Wp/2271/2019 Of General Insurance Corporation Of India v. The Assistant Commissioner Of Income Tax Circle 3(1)(2) And 2 Ors

JPP IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2271 OF 2019 General Insurance Corporation of India … Petitioner V/s. The Assistant Commissioner of Income TaxCircle 3(1)(2) and Ors. ... Respondents. Mr. F.V. Irani i/b. Atul Jasani for the Petitioner. Mr. Sham Walve a/w. Pritish Chatterjee for the Respondents. CORAM : M.S. SANKLECHA & NITIN JAMDAR, JJ. DATE : 14 OCTOBER 2019. P.C.:- This Petition by a Government of India undertakingunder Article 226 of the Constitution of India challenges the orderdated 12 June 2019 passed by the Respondent No.1 – AssessingOfficer and the order dated 13 August 2019 passed by theRespondent No. 2 - Principal Commissioner of Income Tax (Appeals). Both the impugned orders have been passed on thePetitioner’s application for not being treated as an assessee in defaultunder Section 220(6) of the Income Tax Act 1961(the Act),consequent to the Assessment order dated 30 May 2019 relating tothe Assessment Year 2017-18 raising a demand of Rs.3601 crores.The above applications were made by the Petitioner in respect of anappeal from the order dated 30 May 2019 which is pending disposalbefore the Commissioner of Income Tax (Appeals). 2.By the impugned order dated 12 June 2019, theRespondent No.1 – Assessing Officer allowed the Petitioner’sapplication for not being treated as an assessee in default (stay) oncondition of the Petitioner depositing 20% of the disputed demandof Rs.3601 crores i.e. Rs.720 crores immediately. Being aggrievedthe Petitioner filed the further representation on 14 June 2019 beforethe Respondent No.2 – Commissioner of Income Tax under Section220(6) of the Act. This application for stay was disposed of by theimpugned order dated 13 August 2019 of the Respondent No.2 –Commissioner of Income Tax who considered each head comprisingof the disputed demand of Rs.3601 crores and allowed therepresentation on deposit of Rs.439 crores. 3.The impugned order dated 12 June 2019 of theRespondent No.1-Assessing Officer now stands modified by the impugned order date 13 August 2019 by Respondent No.2 –Commissioner of Income Tax. Thus, the impugned order dated 13August 2019 being the final order would only be subject ofexamination in this Petition. 4.At the very outset the Petitioner informed us that thehearing of the Petitioner’s appeal for the assessment order dated 13May 2019 is fixed for hearing on 21 October 2019 before theCommissioner of Income Tax (Appeals). We were therefore inclinedto adjourn the hearing of this Petition to 22 October 2019 as theAppeal itself may be disposed of in the near future. This particularlybearing in mind that post 30 May 2019, the Petitioner has beenenjoying an effective stay of the demand. However, on instructionsthis course of action was strongly opposed by Mr. Walve, the learnedCounsel for the Respondents. It was in the above view that we tookup the Petition for consideration. 5.The impugned order dated 13 August 2019 of theRespondent No.2 – Commissioner of Income Tax dealt with eachhead of the disputed demand arising from the order dated 30 May2019 and determined the quantum of deposit to be made in respectof each of them. The same has been tabulated issue-wise (each headof disputed demand) as under :- The Petitioner had returned an income of Rs.1495 crores and theAssessing Officer by his order dated 30 May 2019 assessed thePetitioner to a total income of Rs.10148 crores. Thus, an highpitched assessment. 5.The impugned order dated 13 August 2019 of theRespondent No.2 – Commissioner of Income Tax dealt with eachhead of the disputed demand arising from the order dated 30 May2019 and determined the quantum of deposit to be made in respectof each of them. The same has been tabulated issue-wise (each headof disputed demand) as under :- The Petitioner had returned an income of Rs.1495 crores and theAssessing Officer by his order dated 30 May 2019 assessed thePetitioner to a total income of Rs.10148 crores. Thus, an highpitched assessment. 