By Sri. K v. Aravind, Adv

IN THR HIGH COURT OF KARNATAKA AT BENGALURU DATBD THIS THR 17 DAY OF APRIL, 2018| BEFORE: THR HON’BLE MRS. JUSTICK S.SUJATHA ;WRIT PETITION No. 13714/2018 (TIT) BETWEEN: M/S BRIGHT PACKAGING PVT LTDRBEPRBESEBNTBD BY ITS AUTHORISEREPRESENTATIVE SRI STANYSANTHOSH RODRIGUESS/O SRI MARIAN RODRIGUESAGED ABOUT 44 YBARS|NO.162-BM BAIKAMPADY INDUSTRIAL AREAMANGALURU-575011. _. PRHTITIONBER (By Sri. S.:ANNAMALAIT, ADV. & Sri.M.LAVA, ADV. FORorl.A. SHANKAR, ADV.) AND 1]THE ASSISTANT COMMISSIONER OF [INCOME TAXCIRCLE-1(1)CR BUILDINGATTAVAR|MANGALURU-575001,CIRCLE-1(1)CR BUILDINGATTAVAR|MANGALURU-575001, «|THE PETITIONBR. COMMISSIONER OF INCOME TAXCR BUILDINGATTAVAR|MANGALURU-575001,CR BUILDINGATTAVAR|MANGALURU-575001, _. RESPONDENTS (By Sri. K. V. ARAVIND, ADV.) -9.- THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND22/ OF THE CONSTITUTIONL OF INDIA PRAYING TO QUASH|THE ORDER UNDER SECTION 220{6] OF THE INCOME-TAX ACT, 1961 PASSBD BY THR R-1 VIDK DTD:2726.3.2018 FOR THASSESSMENT YEAR 2010-11 ANNEXURE-A, AND ETC.| THIS PRTITION COMING ON FOR PRELIMINARY HBARING|IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER Petitionerhas|challengedtheorderdated26.3.2018 passed under Section 220(6) of the IncomeTax Act, 1961 (‘Act’ for short! relating to the assessment.year 2010-11 whereby the petition filed by assessee forerant of absolute stay and collection of disputeddemand is rejected. The assessee is directed to pay theentire demand immediately, failing which recoveryproceedings as per the provisions of the Act shall beinitiated. 2. The petitioner is a company registered underthe Companies Act, 1956 and is in the business ofHDPE/PP woven sacks/Fabrics, etc. The petitioner hasfiled his return of income and declared Nil income. The return of the petitioner was processed and for thereasons recorded for reassessment of the assessment|under Section 143(1) of the Act, determined the incomeof Rs.98,08,840/-, on re-opening under Section 147 ofthe Act, addition of Rs.4,65,00,000/- was made anddemand was raised. Being aggrieved by the saidreassessment, the petitioner filed an appeal before theCommissioner of Income-tax (Appeals), Mangalore andan application was filed before lst respondent to staythe disputed demand. At the first instance, respondent —No.1 though directed the petitioner to pay 20% of thedemand, on adjudication of the said application rejectedthe same and directed the petitioner to pay the entiredemand. Hence this writ petition. 3. Learned counsel for the petitioner wouldcontendthat.1NTerms|oT theOfficeMemorandum /Circular dated 29.22.2016, the assessehas paid 20% of the disputed demand. Accordingly, respondent No.1 ought to have stayed the balancedemand. Learned counsel would submit that clause|4(A) of the Circular instructions dt. 29.2.2016 issquarely applicable to the facts of the case and theimpugned order being contrary to the same, deserves tobe set-aside. 4. Learned counsel for respondents justifyingthe impugned order submitted that clause 4/(A) ofCircular dated 29.2.2016 though contemplates that in acase where the outstanding demand is disputed beforethe CIT(A), the Assessing Officer shall grant stay ofdemand till disposal of the First Appeal on payment of20% of the disputed demand unless the case falls in thecategory discussed in para (B). Para (B) deals with thesituation where the Assessing Officer is of the view thatnone of them relating in the disputed demand is suchthat payment of a lump sum amount higher than 19%.is warranted in a case, where addition is based on 4. Learned counsel for respondents justifyingthe impugned order submitted that clause 4/(A) ofCircular dated 29.2.2016 though contemplates that in acase where the outstanding demand is disputed beforethe CIT(A), the Assessing Officer shall grant stay ofdemand till disposal of the First Appeal on payment of20% of the disputed demand unless the case falls in thecategory discussed in para (B). Para (B) deals with thesituation where the Assessing Officer is of the view thatnone of them relating in the disputed demand is suchthat payment of a lump sum amount higher than 19%.is warranted in a case, where addition is based on credible evidence collected in a search or surveyoperation etc, payment of 20% of the disputed demandwould not be applicable. Learned counsel wouldcontend that on the basis of the undisclosed income otfthe assessee, detailed investigation was made, oncollecting the credible evidence, determination of taxamount is made. However, the petitioner has notavailed opportunity of cross-examining the witnessesbefore the Appellate Authority to discard the evidencerelied upon by the Authorities. In such circumstances,clause 4(B) of the Circular instructions dated 29.2.20160is applicable. Considering the same, the respondent -Authorities have rejected the request of the petitionerfor granting stay as sought for and directed to make theentire demand forthwith which is justifiable and do notwarrant any interference by this court. o. I have given my thoughtful consideration to thearguments advanced at the hands of the learned counsel appearing for the parties and perused thematerial on record. 