Mr K v. Aravind, Senior Standing Counsel For The Revenuedepartment

Maria S. IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO.44 OF 2023 The Goa Forest DevelopmentCorporation, Through its Managing Director,AGovernmentofGoaUndertaking, Having office at 1[st]Lift, 3[rd] floor, Junta House, Panaji-… PetitionerGoa. Versus1. Principal Commissioner ofIncome Tax,Aayakar Bhavan, Plot No.5, EDCComplex, Patto Plaza, Panaji-Goa2. Income Tax Officer,Ward 1 (1, Panaji-Goa. … Respondents Mr Devidas J. Pangam, Advocate General with Ms Maria S. J.Correia, Additional Government Advocate for the Petitioners. Mr K. V. Aravind, Senior Standing Counsel for the RevenueDepartment. CORAM:M. S. SONAK &BHARAT P. DESHPANDE,JJ.Reserved on: 8[th] FEBRUARY 2023 Pronounced on:14[th] FEBRUARY 2023 JUDGMENT: (Per. Bharat P. Deshpande, J). 1. Rule. The Rule is made returnable forthwith. The matter istaken up for final disposal with the consent of both the parties. 2.The petitioner-Corporation is challenging the impugned orderdated 02.12.2022 passed by respondent no.1 wherein the stayapplication filed by the petitioner was rejected only on the ground thatthe petitioner failed to deposit 20% of the disputed demandimmediately. 3.Heard Shri Devidas J. Pangam, learned Advocate General alongwith Ms Maria Correia, learned Additional Government Advocate forthe petitioner and Mr K. V. Aravind, learned Senior Standing Counselfor the Revenue. 4.Shri Pangam would submit that the petitioner received a noticeunder Section 148 of Income Tax Act dated 30.03,2021 requiring thepetitioner to file return of the income for the assessment year 2017-18.Accordingly, on 27.04.2021 returns were filed disclosing loss of₹18805160/-. 5.Shri Pangam would then submit that though notices underSection 143(2) and 142(1) of the Income Tax Act were issued, the staffof the petitioner were not aware of such notices as at the relevant timemost of the staff of the petitioner-Corporation was on auction dutyand, thereafter, on election duty. The notices were not responded tobecause of above reasons. The Assessing Officer resorted to bestjudgment assessment under Section 144 of the Income Tax Act andpassed an order on 26.03.2022 under Section 147 r/w Section 144 r/wSection 144B of the Income Tax Act. In the said order the Assessing Officer considered the income of 50084646/- and accordingly levied₹tax of 38690390/-.₹ 6.Mr Pangam then would submit that petitioner filed an appealon 22.04.2022 against the assessment order. Mr Pangam would thensubmit that demand under Section 156 of Income Tax was issued forthe assessment year 2017-18 for a sum of 78121750/-. The petitioner₹then filed an application for stay of such demand until the disposal ofappeal by the Commissioner of Income Tax. 7.The respondent no.2 refused to consider grant of stay ofdemand as 20% of the disputed demand was not paid. The petitionerwas called upon to pay 20% of the disputed demand. Vide order dated02.12.2022 respondent no.1 rejected the petitioner's appeal on thesole ground that the petitioner failed to deposit 20% of the disputeddemand. The amount of 20% of the disputed demand works out to₹15624350/-. Vide letter dated 05.12.2022 the petitioner was directedto pay 20% of the disputed demand on or before 13.12.2022 failingwhich, recovery proceedings would be initiated as per the Income TaxAct. The petitioner, being aggrieved by such orders passed by therespondents, filed present petition with the prayer clauses as set outbelow: 'A. For a writ of certiorari or a writ in the nature ofcertiorari or any other appropriate writ, order ordirection thereby quashing and setting aside theImpugned Order dated 02.12.2022 passed by theRespondentNo.1bearingreference No.Stay/Pr.CIT/PNJ/2022-23 and the consequentialDemand letter dated 05/12/2022, issued by theRespondentNo.2bearingletterNo.ITBA/RCV/F/17/2022-23/1047808787(1). B. For an order staying the demand for the sum ofRs.7,81,21,752/-. 