The Above Circular Amends An Earlier Circular, Dated 29.02.2016. This Was Considered By This Court In Queen Agencies v. Assistant Commissioner Of Income Tax (Circle-1) And Others Vide Order Dated 01.04.2021 In W.p.(Md)

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT CORAM THE HONOURABLE MR.JUSTICE C.SARAVANAN A K M G Alloys Private LimitedRep. by its Director,G.Venkatachalkumar... Petitioner 1.The Commissioner of Income Tax (Appeals), Office of the Commissioner of Income Tax (Appeals), Bibikulam, Madurai. 2.The Assistant Commissioner of Income Tax, Circle-1, Office of the Assistant Commissioner of Income Tax, Palani Road, Kottapatti Post, Dindigul-624 002. ...Respondents Prayer: Writ Petition filed under Article 226 of the Constitutionof India, praying this Court to issue a Writ of CertiorarifiedMandamus, to call for the records on the file of the secondrespondent in PAN: /DCIT/CIR/2018-19 dated 21.10.2019 andto quash the same as illegal, arbitrary and consequently direct thesecond respondent to stay the recovery of tax demand until thedisposal of the appeal by the first respondent namely theCommissioner of Income Tax (Appeals), Madurai. Senior Standing Counsel ORDER In this writ petition, the petitioner has challenged theimpugned order, dated 21.10.2019 passed by the second respondentAssistant Commissioner of Income Tax, Circle 1, Dindigul. By theimpugned order, the second respondent has rejected the petitionfiled by the petitioner under Section 220 (6) of IT Act, 1961 in thewake of order, dated 18.07.2018 passed under Section 271 D of theIncome Tax Act, 1961, imposing a penalty of Rs.5.70 Crores on thepetitioner.https://hcservices.ecourts.gov.in/hcservices/ 2. In the impugned order reliance has placed on circular dated31.07.2017 bearing reference F.No.404/72/93-ITCC. The only reasongiven in the impugned order is the failure of the petitioner to fileevidence to substantiate financial hardship for non-payment of taxdemanded and penalty that in terms of the above circular andtherefore the petitioner has been directed to deposit 20% of thedisputed amount. 3. The above circular amends an earlier circular, dated29.02.2016. This was considered by this Court in Queen Agencies VsAssistant Commissioner of Income Tax (Circle-1) and others videorder dated 01.04.2021 in W.P.(MD).No5550 of 2020 (THE HONOURABLEMR.JUSTICE G.R.SWAMINATHAN). 4. The learned counsel for the petitioner is however unable toconfirm as to whether the appeal filed against order, dated18.07.2018 passed under Section 271 D has been disposed of or not bythe commissioner of Income Tax (Appeals), as on date. 5. The learned counsel for the respondent submits that there isno merits in the present writ petition. He submits that the appealfiled by the petitioner against the order passed under Section 271 Dof the Income Tax Act, 1961 would have been disposed by now. Thatapart, it is submitted that the petitioner has an alternate remedyby way of revision in terms of circulars of the Central Board ofDirect Taxes and therefore petitioner should have approached suchauthorities. 6. Heard learned counsel for the petitioner and the respondent.In this writ petition, the petitioner has challenged the impugnedorder dated 21.10.2019 passed by the second respondent disposing theapplication filed by the petitioner under Section 220 [6] of theIncome Tax Act, 1961 to stay the recovery proceedings pending appealbefore the commissioner of Income Tax [Appeals] against order dated18.07.2018 passed by the respondent under Section 271 D of theIncome Tax Act, 1961. By the last mentioned order, the secondrespondent has imposed a sum of Rs.5.7 Crores as penalty on thepetitioner under the aforesaid provision of the Income Tax Act,1961. 7. It is submitted that the impugned order merely states thatthe petitioner has failed to file any document to establishfinancial hardship. It is therefore submitted that the impugnedorder is liable to be quashed. In this connection, reference wasmade to few decision of this Court and that of the Hon'ble SupremeCourt. 