Kalaignar Tv Private Limited( v. The Commissioner Of Income Tax-10 Aayakar Bhawan, Annexe Vi Floor

IN THE HIGH COURT OF JUDICATURE AT MADRAS Kalaignar TV Private Limited(Represented by its Director Mr.P.Amirtham)No.367/369, Anna SalaiTeynampetChennai – 600 018...Petitioner Vs. 2.The Commissioner of Income Tax-10 Aayakar Bhawan, Annexe VI Floor No.121, M.G.Road, Nungambakkam Chennai- 600 034 ... Respondents Prayer : Writ Petition filed under Article 226 of theConstitution of India praying for the issuance of Writ ofCertiorarified Mandamus to call for the records of therespondent and quash the impugned order bearing C.No.10601(6)/2017-18/PCIT-10 dated 21.03.2018 issued by Respondent No.2 anddirect the respondents to not to enforce the arrears of demandagainst the petitioner pending disposal of appeals before theCommissioner of Income Tax (Appeals). For Respondents : Mr.J.Narayanasamy Standing Counsel O R D E RThe petitioner/Assessee has filed this writ petitionchallenging an order passed by the second respondent dated21.03.2018 on an application filed by the petitioner for stay ofcollection of taxes pursuant to the Assessment order for theAssessment years 2009-10 and 2010-11. 2. By the impugned order, the second respondent has directedthe Assessee to pay 20% of the tax demanded on or before26.03.2018 and if such condition is complied, the collection ofremaining 80% of the tax will remain stayed, failing which theAssessing Officer may treat the assessee as an assessee-in-default and initiate recovery proceedings. 3.The learned senior counsel for the petitioner contendedthat the assessment order passed by the Assessing Officer dated31.12.2017 for both the Assessment years, namely 2009-10 and2010-11 are unduly high pitched and in such situation, theCentral Board has clarified as early as in the year 1969 thatthe collection of disputed demands should be stayed till theappeals are heard and disposed of. In this regard, reliance wasplaced on Instruction No.96 dated 21.08.1969. It is furthersubmitted that the show-cause notice dated 15.12.2017 as well asthe Assessment Orders dated 31.12.2017 are mirror images of theCharge sheet laid by the Central Bureau of Investigation (CBI)before the Special Court and the persons cited as accused in thesaid case have been acquitted by the said Court, by judgmentdated 21.12.2017. The Assessee had produced the copy of thejudgment before Assessing Officer. Yet, the Assessing Officerhas failed to take note of the same and has completed theassessment. As against the Assessment Orders, the petitionerhas preferred appeals to the Commissioner of Income Tax(Appeals) on 23.02.2018 and the appeals are pending. A notice ofdemand dated 21.02.2018 was issued demanding a sum ofRs.12,66,66,300/- for the Assessment year 2009-10 andRs.79,90,55,680/- for the Assessment year 2010-11. Theseamounts were directed to be paid on or before 07.02.2018,failing which coercive action will be taken against the Assesseefor collection of the demands, as per the provisions of theIncome Tax, 1961, without any further notice. On receipt of thedemand, the petitioner filed stay petitions before the firstrespondent, their Assessing officer, vide petition dated22.02.2018. The same was disposed of by the first respondent byorder dated 23.02.2018 directing the petitioner to pay 20% ofthe disputed demand for both the Assessment years by referringto Board's Instruction No.1914 read with the Office Memorandumdated 29.02.2016 and 31.07.2017 of the CBDT. Immediatelythereafter, the petitioner filed a stay petition before thesecond respondent on 27.02.2018, which has been disposed of bythe impugned order. 4. The learned senior counsel was referring to the decisionsof this Court in N.Jegatheesan Vs. Deputy Commissioner ofIncome-Tax reported in [2016] 388 ITR 410 and submitted thatwhen assessments are unduly high pitched, stay has to be grantedwhen appeals are filed before Commissioner of Income Tax(Appeals). Further it is submitted that the respondent, whiledisposing of the stay petition, did not take into considerationthe effect of the decision of the Special Court and hasmechanically gone by the instruction issued by the CBDT.Therefore, it is submitted that the appeal may be directed to bedisposed of and in the meantime, the notice of demand may bedirected to be kept in abeyance. 