Shree Satkar Coop. Credit Society Ltd v. Income Tax Officer Ward 20(3)(3)And Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION LOD.NO.1233 OF 2019 Shree Satkar Coop. Credit Society Ltd...Petitioners Versus Income Tax Officer Ward 20(3)(3)and Ors...Respondents Mr. Devendra H. Jain for petitioners Mr. N.C.Mohanty for respondents. CORAM:AKIL KURESHI &SARANG V. KOTWAL, JJ. DATE :25[th] April 2019. P.C. Heard learned Counsel for the parties for final disposalof the petition. The petitioner has challenged an order dated 29[th]March 2019 passed by the Principal Commissioner of Income Tax,Mumbai. In such order, the Principal Commissioner insists that thepetitioner must deposit 20% of the disputed tax demand pendingappeal. Brief facts are as under:- Thepetitionerisacooperativesociety.The assessee had filed a return of income for assessment year2011-12. While assessing such return, the Assessing Officernoticed that the petitioner had engaged itself in accepting thecheques of the members of the credit society and paid cash ofequivalent value of the cheques on the same date to suchmembers. 3]The A.O. was of the opinion that the assessee was thusin the business of cheque discounting. He recorded that suchbusiness is a high risk business and the commission for suchcheque discounting activity is usually very high. He applied thealleged rate of 8% of the cheque amount which would be theassessee’s income from such activities. 4]The assessee filed an appeal against the said order ofassessment. The contention of the assessee is that the creditsociety has several small investors like labourers, who require theirown money urgently. When these members, therefore, depositcheques in their accounts, the credit society pays them the cheque 3 9-wplod-1233-19 amount immediately, without waiting for realisation of the saidcheques. In any case, according to the assessee, the commissionrate in such cheque discounting business does not exceed 0.15% ofthe cheque amount. The assessing officer, therefore, applied anunusually high rate of commission. The assessee would point outthat this is a sole head of addition in the assessment order.According to the assessee, therefore, there is a strong prima faciecase in appeal. The assessment can be described as a highpitched assessment. The Principal Commissioner (appeals)therefore, ought to have granted stay pending the appeal, withoutinsisting on depositing of part of the disputed tax amount. 5]For such purpose the assessee had filed an applicationbefore the Commissioner on 25[th] March 2019. On such application,the Commissioner passed his impugned order on 29[th] March 2019,which reads thus:- “ I have been directed to inform you that yourabove application for stay of demand has beenconsidered and rejected. Therefore, you are directed todeposit 20% of the demand raised and balance demandis stayed till disposal of appeal by CIT (A). It may benoted that coercive measures will be initiated to recover 9-wplod-1233-19 the demand in case of failure to pay the same.” 6]Learned Counsel for the petitioner submitted that thedepartment has attached the petitioner's five bank accounts, therebybringing the activity of the petitioner to a halt. He pointed out thatthe department has already recovered Rs.46.75 lakhs. 7]Having heard the learned Counsel for the parties andhaving perused the documents on record, we find that the impugnedorder passed by the Commissioner is rather cryptic and devoid ofreasons. In the present case, when the petitioner pointed out that ina high pitched assessment order, the A.O. has adopted thecommission rate of 8% in the cheque discounting activity, whichsimply does not prevail, the Principal Commissioner, in our opinion,ought to have examined such grievances of the assessee beforedeciding whether the present case is a fit one where therequirement of deposit of 20% of the disputed tax pending appealcan be reduced. 7]Having heard the learned Counsel for the parties andhaving perused the documents on record, we find that the impugnedorder passed by the Commissioner is rather cryptic and devoid ofreasons. In the present case, when the petitioner pointed out that ina high pitched assessment order, the A.O. has adopted thecommission rate of 8% in the cheque discounting activity, whichsimply does not prevail, the Principal Commissioner, in our opinion,ought to have examined such grievances of the assessee beforedeciding whether the present case is a fit one where therequirement of deposit of 20% of the disputed tax pending appealcan be reduced. 8]Under the circumstances, the petition is disposed of withfollowing directions:- (a)The impugned order of Commissioner dated 29[th] March2019 is quashed and set aside; (b)The Commissioner is requested to pass a fresh orderbearing in mind the observations made herein and taking intoconsideration the case of the petitioner. This must be donepreferably before 31[st] May 2019. (c)Attachment on bank account of the petitioner shall belifted forthwith; (d)The amount of tax already recovered from the petitionerwill not be refunded as of now and shall be adjusted against the finalorder that the Principal Commissioner may pass, subject to furtherchallenge by the petitioner; (e)There shall be no recovery against the petitioner for aperiod of two weeks, pursuant to the order passed by theCommissioner after the same is communicated to the assessee/ YBG petitioner. (f)Petition disposed of accordingly. (SARANG V. KOTWAL, J) 9-wplod-1233-19 (AKIL KURESHI, J)