7. It is submitted that the impugned order merely states thatthe petitioner has failed to file any document to establishfinancial hardship. It is therefore submitted that the impugnedorder is liable to be quashed. In this connection, reference wasmade to few decision of this Court and that of the Hon'ble SupremeCourt. 8. I have considered the arguments advanced by the learnedcounsel for the petitioner and the learned counsel for the Incomehttps://hcservices.ecourts.gov.in/hcservices/ Tax Department. I have also perused the orders of this Court andthat of the Honourable Supreme Court. Guidelines have been issued bythe Central Board of Direct Taxes. 9. As per circular, dated 29.02.2016 bearing ReferenceF.No.404/72/93-ITCC, it has been clarified as under: 4.In order to streamline the process of grant ofstay and standardize the quantum of lump sum paymentrequired to be made by the assessee as a pre-condition for stay of demand disputed before CIT (A),the following modified guidelines are being issued inpartial modifiaction of Instruction No.1914: (A) In a case where the outstanding demand isdisputed before CIT (A), the assessing officer shallgrant stay of demand till disposeal of first appealon payment of 15% of the disputed demand, unless thecase falls in the category dicussed in para (B)hereunder. (B) In a situation where, (a) the assessing officer is of the viewthat the nature of addition resulting in the disputeddemand is such that payment of a lump sum amounthigher than 15% is warranted (e.g. In a case whereaddition on the same issue has been confirmed byappellate authorities in earlier years or thedecision of the Supreme Court or jurisdictional HighCourt in favour of Revenue of addition is based oncredible evidence collected in a search or surveyoperation, etc.) or (b) the assessing officer is of the viewthat the nature of addition resulting in the disputeddemand is such that payment of a lump sum amountlower than 15% is warranted (e.g. in a case whereaddition on the same issue has been deleted byappellate authorities in earlier years or thedecision of the Supreme Court or jurisdictional HighCourt is in favour of the assessee etc. the assessingofficer shall refer the matter to the administrativePr.CIT/CIT, who after considering all relevant factsshall decide the quantum/proportion of demand to bepaid by the assessee as lump sum payment for grantinga stay of the balance demand. (C) In a case where stay of demand is granted bythe assessing officer on payment of 15% of thedisputed demand and the assessee is still aggrieved,he may approach the jurisdictional administrative Pr.CIT/CIT for a review of the decision of the assessingofficer. https://hcservices.ecourts.gov.in/hcservices/ (D) The assessing officer shall dispose of a staypetition within 2 weeks of filing of the petition.If a reference has been made to Pr. CIT/CIT underpara4 (B) above or a review petition has been filed bythe assessee under para 4 (C) above, the same shallalso be disposed of by the Pr. CIT/CIT within twoweeks of the assessing officer making such referenceor the assessee filing such review, as the case maybe. (E) In granting stay, the Assessing Officer mayimpose such conditions as he may think fit. He may,inter alia, (i) require an undertaking from the assesseethat he will cooperate in the early disposal ofappeal failing which the stay order will becancelled; (ii) reserve the right to review the orderpassed after expiry of reasonable period (say 6months) or if the assessee has not cooperated in theearly disposal of appeal, or where a subsequentpronouncement by a higher appellate authority ofCourt alters the above situations; (iii) reserve the right to adjust refundsarising, if any, against the demand, to the extent ofthe amount required for granting stay and subject tothe provision of Section 245. (E) In granting stay, the Assessing Officer mayimpose such conditions as he may think fit. He may,inter alia, (i) require an undertaking from the assesseethat he will cooperate in the early disposal ofappeal failing which the stay order will becancelled; (ii) reserve the right to review the orderpassed after expiry of reasonable period (say 6months) or if the assessee has not cooperated in theearly disposal of appeal, or where a subsequentpronouncement by a higher appellate authority ofCourt alters the above situations; (iii) reserve the right to adjust refundsarising, if any, against the demand, to the extent ofthe amount required for granting stay and subject tothe provision of Section 245. 