Devansh Jain, Advs. For the Respondents Through: Mr. Prashant Meharchandani, SSC with Mr. Akshat Singh, Ms. Ritika Vohra Mr. Utkarsh Kandpal, Advs. JUDGMENT YASHWANT VARMA, J. (Oral) CM APPL. 18052/2024 (Ex.) 1. Allowed, subject to all just exceptions. 2. Application is disposed of. W.P.(C) 4413/2024 CM APPL. 18051/2024 (interim relief) 3. The petitioner invokes our jurisdiction conferred by Article 226 of the Constitution and impugns the order dated 22 November 2021 passed by the second respondent as well as the order dated 27 February 2024 passed by the first respondent Principal Commissioner of Income Tax [PCIT] (Central), Delhi -2 , disposing of stay applications filed by the petitioner for outstanding demands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 8. In response to the aforesaid, the petitioner furnished a detailed reply on 26 September 2023 asserting that the original assessment is wholly arbitrary and is rendered unsustainable in light of the judgment of the Supreme Court rendered in Principal Commissioner of Income Tax, Central 3 v. Abhisar Buildwell Private Limited (2024) 2 SCC 433. The petitioner also appears to have offered to pledge properties owned by M/s American Hotels and Restaurants Pvt. Ltd., an entity in which the petitioner s family members are directors/shareholders, in order to securitize the outstanding demand to the extent of 20%, as was being consistently insisted upon by the respondents. 9. On 19 October 2023, the second respondent proceeded to reject that prayer observing as follows:- Subject: Outstanding demand of Rs. 181,37,14,117/- in the case of Sh. Sushen Mohan Gupta (PAN:AFEPG7593R)-regarding Ref: Your letter dated 26.09.2023 on the above subject Kindly refer to the above. In this matter, a notice u/s 220(1) of the Income-tax Act, 1961 was issued on 16.09.2023 requiring you to pay the outstanding demand and to produce the challan as proof of payment. Further, you were asked to provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall deposit demand to the extent of Rs. 72,54,85,642/- (i.e. 40% of total outstanding demand of Rs. 1,81,37, 14, 107/-) within 15 days of receipt of this order. The balance demand of Rs. 1,08,82,28,464/- shall remained stayed, subject to payment of Rs. 72,54,85,642/- within the stipulated period, till the disposal of the first appeal or for a period of six months from the date of this order, whichever is earlier. 11. Appearing in support of the writ petition, Mr. Balbir Singh, learned senior counsel, submitted that the respondents have woefully failed to examine the prima facie merits of the challenge which stood raised in respect of the assessment orders as framed and which was clearly incumbent in light of the various precedents rendered on the subject. Mr. Singh submitted that the judgments which had been cited for the consideration of the respondents had culled out the considerations that must weigh while examining a prayer for stay referable to Section 220(6) of the Act. Insofar as prima facie merits are concerned, Mr. Singh drew our attention to the fact that an addition of approximately INR 284 crores has been made on the basis of documents and pen drives tendered by one Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent upon the facts of a particular case. The subsequent OM merely amended the rate to be 20%. In fact, while the subsequent OM chose to describe the 20% deposit to be the standard rate , the same would clearly not sustain in light of the discussion which ensues. 13. We note that while dealing with an identical question, we had in Avantha Realty Ltd. vs The Principal Commissioner of Income Tax Central Delhi Anr. observed as under:- 2. We note that the impugned orders are principally based on the instructions of the Central Board of Direct Tax [ CBDT ] as encapsulated in the Office Memorandum dated 31 July 2017 and which had while dealing with the manner in which the power under Section 220(6) of the Act is liable to be exercised had held that assessees may be accorded interim protection subject to deposit of 20% of the total outstanding demand failing which they would be treated as an assessee in default . 3. Insofar as the aforesaid Office Memorandum is concerned, suffice it to note that while considering its ambit the Supreme Court in Principal Commissioner of Income Tax and Others vs. LG Electronics India Private Limited had held as follows:- 1. Delay condoned. Leave Granted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree basic principles i.e. the prima facie case, balance of convenience and irreparable injury have not been considered while deciding the stay application. 16. More recently in Indian National Congress vs Deputy Commissioner of Income Tax Central 19 Ors. we had an occasion to examine the scope of the power conferred by Section 220(6) of the Act and which was explained in the following terms: 22. However, as we read the order impugned, the matter does not appear to have proceeded along those lines before the ITAT. The tone and tenor of submissions clearly appear to have been concentrated upon the merits of the assessment order. Although the issue of payment of 20% of the outstanding demand appears to have been raised, the same came to be summarily rejected by the ITAT in cryptic terms. Notwithstanding the above, it becomes pertinent to observe that the 20% deposit which is spoken of in the OM dated 31 July 2017 is not liable to be viewed as a condition etched in stone or one which is inviolable. The OM merely seeks to provide guidance to the authorities to bear in mind certain aspects while considering applications for stay of demand pending an appeals remedy being pursued. The OM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut if on a cursory glance it appears that the demand raised has no leg to stand on, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen s faith in the impartiality of public administration, interim relief can be given. 