5. Mr.J.Narayanasamy, learned senior standing counsel forthe revenue submitted that identical submissions, as made beforethis Court, were made by the petitioner before the Hon'ble FirstBench in a writ petition, being W.P.No.13624 of 2018, in whichthe order passed by the Income Tax Appellate Tribunal (ITAT)dated 25.05.2018 was put to challenge. The Tribunal grantedstay of recovery of tax payable subject to payment ofinstallments of Rs.2.50 Crores per month, of which the firstinstalment was to be paid on or before 15.06.2018 and thesubsequent installments on or before 15[th] of every subsequentmonth. It is submitted that the Hon'ble First Bench, by orderdated 12.06.2018, declined to interfere with the order passed byITAT and directed the Tribunal to dispose of the appeal withinsix months. Therefore, it is submitted that though the orderpertains to the Assessment year 2011-12, the factual position,which was pleaded before this Court in this writ petition, is nodifferent from W.P.No.13624 of 2018 and the Court may notinterfere with the impugned order. 6. Further it is submitted the order passed by the secondrespondent is a reasoned order and the petitioner was directedto pay only 20% of the disputed tax and hence, the impugnedorder does not call for interference. Further it is submittedthat Instruction No.96 dated 21.08.1969 has been superseded byInstruction No.1914 dated 22.12.1993 and therefore, 1969instruction cannot be relied upon. Further by referring to thecounter affidavit filed by the second respondent, it issubmitted that the Assessing Officer, after examining variousmaterials in his possession and after considering all thesubmissions of the assessee, came to the conclusion that a sumof Rs.25 Crores was unexplained for the assessment year 2009-10and a sum of Rs.175 Crores was unexplained for the assessmentyear 2010-11. The Assessing officer was not satisfied withregard to the nature and source of Rs.200 Crores. It is furthersubmitted that in any case, the matter is pending before CIT (A)and the CIT (A) will be passing orders on merits of the additions made by the Assessing Officer and in thesecircumstances, the payment of 20% directed to be made is veryreasonable. Further by referring to Counter affidavit, it issubmitted that income tax proceedings are civil proceedings andthe judgment of the CBI Special Court exonerating the accusedwill have no impact on the Income Tax proceedings and suchdecision cannot be applied to a tax assessment case. Further itis submitted that CBI Court adjudicated on the matter of illegalgratification under the laws relating to prevention ofcorruption, whereas the assessing officer made additions on theground of whether the sums credited on the books of the assesseeare genuine with regard to its nature and source thereof.Further by referring to the decision of the Hon'ble SupremeCourt in the case of Assistant Collector of Central Excise Vs.Dunlop India Ltd., and others reported in 1985 AIR 330 (SC), itis submitted the Government cannot continue to run on mere BankGuarantees and liquid cash is necessary for the running of aGovernment as indeed any other enterprises and therefore, theinterest of Revenue will be protected only if the impugned orderis upheld. 7. Heard Mr.P.Wilson, learned senior counsel appearing onbehalf of Mr.Sandeep Bagwar, learned counsel on record for thepetitioner and Mr.J.Narayanasamy, learned senior standingcounsel for the respondents. 8. The second respondent, while passing the impugned order,held that the Assessment Orders cannot be stated to be highpitched. However, the second respondent has not given anyfinding or reasons to support such a stand as to why theassessment is not high pitched. With regard to the judgment ofthe Special Court, New Delhi, it is stated by the secondrespondent that the criminal proceedings are different fromcivil proceedings and Income Tax assessment proceedings arecivil in nature and the rules of evidence are not strictlyapplicable to the proceedings as they apply in criminalproceedings. Further it is submitted that a criminal charge isrequired to be proved beyond reasonable doubt, whereas it ispreponderance of probabilities in income tax proceedings.Further, merely because the charge sheet filed by the CBI orEnforcement Directorate in the trial Court did not result in theconviction of the accused, it cannot be argued that there is nocase in the income-tax assessment proceedings. Further it isstated that the assessment is not merely based upon CBI chargesheet and it also takes into account such other materials asdiscussed in the assessment order. 