6.It is the case of the Petitioners that so far as Serial Nos. 1(deduction for claim incurred but not reported), 2 (Exemption underSection 10(38) of the Act) and 5 (Amortization of premium)hereinabove are concerned, the same stands concluded in favour ofthe Petitioner either by virtue of decision of the Income TaxAppellate Tribunal (Tribunal) or the decision of this Court.Notwithstanding the above, the impugned order dated 13 August2019 of Respondent No.2 - the Commissioner of Income Tax hasdirected them to deposit 20% of the disputed amounts under ItemNos.2 and 5 above and 10% of the disputed amount under ItemNo.1 above. It is further submitted that in the ordinary course byvirtue of the Board Circulars/Instructions, a deposit of 20% of thedisputed demand by an assessee who has filed the first appeal wouldbe entitled to a stay of the balance demand till the disposal of theAppeal by the First Appellate Authority. In support reliance is placedby the Petitioner upon Instruction No.1914 dated 2 February 1993as modified by the office memorandums dated 29 February 2016and dated 31 July 2017 issued by the Central Board for Direct Taxes(CBDT). 7.So far as Item Nos. 3,4 and 7 of the above chart areconcerned, the Petitioner only for the purposes of the stay does notdispute the direction to deposit 20% of disputed demand inimpugned order dated 13 August 2019 of Respondent No.2 -Commissioner of Income Tax. This of course is what prejudice to its contention that no amount is payable under the above heads, whichis being impugned in the appeal. It is thus submitted that completestay of demand attributable to Item No.1,2 and 5 be granted andthat time be given to pay the amount of 20% payable in respect ofItem Nos.3,4 and 7 above. 8.On the other hand, Mr. Walve, learned Counselappearing for the Respondents supports the impugned order andstates that it is very fair and called for no interference. This fairnesshe submits is evident from the fact so far as Item No.6 of the abovechart i.e. disallowance of Section 14A of the Act is concerned, theCommissioner of Income Tax has directed a complete stay in view ofthe fact the issue stood covered in favour of the Petitioner by virtueof Tribunal decisions in the Petitioner’s own case for the earlierAssessment Years 2006-07 to 2011-12. So far as other claims areconcerned, Mr. Walve invited our attention to the impugned orderso far as Item Nos.1,2 and 5 are concerned. On the reading of thesame, it is submitted that direction of deposit of 10% and 20% isreasonable as there are decisions contrary to this Court and theTribunal (Mumbai Bench) being relied upon by the Petitioner forgrant of stay. In the above circumstances, he submits that there is nowarrant to interfere with the impugned order dated 13 August 2019of Respondent No.2 – Commissioner of Income Tax. Thus hesubmits that the Petition be dismissed. 9.Before dealing with the rival submissions it would beuseful to set out the parameters to be borne in mind while disposingof stay application as laid down by this Court. We refer to thefollowing extract of the decision of this Court in MumbaiMetropolitan Region Development Authority v/s. Deputy Directorof Income Tax (WP(L) No. 2348 of 2014) rendered on 29 October2014 as under :- 9.Before dealing with the rival submissions it would beuseful to set out the parameters to be borne in mind while disposingof stay application as laid down by this Court. We refer to thefollowing extract of the decision of this Court in MumbaiMetropolitan Region Development Authority v/s. Deputy Directorof Income Tax (WP(L) No. 2348 of 2014) rendered on 29 October2014 as under :- “11. We have today, disposed of another Petitionbearing No. 2542 of 2014 filed by the SlumRehabilitation Authority and set out the parameters indeciding stay application as laid down by this Court inKEC International Limited v/s. B. R. Balakrishnan 251ITR 158; UTI Mutual Funds v/s. ITO 345 ITR 71 andUTI Mutual Fund v/s. ITO in W.P.(L) No.523 of 2013rendered on 6 th March 2013 which can for thepurposes of disposing an application of stay can besummarized as under: (a) The order on stay application must briefly set out theissue and the submission of the assessee/ applicant insupport of the stay; (b) In cases where the assessed income under theimpugned order far exceeds returned income so as tomake the demand arbitrary or the issue arising forconsideration stands concluded by a decision of anhigher forum or where the order appealed against is inbreach of Natural Justice or the view taken in the orderbeing appealed against is contrary to what has been heldin the preceding previous years ( even if issue pendingbefore higher forum ) without there being a materialchange in facts or law, stay should normally be granted; (c) If