'A. For a writ of certiorari or a writ in the nature ofcertiorari or any other appropriate writ, order ordirection thereby quashing and setting aside theImpugned Order dated 02.12.2022 passed by theRespondentNo.1bearingreference No.Stay/Pr.CIT/PNJ/2022-23 and the consequentialDemand letter dated 05/12/2022, issued by theRespondentNo.2bearingletterNo.ITBA/RCV/F/17/2022-23/1047808787(1). B. For an order staying the demand for the sum ofRs.7,81,21,752/-. C. That pending hearing and final disposal of this writPetition, this Hon'ble Court may be pleased to stay theeffect and operation of the Impugned Order dated01/12/2022 passed by the Respondent No.1 bearingreference No.Stay/Pr.CIT/PNJ/2022-23 as well as theconsequential demand letter dated 05/12/2022, issued bytheRespondentNo.2bearingletterNo.ITBA/RCV/F/17/2022-23/1047808786(1). D. Ex-parte ad interim relief in terms of prayer clause(B). E. In the alternate, for an order remanding the matter tothe Respondent No.1 for fresh consideration of thePetitioners communication dated 14/07/2022. For suchother and further reliefs that this Hon'ble Court maydeem fit and proper.' 8.Shri Pangam then submitted that the bank deposits of thepetitioner were wrongfully considered by the Assessing Officer asunexplained income despite such investments being made in the fixeddeposits during the year with the banks, out of the grants receivedfrom the Government Goa. Similarly, the sale price of the vehiclepurchased was also wrongly considered as unexplained expenditure.He would then submit that there are various such amounts which havebeen considered as unexplained and the same need to be properly explained by the petitioner during the appeal. He then would submitthat the petitioner company is owned 100% by Government of Goaand the petitioner highlighted the hardships which it would face in theevent the entire demand is not stayed. 9.Shri Pangam would then submit that the petitioner is ready andwilling to deposit 30 lacs at present, within a period of two weeks so₹that the appeal could be decided on merit. 10.Shri Aravind, learned Senior Standing Counsel appearing forthe Revenue submitted that since there was no reply received from thepetitioner to the Notices, the Assessment Officer considered the caseof the petitioner on best assessment judgment. He would submit thatthe appeal was rightly dismissed since the petitioner failed to deposit20% of the disputed demand. 11.Shri Pangam placed reliance on the decision in Writ PetitionNo.471 of 2002 along with 3 others writ petitions decided on30.09.2022 by a coordinate Bench of this Court in which one of us(Bharat P. Deshpande, J) is a Member. In those matters essentially theconcern of the petitioners was with regard to refusal of stay to thedemand notices. Present matter is also essentially with regard to refusalof stay by the Assessing Officer to the demand notices pending appeal.Issue with regard to financial constraints was raised to make demandof 20% of the disputed demand, which was not considered by theconcerned authority. Paragraphs 13 and 14 of the said decision speaksthus:- 11.Shri Pangam placed reliance on the decision in Writ PetitionNo.471 of 2002 along with 3 others writ petitions decided on30.09.2022 by a coordinate Bench of this Court in which one of us(Bharat P. Deshpande, J) is a Member. In those matters essentially theconcern of the petitioners was with regard to refusal of stay to thedemand notices. Present matter is also essentially with regard to refusalof stay by the Assessing Officer to the demand notices pending appeal.Issue with regard to financial constraints was raised to make demandof 20% of the disputed demand, which was not considered by theconcerned authority. Paragraphs 13 and 14 of the said decision speaksthus:- '13. We have heard learned counsel for the parties andwith their assistance we have perused the record. On perusalof the orders by which the stay of the demand has beenrejected by the Assessing Officer as also by the PrincipalCommissioner of Income tax, we may observe that in thepetitioner's application dated 30.07.2021 the petitioner hadaverred a categorical case of financial hardship. However,the Assessing Officer rejected the petitioner's application ofa stay on the demand, without assigning any reasons. Thepetitioner accordingly approached the PrincipalCommissioner praying for stay of the demand, reiteratingthe specific grounds in that regard contending that theAssessing Officer has not applied his mind to the aspect offinancial stringency and therefore the demand needs to bestayed. However, the fate of the petitioner before thePrincipal Commissioner was not different. Although otherissues on merits are considered by the