9. It has become an unfortunate trend to casually dispose of stay applications by referring to decisions in Siliguri Municipality and Dunlop India cases without analysing factual scenario involved in a particular case. xxxx xxxx xxxx 11. Two significant expressions used in the provisions are un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rving and appropriate cases where entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue, during the pendency of the appeal. 19. In B.P.L. Sanyo Utilities and Appliances Ltd. v. Union of India, 1999 (108) E.L.T. 621 , the Karnataka High Court held that in the matter of grant of waiver of pre-deposit, each case has to be examined on its own merit and no hard and fast rule can be formulated. xxxx xxxx xxxx 21. In Mehsana District Cooperative Milk P.U. Ltd. v. Union of India, 2003 (154) E.L.T. 347 (S.C.), the Hon'ble Supreme Court considered the case of dispensation of pre-deposit condition and held that the Appellate Authority must address to itself to the prima facie merits of the appellant's case and upon being satisfied of the same, determine the quantum of deposit taking into consideration the financial hardship and other such related factors. xxxx xxxx xxxx 23. In J.N. Chemicals Pvt. Ltd. v. CEGAT, 1991 (53) E.L.T. 543 , the Calcutta High Court while considering the provisions of pre-deposit of duty and penalty, observed that where the authority concerned comes to the conclusion that the appellant has a good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar issue and placed reliance upon a large number of judgments and held that the phrase undue hardship would cover a case where the appellant has a strong prima facie case. The phrase also covers a situation where there is an arguable case in the appeal. If the Appellate Authority forms the opinion that appellant has a strong prima facie case, it should dispense with the pre-deposit condition altogether. However, where it is of the opinion that the appellant has no arguable case, the Appellate Authority must safeguard the interest of the Revenue, as the same also cannot be jeopardised. 27. In Sri Krishna v. Union of India, 1998 (104) E.L.T. 305 , Delhi High Court considered the issue of dispensation of pre-deposit condition and the concept of undue hardship while considering the provisions of Section 129E of the Customs Act, 1962 and Section 35 of the Act and held that the Court while considering the case of the appellant should examine as to whether the Appellate Authority or Tribunal have dealt with the plea raised by the appellant before it and have considered as to whether the appellant has a prima facie case on merit. In case the appellant has a strong prima facie case, as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of the judgment of the jurisdictional High Court then the authorities may pass the order under proviso to Section 35F of the Act keeping in view the facts of the case in hand. xxxx xxxx xxxx 35. In view of the above, the aforesaid authorities make it clear that the Court should not grant interim relief/stay of the recovery merely by asking of a party. It has to maintain a balance between the rights of an individual and the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be no financial restrain on the appellant running in a good financial condition . The arguments that appellant is in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing demand. The aforesaid view as adopted is clearly untenable and erroneous bearing in mind the legal position as enunciated in NASSCOM. As we had held in NASSCOM, the CBDT s OMs cannot possibly be read as mandating a pre-deposit of 20% of the outstanding demand, without reference to the prima facie merits of a challenge that may be raised by an assessee in respect of an assessment order. 16. It becomes pertinent to note that the first respondent has thereafter proceeded to cause even greater prejudice to the writ petitioner by requiring it to deposit 40% of the outstanding demand. The petitioner had moved the first respondent in terms of the provisions made in the OM dated 29 February 2016 and which reads thus: - OFFICE MEMORANDUM [F.NO. 404/72/93-ITCC] SECTION 220 OF THE INCOME-TAX ACT, 1961 COLLECTION AND RECOVERY OF TAX WHEN TAX PAYABLE AND WHEN ASSESSEE DEEMED IN DEFAULT AMENDMENT OF INSTRUCTION NO.1914, DATED 21-3-1996 TO PROVIDE FOR GUIDELINES FOR STAY OF DEMAND AT FIRST APPEAL STAGE OFFICE MEMORANDUM [F.NO.404/72/93-ITCC], DATED 29-2-2016 Instruction No. 1914 dated 21-3-1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand. (C) In a case where stay of demand is granted by the assessing officer on payment of 15% of the disputed demand and the assessee is still aggrieved, he may approach the jurisdictional administrative Pr. CIT/CIT for a review of the decision of the assessing officer. (D) The assessing officer shall dispose of a stay petition within 2 weeks of filing of the petition. If a reference has been made to Pr. CIT/CIT under para 4 (B) above or a review petition has been filed by the assessee under para 4 (C) above, the same shall also be disposed of by the Pr. CIT/CIT within 2 weeks of the assessing officer making such reference or the assessee filing such review, as the case may be. (E) In granting stay, the Assessing Officer may impose such conditions as he may think fit. He may, inter alia,- (i) require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; (ii) reserve the right to review the order passed after expiry of reasonable period (say 6 months) or if the assessee has not co-operated in the earl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