10. The thumb rule as per the above circular is thatmandatorily an assesse preferring any appeal before an AppellateCommissioner shall deposit 15% pending disposal of the first appeal.The aforesaid amount of 15% was later enhanced to 20% by asubsequent Office Memorandum dated 31.07.2017, bearing ReferenceF.No.404/72/93-ITCC. 11. The circular also states that in a case where a stay ofdemand is granted by the Assessing Officer on payment of 15% (now20% amended) of the disputed demand and if the assessee is stillaggrieved, he may approach the Jurisdictional Principal CIT forreview of the decision of the Assessing Officer disposing anapplication. 12. The Hon’ble Supreme Court in Principal Commissioner ofIncome Tax Vs LG Electronics India Private Limited reported in(2018) 18 SCC 447 has held that where orders passed under 220 (6) ofthe Act are without any reason, the case can be remitted back fordetermination of financial hardship The Hon’ble Supreme Court hasalso held that it is open to the authorities to examine the facts ofhttps://hcservices.ecourts.gov.in/hcservices/case and grant an order directing deposit of an amount less than 20%, pending main appeal. 13. A reading of the impugned order indicates that it merelystates that the petitioner has not brought any evidence of record toshow financial hardship. However, what is required to be examined iswhether the petitioner had made out a prima facie case on merits andwhether the balance of convenience was overwhelmingly in favour ofthe petitioner for grant of an interim relief, apart from financialstringency as in held in Kannammal Vs Income Tax Officer reportedin (2019) 413 ITR 390(Mad). 14. Since the circular also gives the revisional remedy to thepetitioner, I am inclined to dispose the writ petition by permittingthe petitioner to file appropriate application for revising theimpugned order within a period of two weeks from the date of receiptof copy of this order, provided no order has been passed in theappeal filed by the petitioner against order dated 13.07.2019 beforeCIT (Appeals). In case, the appeal has been disposed of, it is opento the petitioner to file appropriate appeal before the Tribunalalong with a stay application. In case, the appeal of the petitionerhas not been disposed by the CIT (Appeals), there shall be an orderof interim protection for a period of four weeks to facilitate tothe petitioner to file revision application. If the petitioner filessuch application within a period of two weeks from the date of thisorder, before the Principal Commissioner/Commissioner of Income Tax,it shall be disposed within two weeks thereafter. Needless to statethat the Principal Commissioner/Commissioner shall be guided by theabove decision of this Court and that of the Hon'ble Supreme Court. 15. The writ petition stands disposed of with the aboveobservation. No costs. Consequently, the connected MiscellaneousPetitions are closed. Sd/- Deputy Registrar(LA & MC) sn / /2022Sub Assistant Registrar(CS) 15. The writ petition stands disposed of with the aboveobservation. No costs. Consequently, the connected MiscellaneousPetitions are closed. Sd/- Deputy Registrar(LA & MC) sn / /2022Sub Assistant Registrar(CS) Note : In view of the present lock down owing toCOVID-19 pandemic, a web copy of the order may beutilized for official purposes, but, ensuring thatthe copy of the order that is presented is thecorrect copy, shall be the responsibility of theadvocate/litigant concerned. https://hcservices.ecourts.gov.in/hcservices/ To 1.The Commissioner of Income Tax (Appeals), Office of the Commissioner of Income Tax (Appeals), Bibikulam, Madurai. 2.The Assistant Commissioner of Income Tax, Circle-1, Office of the Assistant Commissioner of Income Tax, Palani Road, Kottapatti Post, Dindigul-624 002. +1 CC to M/s.N.DILIPKUMAR, Advocate ( SR-5456[F] dated 10/02/2022 )+1 CC to M/s.S.KARUNAKAR, Advocate ( SR-5463[F] dated 10/02/2022 ) W.P(MD).No.25512 of 201909.02.2022 SK(CO)TR(08.03.2022) 6P 5C