PrincipalCommissioner, we find that there are no reasons in thecontext of financial hardship, in both the orders passed bythe Principal Commissioner being orders dated 11.08.2021and order dated 29.12.2021. Thus, the case of thepetitioner on financial stringency is not at at all consideredin the perspective it ought to have been considered by thePrincipal Commissioner, after applying his mind to thespecific plea as taken by the petitioners in that regard. Suchplea was required to be decided by considering the facts andfigures from the materials as placed on record, so as todetermine by giving reasons as to whether the plea was at allgenuine and acceptable. 14.It is clearly seen from the decision cited by Mr.Pardiwala in the case of Mumbai Metropolitan RegionDevelopment Authority v/s. Deputy Director ofIncome -tax (Exemption-1)(2015) 273 CTR317(Bombay) that this Court considering the earlierdecisions on such issue as noted by us, has held that theaspect of financial hardship is one of the grounds which isrequired to be considered by the authority concerned andthe authority concerned should briefly indicate whether the assessee is financially sound and viable to deposit theamount or the apprehension of the revenue of non-recovery later is correct warranting deposit. We find thatat this stage such test is not applied in passing of theimpugned orders by the Principal Commissioner who hassimplicitor referred to the Assessing Officer's report inrejecting stay on deposit of the tax.' 12.The letter dated 10.05.2022 addressed to the Income TaxOfficer by the petitioner reveal the request for grant of stay to the taxdemand. It gives details about the amounts which have beenconsidered incorrectly, i.e. bank deposits, the sale price of the vehicleand the interest. However, Assessing Officer in one line rejected suchstay application vide order dated 10.60.2022 which reads thus: 'Since, 20% of the disputed amount is not paid, therequest for stay of demand is not considered. Therefore,you are requested to pay 20% of the disputed demand.' 12.The letter dated 10.05.2022 addressed to the Income TaxOfficer by the petitioner reveal the request for grant of stay to the taxdemand. It gives details about the amounts which have beenconsidered incorrectly, i.e. bank deposits, the sale price of the vehicleand the interest. However, Assessing Officer in one line rejected suchstay application vide order dated 10.60.2022 which reads thus: 'Since, 20% of the disputed amount is not paid, therequest for stay of demand is not considered. Therefore,you are requested to pay 20% of the disputed demand.' 13.The petitioner then approached respondent no.1, i.e thePrincipal Commissioner of Income Tax before whom the appeal wasfiled, vide their letter dated 14.07.2022 requesting for grant of stay tothe tax demand for the assessment year 2017-2018, giving all thenecessary grounds. The stay was rejected by respondent no.1 videorder dated 02.12.2022, which is challenged before this Court alongwith letter dated 05.12.2022 for demand of 20% of the disputedclaim. The petitioner then approached respondent no.1, i.e the 14.The observations of this Court in the case of TungabhadraMinerals Pvt. Ltd., in Writ Petition 471 of 2022(supra) are squarelyapplicable to the facts and circumstances of the matter in hand.Rejection of such application without giving any reason clearly exhibitnon-application of mind and, therefore, the matter needs to beconsidered in the light of explanation given by the petitioner in boththeir applications. The concerned authority must apply the principlesof natural justice by giving the reasons for rejecting stay applications. 15.In the case of Kec International Ltd., v/s. B. R. Balakrishnaand others[1], the division Bench of this Court at the Principal Seatwhile considering stay of demand, laid down some guidelines whichare as under:- '6... (a) While considering the stay application, the authorityconcerned will at least briefly set out the case of the assessee. (b) In cases where the assessed income under the impugnedorder far exceeds returned income, the authority will considerwhether the assessee has made out a case of unconditionalstay. If not, whether looking to the questions involved inappeal, a part of the amount should be ordered to bedeposited for which purpose, some short