9. As pointed out earlier, the second respondent has notgiven any reason as to why in his opinion the assessment is nothigh pitched. With regard to the other statement of law which https://hcservices.ecourts.gov.in/hcservices/ has been mentioned there, can be of no quarrel or no doubt thatthe said Income tax proceedings are civil in nature and strictrule of evidence are not applicable. However, the applicabilityof general preposition to the case on hand is required to beseen. The prima facie examination required is, as to whetherthere can be any impact on the income tax proceedings on accountof the acquittal in the criminal proceedings. 9. As pointed out earlier, the second respondent has notgiven any reason as to why in his opinion the assessment is nothigh pitched. With regard to the other statement of law which https://hcservices.ecourts.gov.in/hcservices/ has been mentioned there, can be of no quarrel or no doubt thatthe said Income tax proceedings are civil in nature and strictrule of evidence are not applicable. However, the applicabilityof general preposition to the case on hand is required to beseen. The prima facie examination required is, as to whetherthere can be any impact on the income tax proceedings on accountof the acquittal in the criminal proceedings. 10. This Court perused the show-cause notice dated15.12.2017. In the show-cause notice, there is substantialreference to the averments set out in the charge sheet filed bythe CBI. The petitioner had submitted their reply to the show-cause notice on 26.12.2017, after which the assessment has beencompleted under Section 143(3) r/w.254 of the Act. On a cursoryperusal of the Assessment Order dated 31.12.2017, I find thatsubstantial portion of the charge sheet filed by the CBI, whichwas relied on in the show-cause notice, has been referred toonce again and a finding has been arrived at by the AssessingOfficer. The correctness of the findings is to be tested by theCIT (Appeals) before whom the appeal petitions dated 07.02.2018are pending. Therefore, the finding of the second respondentthat the assessment is not solely based upon the CBI chargesheet appears to be prima facie incorrect because there issubstantial reference to the proceedings which were initiated bythe CBI. Undoubtedly, this issue has to be considered in thepending appeals before the CIT (A). Hence, it will be incorrectto render finding on that aspect and it is left to the decisionof the CIT (A). However, when a stay petition is moved beforethe second respondent and the petitioner refers to the effect ofthe judgment of the Special Court, not only in the grounds ofappeal as well as in the stay petition, the second respondentwas required to examine the said contention to ascertain as towhether the petitioner has made out a prima facie case andwhether the balance of convenience is in their favour andwhether they will be put to irreparable hardship, if interimorders are not granted. The second respondent admits in thecounter affidavit that the contentions raised by the assesseewill be examined by CIT (A). However, in the interregnum, asthere is a threat of recovery, the second respondent ought tohave considered the prima facie effect of the judgment of theSpecial Court on the prayer for stay of the demand. This ismore so because the Assessee's consistent case is that theincome tax proceedings is a mirror image of the proceedingsinitiated by the CBI. 11. So far as the contention of the Revenue that InstructionNo.96 dated 21.08.1969 has superseded Instruction No.1914 isconcerned, the stand is incorrect in the light of the decisionof this Court in the case of N.Jegatheesan Vs. DeputyCommissioner of Income-Tax, cited supra. Identical plea was raised by the Revenue in the said case and the Court aftertaking into consideration several decisions, held thatInstruction No.96 dated 21.08.1969 issued with the consent ofthe Informal Consultative Committee continues to hold the field.The relevant portion of the order reads as follows: 11. So far as the contention of the Revenue that InstructionNo.96 dated 21.08.1969 has superseded Instruction No.1914 isconcerned, the stand is incorrect in the light of the decisionof this Court in the case of N.Jegatheesan Vs. DeputyCommissioner of Income-Tax, cited supra. Identical plea was raised by the Revenue in the said case and the Court aftertaking into consideration several decisions, held thatInstruction No.96 dated 21.08.1969 issued with the consent ofthe Informal Consultative Committee continues to hold the field.The relevant portion of the order reads as follows: 16.It is the contention of the learned counsel forthe petitioner that pending the appeal, the petitioneris entitled for stay of recovery of the demand amount,as his case falls within the ambit of Sections 220(3) &220(6) of the IT Act. In view of the pendency of theappeal, the respondent ought to have passed an ordertreating him as not being in default in respect of theamount in dispute in the appeal, by placing reliance onCBDT Instruction No.95 dated 21.08.1969. But, accordingto the respondent, the said CBDT Instruction No.95 wassuperseded and as such, the respondent has exercisedhis power under subsequent Instruction No.1914 dated02.12.1993. But, the learned counsel for thepetitioner, by relying upon number of judgmentssubmitted that CBDT Instruction No.95 is still inforce. 