Recovery of the demand awaiting the first appeal does not always have to be suspended if 20% of the challenged tax demand is not satisfied
Fact and Issue of the case
Present writ petitions have been filed challenging the order dated 26th October, 2022 dismissing the Petitioner’s application for stay of demand and directing the Petitioner to pay 20% of the total outstanding demand by 10th November, 2022. Petitioner also seeks stay of the demands raised by virtue of the orders dated 4th August, 2021 and 8th September, 2020 passed by Respondent under Section 201/201(1A) of the Income Tax Act, 1961 for Assessment Years 2013-14 to 2020-21 till the disposal of the appeals filed before the Commissioner of Income Tax (Appeals).
Observation of the court
The court has heard learned counsel for the parties and having perused the two Office Memorandums, in question, this Court is of the view that the requirement of payment of twenty percent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases. The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th February, 2016 gives instances like where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee.
In fact the Supreme Court in the case of PCIT vs. M/s LG Electronics India Pvt. Ltd. (2018) 18 SCC 447 has held that tax authorities are eligible to grant stay on deposit of amounts lesser than twenty percent of the disputed demand in the facts and circumstances of a case. In the present case, the impugned order is non-reasoned. The three basic principles i.e. the prima facie case, balance of convenience and irreparable injury have not been considered while deciding the stay application.
Consequently, the impugned order is set aside and the matter is remanded back to the Commissioner of Income Tax for fresh decision on the application for stay. However, before deciding the stay application, the Commissioner of Income Tax shall grant a personal hearing to the authorised representative of the Petitioner. For this purpose, list the matter before the Commissioner of Income Tax on 05th December, 2022. It is clarified that till the stay application filed by the petitioner is not decided, no coercive action shall be taken by the Respondents against the Petitioner in pursuance to the demand arising out of the impugned order. With the aforesaid directions, the present writ petition along with pending applications stand disposed of.
The court ruled in favour of the assessee and ordered the department to conduct hearing before deciding on the stay of demand and also clarified that till the stay application filed by the petitioner is not decided, no coercive action shall be taken by the department against the assessee in respect to the demand arising out of the order.Dabur-India-Limited-Vs-CIT-Delhi-High-Court