prima facie reasonscould 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 theassessee is financially sound and viable to deposit the amountif the authority wants the assessee to so deposit. (d) The authority concerned will also examine whether thetime to prefer an appeal has expired. Generally, coercivemeasures may not be adopted during the period provided bythe statute to go in appeal. However, if the authority 1 2001 SCC OnLine Bom 1229 concerned comes to the conclusion that the assessee is likelyto defeat the demand, it may take recourse to coercive actionfor which brief reasons may be indicated in the order. (e) We clarify that if the authority concerned complies withthe above parameters while passing orders on the stayapplication, then the authorities on the administrative side ofthe Department like respondent No.2 herein need not onceagain give reasoned order. ' 16.In view of the above decisions and the fact that the AssessingOfficer failed to disclose reasons while rejecting stay application andsince the appellate authority also failed to consider the stay applicationand demanded 20% of the disputed demand, considering this limitedissue, we are of the opinion that the Principal Commissioner need tore-consider and pass appropriate order as canvassed by the petitioner,by furnishing reasons. (e) We clarify that if the authority concerned complies withthe above parameters while passing orders on the stayapplication, then the authorities on the administrative side ofthe Department like respondent No.2 herein need not onceagain give reasoned order. ' 16.In view of the above decisions and the fact that the AssessingOfficer failed to disclose reasons while rejecting stay application andsince the appellate authority also failed to consider the stay applicationand demanded 20% of the disputed demand, considering this limitedissue, we are of the opinion that the Principal Commissioner need tore-consider and pass appropriate order as canvassed by the petitioner,by furnishing reasons. 17.Instead of a remand to consider the application for waiver thatwould entail further delay, We were invited to decide on suchapplication based on the material placed and the law as discussedabove. Only in the peculiar facts of this case and with consent We haveagreed. Considering the facts and figures placed before us, At least 10% amount must be deposited by the Petitioner. The financialhardships projected by the Petitioner, which is a Government concernmust be balnced with the interests of the revenue in public interests. 18.Shri Pangam submitted that petitioner is ready and willing todeposit an amount of 30 lacs within a period of 2 weeks. We accept₹such statement and direct the petitioner to deposit 30 lacs with the₹ respondent no.1, within a period of 2 weeks. This is less than 10% ofthe tax demanded. In the facts of the present case and considering thematerial placed before us, instead of a remand to consider the waiverapplication, interests of justice would be suitably served if thePetitioner deposits 10% of the demanded amount. Further, thehearing of the appeal on merits could be expedited. In light of aboveobservations, we dispose of the present petition by the following order: O R D E R I) Respondent No.1 is directed to hear the petitioner's appealon merit on the condition that the petitioner shall deposit anamount of 30 lacs within a period of 2 weeks from today and₹the balance to make up 10% of the demanded amount withinfurther two weeks from the date of first deposit. Thus, withinfour weeks from today, the Petitioner must deposit 10% of thedemanded amount with the Respondents. The impugned orderon pre-deposit is set aside subject to this condition. II) In the meantime, and subject to compliance of the abovecondition of deposit of 10% of the demanded amount, thereshall be a stay on the demand notices issued by therespondents. 19.We clarify that while considering the above aspects and the viewtaken by us, the matter on merits was not taken into considerationand all contentions of the respective parties are left open. 20.The Rule is made absolute in the above terms. 21.Parties shall act based on the authenticated copy of this order. BHARAT P. DESHPANDE, J. M. S. SONAK, J. MARIA SUZANA REBELLODigitally signed by MARIA SUZANA REBELLO Date: 2023.02.14 17:19:29 +05'30'