17.Therefore, it would be appropriate to refersome of the decisions in this regard. In the case ofTaneja Developers & Infrastracture Ltd., Vs. AssistantCommissioner of Income Tax, Delhi & ors in W.P.(C).No.6956 of 2009, dated 24.02.2009, the Division Benchof Delhi High Court has held as follows:- '8.Relying upon the said Instruction No.1914 of1993, Mr.Jolly submitted that all previousinstructions stood superseded which included thesupersession of said Instruction No.96. Hefurther submitted that paragraph No.2(C), whichdeals with guidelines for staying demand,specifically requires that a demand be stayedonly if there are valid reasons for doing so andthat a mere filing of an appeal against theassessment order will not be a sufficient reasonfor staying recovery of a demand. 9.Having considered the arguments advanced by thelearned counsel for the parties, we are of theview that although Instruction No.1914 of 1993specifically states that it is in supersession ofall earlier instructions, the position obtainingafter the decision of this Court in ValvolineCummins Ltd., (Supra) is not altered at all. Thisis so because paragraph No.2(A) which speaks ofresponsibility specifically indicates that itshall be the responsibility of the AssessingOfficer and the TRO to collect every demand thathas been raised ?except the following', which includes ?(d) demand stayed in accordance withthe paras B and C below?. Para B relates to staypetitions. As extracted above, Sub-clause (iii)of para B clearly indicates that ahigher/superior authority could interfere withthe decision of the Assessing Officer/TRO only inexceptional circumstances. The exceptionalcircumstances have been indicated as - ?where theassessment order appears to be unreasonably highpitched or where genuine hardship is likely to becaused to the assessee.?. The very question as towhat would constitute the assessment order asbeing reasonably high pitched in considerationunder the said Instruction No.96 and, there, ithas been noted by way of illustration thatassessment at twice the amount of the returnedincome would amount to being substantially higheror high pitched. In the case before this Court inValvoline Cummins Ltd., (supra) that assessee'sincome was about eight (8) times the returnedincome. This Court was of the view that was highpitched. In the present case, the assessed incomeis approximately 74 times the returned income andobviously, this would fall within theexpression ?unreasonably high pitched?. (Emphasissupplied).' A reading of the above dictum would show that ifassessment order is unreasonably high pitched orgenuine hardship is likely to be caused to theassessee, then the assessee is entitled to be treatedas not being in default in respect of the amount indispute in the appeal. In the case reported in (1997) 223 ITR 192 (Raj)[Maharana Shri Bhagwat Singhji of Mewar Vs. Income-TaxAppellate Tribunal, Jaipur Bench, and others), theRajasthan High Court has held as follows:- “accordingly, on the facts, that the factorswhich are relevant for deciding the stayapplications primarily are a prima facie case,balance of convenience, financial status of thepetitioner, hardship and also the interestRevenue. In the instant case there was an orderof the court restraining the accountable personfrom alienating/disposing of the properties ofthe estate. The value of the estate which wasdetermined by the authority was much more thantwice the returned value. Hence, theInstruction No.96 of August 21, 1969, was applicable. It was also established that theaccountable person had no cash belonging to theestate. A perusal of the order of the Tribunalindicated that the contention raised by thepetitioner before the Tribunal for staying thetotal recovery was not contraverted and norelevant and convincing material regarding thefinancial status of the petitioner was placedbefore the Tribunal to establish that thepetitioner was in a position to deposit 25percent of the disputed duty. The recovery ofthe entire duty had to be stayed till thedisposed of the appeal.' In the case in Kec International Ltd Vs.B.R.Balakrishnan and ors, reported in [2001] 251 ITR158/1`19 