not, whether looking to the questions involved inappeal, keeping in view the likelihood of success inappeal what part of the demand the whole(in case issuecovered against the applicant by a decision of higherforum) or part of it and must be justified by shortreasons in the order disposing of the stay application; (c) Lack of financial hardship would not be a soleground to direct deposit/payment of the demands if theassessee/applicant has a strong arguable case on merits; (d) In cases where the assessee/applicant relies uponfinancial difficulties, the authority concerned shouldbriefly indicate whether the assessee is financially soundand viable to deposit the amount or the apprehension ofthe revenue of non recovery later. Thus warrantingdeposit. This of course, if the case is not otherwisesustainable on merits; (d) The authority concerned will also examine whetherthe time to prefer an appeal has expired. Generally,coercive measures may not be adopted during theperiod provided by the statute to go in appeal. However,if the authority concerned comes to the conclusion thatthe assessee is likely to defeat the demand, it may takerecourse to coercive action for which brief reasons maybe indicated in the order (e) In exercising the powers of stay, the Authorityshould always bear in mind that as a quasi judicialauthority it is vested with the public duty of protectingthe interest of the Revenue while at the same timebalancing the need to mitigate hardship to the assessee.Though the assessing officer has made an assessment, hemust objectively decide the application for stayconsidering that an appeal lies against his order; the application for stay must be considered from all its facetsand the order should be passed, balancing the interest ofthe assessee with the protection of the Revenue. The above guidelines are only illustrative and theauthority concerned would have to have exercise hisdiscretion in matters of stay on the facts of the casebefore him. Keeping in view of the above broadparameters we shall now examine whether theauthorities have properly exercised their jurisdiction.” application for stay must be considered from all its facetsand the order should be passed, balancing the interest ofthe assessee with the protection of the Revenue. The above guidelines are only illustrative and theauthority concerned would have to have exercise hisdiscretion in matters of stay on the facts of the casebefore him. Keeping in view of the above broadparameters we shall now examine whether theauthorities have properly exercised their jurisdiction.” Besides the above, we shall also keep in mind theCirculars/Instructions issued by the CBDT from time to time,directing the Officers of Revenue to the manner in which stayapplications are to be disposed of. These circulars/instructions arebinding upon the Officers of the Revenue. Reference will be madeto the appropriate Circulars/Instructions while considering thesubmissions. 10.We shall now examine the impugned order dated 13August 2019 of the Respondent No.2 – Commissioner of IncomeTax bearing in mind the yardstick laid down in the above decisionsand the Circulars/Instructions of CBDT in the context of thesubmissions made by the parties. We are also taking into account thefact that the appeal before the Commissioner of Income Tax(Appeals) is ripe for hearing and is in fact fixed on 21 October 2019.Thus the appeal itself is in all likelihood will be decided in the nearfuture. 11.So far as Issue No.1 above is concerned, the Petitionersubmits that same stands concluded in its favour by virtue of thedecision dated 11 October 2017of the Mumbai Bench of theTribunal in DCIT Circle 3(1)(2) vs. ECGC IT No.7657/Mum/2014 and the Kolkata Bench of the Tribunal in the caseof DCIT v/s. Mutual Insurance Co. Ltd. 2016 (72) Taxmann.Com116 in favour of the Petitioner. However, the impugned order stilldirected a deposit of 10% of disputed demand on this Court in viewof the decision of Chennai Bench of the Tribunal in the case ofUnited India Insurance v/s. JCIT (2018) 97 Taxmann.com 466. Wenote that the Chennai Bench decision of the Tribunal has ignoredthe co-ordinate bench decision of Mumbai and Kolkata benches ofthe Tribunal. Therefore, prima facie per incurium. In any case theCBDT Circular No. 530 dated 6 March 1989 states that stay ofdemand be granted where there are conflicting decisions of the HighCourt. This principle can be extended to the conflicting decisions ofthe different benches of the Tribunal. Thus, in the above facts thecomplete stay of the demand on the above head i.e. Item No.1 of theabove chart was warranted in the Petitioner’s favour. 