Shri Lal Mahal Ltd v. Addl. Commissioner Of Income-Tax

$~64 *IN THE HIGH COURT OF DELHI AT NEW DELHI+W.P.(C) 2813/2019 & CM APPL. 13033/2019 SHRI LAL MAHAL LTD. ..... Petitioner Through:Mr. Gurmehar Sistani, Advocate withMr. Shivansh Pandya, Advocate versus ADDL. COMMISSIONER OF INCOME-TAX. & ANR ..... RespondentsThrough:Mr.Zoheb Hossain, Senior StandingCounsel for Revenue with Mr.SunilKumar Yadav, Additional CIT,Special Range 8. CORAM:JUSTICE S.MURALIDHARJUSTICE I.S.MEHTA % O R D E R19.03.2019 1. The Petitioner challenges an order passed by the Principal Commissionerof Income-tax-08 (Respondent No.2) dated 28[th]February 2019 calling uponthe Petitioner to pay the following outstanding demands immediately: “(i) 10 percent of demands disputed before the CIT (A). Asdirected by the Hon’ble High Court, Assessing Officer hassubmitted remand reports to the CIT (A) who is under thedirections of the Hon’ble Court to dispose of pending appealswithin six weeks. After the disposal of Assessee’s pendingappeals matter will be reviewed. (ii) 100 percent of demand (including interest) pertaining to AY2016-17 which is self admitted tax liability.” 2. This is the second round of litigation. Earlier, the Petitioner had filedW.P.(C) 1707/2019 in this Court at a stage when its application for stayunder Section 220 (6) before the Respondent No.2 was pending. Whileexpediting the disposal of the appeals pending before the CIT (A), this Courtby order dated 19[th]February 2019 disposed of the above writ petition byissuing the following directions as far as the question of stay of demand wasconcerned: “4. As far as the question of stay of demand is concerned, theCourt is of the opinion that Principal Commissioner of IncomeTax (PCIT) should first decide the application pending underSection 220(6) within ten days. During that time, the noticesunder Section 226(3) in question shall not be proceeded withand no coercive action shall be taken.” 3. It is pursuant to the above order that the impugned order was passed bythe Respondent No.2 on 28[th]February 2019. 4. The main plea of the Petitioner is that the above demand is too harshparticularly considering that the Petitioner is owed refunds by theDepartment. According to the Petitioner, a total refund in the sum ofRs.4,55,44,500 together with interest for the assessment years 1999-2000,2002-2003 and 2003-2004 is due to the Petitioner and that if those refundamounts were to be adjusted then the Petitioner would not be required todeposit the sums as ordered by the Respondent No.2 by the impugned orderdated 28[th]February 2019. 5. It is seen that the demand as per the Assessing Officer (AO) is to the tune of Rs.55,97,78,708. In para 4 of the impugned order, in a tabular form, thedetails of these demands which have been raised from AY 2001-2002onwards have been set out. For the AY 2016-17 the demand ofRs.10,07,79,190 includes self assessment tax of Rs.4,13,25,871/- plusinterest of Rs.1,15,71,243/- totalling to Rs.5,28,97,115/-. This is on theAssessee’s own admission the tax payable by it for AY 2016-17. 6. In para 7 of the impugned order, it is observed inter alia that according tothe AO the Petitioner is carrying out business in the name of sister concernsand is also conducting business in cash outside of its books of account. Areference has also been made to the formation of front companies formed bythe Assessee with the help of dummy directors to divert earnings. 7. Consequently the Respondent No.2 has in the impugned order directeddeposit of the admitted tax liability before A.O. pertaining to AY 2016-17and 10% of the remaining demand. 8. Mr. Gurmehar Sistani, learned counsel for the Petitioner, submits that thePetitioner is in a dire financial condition and since substantial amounts weredue to it by the Respondent by way of refund, the above demand is tooharsh. 6. In para 7 of the impugned order, it is observed inter alia that according tothe AO the Petitioner is carrying out business in the name of sister concernsand is also conducting business in cash outside of its books of account. Areference has also been made to the formation of front companies formed bythe Assessee with the help of dummy directors to divert earnings. 7. Consequently the Respondent No.2 has in the impugned order directeddeposit of the admitted tax liability before A.O. pertaining to AY 2016-17and 10% of the remaining demand. 8. Mr. Gurmehar Sistani, learned counsel for the Petitioner, submits that thePetitioner is in a dire financial condition and since substantial amounts weredue to it by the Respondent by way of refund, the above demand is tooharsh. 9. As far as the refunds are concerned, it is a separate subject matter, whichthe Petitioner has to pursue in accordance with law. What the Court isconcerned about here is the question of stay demand in relation to theappeals pending before the CIT (A). The limited scope is whether under Section 226 (3) of the Income Tax Act, 1961, the above order requiring thePetitioner to pay 10% of the demand as a condition for stay of the totaldemand during the pendency of the appeals before the CIT (A) apart fromthe admitted liability for AY 2016-17 can be said to be unjustified? 10. Considering the demands raised against the Petitioner for various AYsfrom time to time and the total outstanding demand being Rs.55.97 crores,the Court is of the view that the impugned order requiring the Petitioner topay 10% of the demand cannot be termed to be unreasonable. 11. Mr. Zoheb Hossein, learned Senior standing counsel for the Revenue,has shown the Court the copy of a demand dated 17[th]March 2017 raised bythe Additional Commissioner of Income Tax on the Petitioner under Section221 (1) which is 15% of all the disputed demands which form the subjectmatter of the appeals pending before the CIT (A). This has in fact beenreduced to 10% by the impugned order of Respondent No.2. 12. Mr. Sistani for the Petitioner then drew attention of the Court to thenotices dated 5[th]March 2019 issued to the trade debtors of the Petitionerunder Section 226 (3) of the Act and prayed that those should be stayedpending the disposal of the appeal before the CIT (A). 13. The above notices issued are consequential upon the impugned orderdated 28[th]February 2019. With the said order not calling for anyinterference, these notices also do not call for any interference. 14. The writ petition is accordingly dismissed and the application is alsodismissed. S. MURALIDHAR, J. MARCH 19, 2019sr I.S. MEHTA, J.