Taxman 974, the Bombay High Court has heldas follows:- '...Hence, we intend to lay down certain parameterswhich are required to be followed by the authoritiesin cases where a stay application is made by anassessee pending appeal to the first appellateauthority. (a)While considering the stay application, theauthority concerned will at least briefly set out thecase of the assessee. (b)In cases where the assessed income under theimpugned order far exceeds returned income, theauthority will consider whether the assessee has madeout a case for unconditional stay. If not, whetherlooking to the questions involved in appeal, a part ofthe amount should be ordered to be deposited for whichpurpose, some short prima facie reasons could be givenby the authority in its order. (c)In cases where the assessee relies upon financialdifficulties, the authority concerned can brieflyindicate whether the assessee is financially sound andviable to deposit the amount if the authority wantsthe assessee to so deposit. (d)The authority concerned will also examine whetherthe time to prefer an appeal has expired. Generally,coercive measures may not be adopted during the periodprovided by the statute to go in appeal. However, ifthe authority concerned comes to the conclusion thatthe assessee is likely to defeat the demand, it maytake recourse to coercive action for which briefreasons may be indicated in the order. (e)We clarify that if the authority concerned complieswith the above parameters while passing orders on thestay application, then the authorities on the administrative side of the Department like respondentNo.2 herein need not once again give reasoned order.? In the judgment reported in 346 ITR 375(M/s.Maheswari Agro Industries Vs. Union of India andothers), it has been held by the Rajasthan High Courtas follows:- (e)We clarify that if the authority concerned complieswith the above parameters while passing orders on thestay application, then the authorities on the administrative side of the Department like respondentNo.2 herein need not once again give reasoned order.? In the judgment reported in 346 ITR 375(M/s.Maheswari Agro Industries Vs. Union of India andothers), it has been held by the Rajasthan High Courtas follows:- “52............ The mandate of Parliament in sub-section (6) seems to be that the lower AssessingOfficer should abide by and being bound by thedecision of the appellate authority, should normallywait for the fate of such appeal filed by theassessee. Therefore, his discretion of not treatingthe assessee in default, conferred under sub-section(6) should ordinarily be exercised in favour ofassessee, unless the overriding and overwhelmingreasons are there to reject the application of theassessee under Section 220(6) of the Act. Theapplication under Section 220(6) of the Act cannotnormally be rejected merely describing it to beagainst the interest of Revenue if recovery is notmade, if tax demanded is twice or more of the declaredtax liability. The very purpose of filing of appeal,which provides an effective remedy to the assessee islikely to be frustrated, if such a discretion wasalways to be exercised in favour of revenue ratherthan assessee.53.The tendency of making high pitched assessments bythe Assessing Officers is not unknown and it mayresult in serious prejudice to the assessee andmiscarriage of justice & sometimes may even resultinto insolvency or closure of the business if suchpower was to be exercised only in a pro revenuemanner. It may be like execution of death sentence,whereas the accused may get even acquittal from higherappellate forums or courts. Therefore, this Curt is ofthe opinion that such powers under sub-section (6) ofSection 220 of the Act also have to be exercised inaccordance with the letter and spirit of InstructionNo.95 dated 21.08.1969, which even now holds the fieldand its spirit survives in all subsequent CBDTCirculars quoted above, and undoubtedly the same isbinding on all the assessing authorities created underthe Act.”From the reading of the above cited judgments, it isclear that it is incorrect to state that DBDTInstruction No.1914, dated 02.12.1993 supersedes allprevious instructions. Although instruction No.1914specifically states that it is in supersession ofearlier instructions, the position obtaining after the decision of the case in Volvoline Cummins Limited Vs.DCIT (2008) 307 ITR 103 (Del) is not altered at all.This is so, the DBDT Instruction No.95, dated21.08.1969 was issued with the consent of the informalconsultative committee held on 13th May, 1969 formedunder the business rules of the Parliament, which evennow holds the field. 