Neutral Citation No: 2022/Dhc/001045 v. Commissioner Of Income Tax (Intl. Tax) -3, Newdelhi And Anr

$~42 *IN THE HIGH COURT OF DELHI AT NEW DELHI+W.P.(C) 4639/2022 & C.M.No.13945/2022M/S TOSHIBA CORPORATION ..... Petitioner ThroughMr.Deepak Chopra with Mr.AnkulGoyal, Advocates. versus COMMISSIONER OF INCOME TAX (INTL. TAX) -3, NEWDELHI AND ANR. ..... RespondentsThroughMr.Ruchir Bhatia, Advocate. % Date of Decision: 23[rd]March, 2022 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MR. JUSTICE DINESH KUMAR SHARMA J U D G M E N T MANMOHAN, J (Oral): 1.Present writ petition has been filed challenging the orders dated14[th]March, 2022, 10[th]March, 2022, 11[th]February, 2022 and 28[th]January,2022 directing the Petitioner to deposit twenty percent of outstandingdemand. Petitioner also seeks stay of recovery proceedings arising out of theorder dated 12[th]November, 2021 passed under Section 201(1)/201(1A) ofthe Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) and notice ofdemand dated 12[th]November, 2021 issued under Section 156 of the Act. 2.Learned counsel for the petitioner states that in the Financial Year2015-16, the Petitioner purchased 12,70,276 unlisted equity shares of UEMIndia Private Limited (Now known as Toshiba Water Solutions PrivateLimited) from non-residents (tax residents of USA) and deducted TDS @ 10% as well as applicable surcharge and cess while remitting saleconsideration of Rs.31,51,80,881/-. He states that proceedings were initiatedunder Section 201(1)/201(1A) of the Act against the Petitioner whichculminated in passing the order dated 12[th]November, 2021 vide which thetransaction of purchase of shares undertaken by the Petitioner was re-characterised as purchase of depreciable assets and short-term capital gainwas computed, pursuant to which a demand of Rs.33,03,55,413/- was raisedon the Petitioner. 3.Learned counsel for the Petitioner states that aggrieved by the orderdated 12[th]November, 2021, the Petitioner filed an appeal before CIT(A) andalso preferred an application before the Assessing Officer under Section220(6) of the Act seeking a stay on recovery of demand raised pursuant tothe impugned order. He states that the Assessing Officer vide the impugnedorder dated 28[th]January, 2022 directed the Petitioner to deposit twentypercent of the total tax demand in terms of CBDT Instruction No. 1914 asamended by Office Memorandum dated 29[th]February, 2016 and 31[st]July,2017 without dealing with any of the submissions of the Petitioner. 4.He states that the Petitioner filed an application for review/stay beforeCIT in terms of the Office Memorandum dated 29[th]February, 2016 asmodified by the Office Memorandum dated 31[st]July, 2017. However, thesaid application was rejected by Respondent no.1 vide order dated11[th]February, 2022 stating that the “application would not qualify foradjudication as a pre-payment of 20% of the disputed demand is necessary”.He states that the petitioner on 21st February, 2022 made another request torespondent no.1 to decide the review application as per prescribedprocedure. However, Respondent no.1 passed orders dated 10[th]March, 2022 and 14[th]March, 2022 directing the Petitioner to deposit twenty percent ofthe demand, without providing any reasons for the same. 5.Issue notice. Mr.Ruchir Bhatia, Advocate accepts notice on behalf ofthe Respondents. He states that the transaction, in question, is a colourabledevice to avoid payment of taxes. He further states that as far as direction todeposit twenty percent of the demand is concerned, the same is inaccordance with the Office Memorandums dated 29[th]February, 2016 and31[st]July, 2017. and 14[th]March, 2022 directing the Petitioner to deposit twenty percent ofthe demand, without providing any reasons for the same. 5.Issue notice. Mr.Ruchir Bhatia, Advocate accepts notice on behalf ofthe Respondents. He states that the transaction, in question, is a colourabledevice to avoid payment of taxes. He further states that as far as direction todeposit twenty percent of the demand is concerned, the same is inaccordance with the Office Memorandums dated 29[th]February, 2016 and31[st]July, 2017. 6.Having heard learned counsel for the parties and having perused thetwo Office Memorandums, in question, this Court is of the view that therequirement of payment of twenty percent of disputed tax demand is not apre-requisite for putting in abeyance recovery of demand pending firstappeal in all cases. The said pre-condition of deposit of twenty percent ofthe demand can be relaxed in appropriate cases. Even the OfficeMemorandum dated 29[th]February, 2016 gives instances like where additionon the same issue has been deleted by the appellate authorities in earlieryears or where the decision of the Supreme Court or jurisdictional HighCourt is in favour of the assessee. 7.In fact the Supreme Court in the case of PCIT vs. M/s LG ElectronicsIndia Pvt. Ltd. 2018 SCC 447 has held that tax authorities are eligible togrant stay on deposit of amounts lesser than twenty percent of the disputeddemand in the facts and circumstances of a case. The relevant portion of thesaid judgment is reproduced hereunder: ‘HavingheardShriVikramjitBanerjee,learnedASGappearing on behalf of the appellant and giving credence to thefact that he has argued before us that the administrativeCircular will not operate as a fetter on the Commissioner since it is a quasi-judicial authority, we only need to clarify that inall cases like the present, it will be open to the authorities, onthe facts of individual case, to grant deposit orders of a lesseramount that 20%, pending appeal.’ 8.In the present case, the impugned orders are non-reasoned orders.Neither the Assessing Officer nor the CIT have considered three basicprinciples i.e. the prima facie case, balance of convenience and irreparableinjury while deciding the stay applications. 9.Consequently, the impugned orders and notices are set aside and thematter is remanded back to the Commissioner of Income Tax for freshadjudication in the application for stay. However, before deciding the stayapplication, the Commissioner of Income Tax shall grant a personal hearingto the authorised representative of the Petitioner. For this purpose, list thematter before the Commissioner of Income Tax on 18[th]April, 2022. It isclarified that till the stay application filed by the petitioner is not decided, nocoercive action shall be taken by the respondents against the Petitioner inpursuance to the demand arising out of the order dated 12[th]November, 2021.10.With the aforesaid directions, the present writ petition stands disposedof. MANMOHAN, J MARCH 23, 2022KA DINESH KUMAR SHARMA, J