12.So far as Issue No.2 of the above table is concerned, it isthe case of the Petitioner that the issue is covered by the decision ofthis Court in PCIT v/s. New India Assurance Co. Ltd. 91Taxmann.Com 433. The Revenue contended that the 12.So far as Issue No.2 of the above table is concerned, it isthe case of the Petitioner that the issue is covered by the decision ofthis Court in PCIT v/s. New India Assurance Co. Ltd. 91Taxmann.Com 433. The Revenue contended that the Commissioner of Income Tax (Appeals) for the earlier AssessmentYears i.e. A.Y. 2006-07 to 2011-12 had taken a view adverse to thePetitioner and thus follows it. However, we are informed that onfurther Appeal to the Tribunal, the demand attributable on theaforesaid head had been stayed on partial deposit and the Appeal isnow fixed for hearing on 11 December 2019. However, we note thefact that while the impugned order of Commissioner of Income Taxdirected the Petitioner to pay 20% on this issue, it has not indicatedthe reason it has chosen to follow the decision of the Commissionerof Income Tax (Appeals) for the earlier Assessment Year inpreference to the decision of this Court in New India Assurance(Supra). This when it is the Petitioner’s contention that theamendment made in Rule 5 of the 1[st] Schedule to the Act will notaffect the claim for deduction under Section 10(38) of the Act. Noprima facie view on this is taken by the impugned order. Besides thedecision of jurisdictional High Court is binding upon the Authority.Therefore, in the above view, no deposit should have been directedon this head of disputed tax. An unconditional stay of this demandat Item No.2 of the chart in the present fact was warranted. 13.So far as Issue No.5 in the above chart is concerned, wefind that the impugned order dated 13 August 2019, does record thePetitioner’s submission that this issue stands concluded in its favourby the decision of the Mumbai Bench of the Tribunal in the case of Tata AIG General Insurance Co. Ltd. v/s. ITA (ITA No. 2543 of2009). Nevertheless the aforesaid binding decision is ignored on theground that the Chennai Bench of the Tribunal in Chennai UnitedIndia Insurance v/s. JCIT has taken a different view. There is nodiscussion as to why the Chennai Bench decision of the Tribunal isto be preferred in the Mumbai Bench decision of the Tribunal. Inthis case also CBDT Circular No. 530 dated 6 March 1989 whilestating that a stay of demand be granted if there are conflicting viewsof the High Court. This in our view could be extended toconflicting view of different benches of the Tribunal. In the aboveview, the impugned order directing the deposit of 20% on this headwas also not justified. An unconditional stay of this demand at ItemNo.5 of the chart, in the present facts is warranted. 14.In the above view, we modify the impugned order dated13 August 2019 of Respondent No.2 – Commissioner of IncomeTax to the extent that there shall be a complete stay of the demandsmade on Item at Serial Nos. 1,2 and 5 of the chart hereinabove. ThePetitioner will deposit the balance amount as directed by theCommissioner of Income Tax (Appeals) of Rs.26.40 crores with theRespondents within a period of four weeks from today. 15.It is made clear that one of the factors which weighedwith us in passing this order was the hearing of the appeal is now fixed before the Commissioner of Income Tax (Appeals) on 21October 2019 and the Petitioner’s undertaking to us that it will co-operate with the Commissioner of Income Tax (Appeals) in earlydisposal of the appeal. 16. It is made clear that observations made herein are only inthe context of the order of stay passed under Section 220(6) of theAct. Our observations are only prima facie view for the limitedpurpose of disposal of the stay application. It would not haveimpact/influence on the Commissioner of Income Tax (Appeals)while considering the Petitioner’s appeal on merits for the orderdated 30 May 2019 of the Assessing Officer. The Commissioner ofIncome Tax (Appeals) will dispose of the appeal on its own meritswithout in any manner being influenced by any observation in thisorder. 17.The Petition is disposed of in the above terms. NITIN JAMDAR, J. M.S. SANKLECHA, J.