18. Hence, I am of the opinion that the tendencyof making high pitched assessments by the AssessingOfficer is not unknown and it may result in seriousprejudice to the assessee and miscarriage of justice &sometimes may even result into insolvency or closureof the business if such power was to be exercised onlyin a pro-revenue manner. Hence, I am of the opinionthat the powers under Sections 220(3) & 220(6) of ITAct have to be exercised in accordance with the letterand spirit of CBDT Instruction No.95 dated 21.08.1969,which is binding on all the assessing authoritiescreated under the Act. 19.Therefore, the impugned order passed by therespondent without considering CBDT Instruction No.95,dated 21.08.1969 is against the principles laid downin the judgments stated supra.” 12. In the light of the above decision, which has beenrendered following the decisions of the other High Courts, ithas to be held that Instruction No.1914 does not specificallysupersede Instruction No.96 and it binds the Assessing Officers. 19.Therefore, the impugned order passed by therespondent without considering CBDT Instruction No.95,dated 21.08.1969 is against the principles laid downin the judgments stated supra.” 12. In the light of the above decision, which has beenrendered following the decisions of the other High Courts, ithas to be held that Instruction No.1914 does not specificallysupersede Instruction No.96 and it binds the Assessing Officers. 13. So far as the decision of the Hon'ble Divison Bench isconcerned, firstly the same relates to the Assessment year 2011-12 and it is admitted by the Revenue that the issue arising forthe Assessment years 2009-10 and 2010-11 is not the issue whichhas arisen for the Assessment year 2011-12. Apart from that theorder impugned before the Hon'ble Division Bench was an orderpassed by the Tribunal on a stay application and the writpetition was disposed of with a direction to the Tribunal toexpedite the disposal of the appeal. Therefore, in myconsidered view, the decision of the Hon'ble First bench doesnot render much support to the case of the Revenue. 14. In the light of the above discussion, this Court is ofthe view that the prima facie effect of the judgment of theSpecial Court was required to be considered by the secondrespondent while examining the prayer for stay. Further, theimpugned order states that no such situation has beencontemplated in the CBI Instruction No.1914. In my consideredview the instruction issued by the Board are illustrative andnot exhaustive. The instruction itself was issued to bring about https://hcservices.ecourts.gov.in/hcservices/ uniformity in the manner in which the stay petitions have to bedealt with by the Assessing Officers. Even in the saidinstruction, discretion has been given to the Assessing Officerto impose conditions which are just and proper. Therefore, tostate that CBDT instruction does not cover facts andcircumstances like the assessee's case is incorrect way ofinterpreting the issue which has arisen for consideration beforethe second respondent. In the light of the above discussion,this Court is of the view that the impugned order calls forinterference. However, since the appeals are pending before CIT(A) and as admitted by the second respondent that the case ascanvassed by the petitioner has to be dealt with by the CIT (A)on the merits of the additions made by the Assessing Officer,with a view to avoid double exercise, I propose to pass thefollowing order, while setting aside the impugned order. In the result, the writ petition is allowed and the impugnedorder is set aside with a direction to the petitioner to file astay petition before Commissioner of Income Tax (Appeals) withina period of one week from the date of receipt of a copy of thisorder. On receipt of the stay petition, the Commissioner ofIncome Tax (Appeals) is directed to afford an opportunity ofpersonal hearing to the authorized representative of theAssessee and pass orders on the stay petition on merits and inaccordance with law. It is made clear that this Court has notrendered any finding on merits of the assessment. It is wellopen to the CIT (Appeals) to take note of all the aspects of thematter during the course of hearing. Sd/- Assistant Registrar(CS V) //True Copy// Sub Assistant Registrar To 1. The Assistant Commissioner of Income Tax Non-Corporate Circle – 20(1) M.G.Road, Nungambakkam Chennai-34 2.The Commissioner of Income Tax-10 Aayakar Bhawan, Annexe VI Floor No.121, M.G.Road, Nungambakkam Chennai- 600 034 VGII(CO)GSP(30/07/2018) https://hcservices.ecourts.gov.in/hcservices/