6. It is not in dispute that by letter dated15.2.2018 respondent No.1 had directed the petitioner |to pay the demand raised to the extent of 20% as perCBDT order F.No.404/72/93-ITCC if the petitioner ischallenging the order before the Appellate Authority. —Accordingly, the petitioner has paid the said 20% of thedemand and sought for further stay of the entiredemand. On the said application filed by the petitioner, ©respondent No.1 referred the matter to the CIT seekinghis approval for collection of the entire demand whichproposal was approved by the Pr. CIT. Based on thesame the impugned demand is passed. The mainreason to reject the request of the petitioner is,fabrication of capital and share premium contributedfrom other companies. It is the case of the departmentthat assessee has failed to prove the genuineness of the -~Tf- said companies who contributed to the share capital. Itis based on the vague statement and the statement onoath recorded of certain persons relating to thosecompanies, additions have been made. It is not indispute that the petitioner has challenged the saidassessment order before the Appellate Authority and thematter is pending consideration. Prima facie, thedetermination made by the Assessing Officer appears tobe high-pitched. In the circumstances, the respondentsought to have considered the said applicationjudiciously. T. The coordinate Bench of this Court inFLIPKARTINDIA|PRIVATE|LIMITEDVASTHEASSISTANT COMMISSIONER OF INCOME TAX ANDOTHERS IN W.P.NOS.1339-1342/2017 (T-IT)reportedin [2017] 79 tax 159>E8)<4considering the very same.Circular dated 29.2.2016 observed that the CIT has/failed to notice the fact that letter/circular is only partially modified the former Circular No.1914 andfailed to consider whether the assessment order suffersfrom being unreasonable, high-pitched or whether anygenuine hardship would be caused to the assessee incase the assessee were required to deposit 15% of thedisputed amount or not. It is true that said Judgmentrefers to deposit of 15% of the disputed amount, but itcannot be held that even in other cases, the respondent-Authorities can insist for the deposit of the entiredemand sans considering these two relevant factors. —Considering the facts and circumstances of the case,the matter being seized of by Appellate Authority, therespondent -Authorities are expected to consider thegenuine hardship that would be caused to the assesseedue to the high-pitched assessment. | partially modified the former Circular No.1914 andfailed to consider whether the assessment order suffersfrom being unreasonable, high-pitched or whether anygenuine hardship would be caused to the assessee incase the assessee were required to deposit 15% of thedisputed amount or not. It is true that said Judgmentrefers to deposit of 15% of the disputed amount, but itcannot be held that even in other cases, the respondent-Authorities can insist for the deposit of the entiredemand sans considering these two relevant factors. —Considering the facts and circumstances of the case,the matter being seized of by Appellate Authority, therespondent -Authorities are expected to consider thegenuine hardship that would be caused to the assesseedue to the high-pitched assessment. | 8. Hence, in the circumstances, this court is ofthe opinion that interest of justice would be sub-servedin directing the petitioner to deposit 20% of the total enforceable demand in addition to 20% deposited andfurnishing suitable security for another 39% of the totaldemand. Hence the following: ORDER Writ petition is allowed. The impugned order at Annexure-A is modified.The petitioner shall deposit 40% of the total enforceabledemand. Deductions shall be given to the amountalready deposited. Sufficient security shall be furnishedfor 39% of the enforceable total demand within a periodof four weeks from today. subject to the payment of the amount asaforesaid, notices issued under Section 226(3) shall berevoked. Any observations made in this writ petition shall not be treated as a precedent. ln. Sd/-.JUDGE