Wp/36059/2015 Of Pavan Kumar Kukreja v. Income-Tax Officer

THE HON’BLE SRI JUSTICE RAMESH RANGANATHANAndTHE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHYWRIT PETITION No.36059 of 2015 ORDER:(per Hon’ble Sri Justice Ramesh Ranganathan) The order under challenge in this Writ Petition is the orderpassed by the Income Tax Officer under Section 220 (6) of the IncomeTax Act, 1961 ( for brevity, ‘the Act’) granting stay of collection of thedisputed demand on condition that the petitioner pays 50% of thedisputed tax in six equal monthly instalments commencing fromOctober, 2015. The petitioner, in whose name the subject-property stood, wassubjected to tax on capital gains on the sale of the subject-immovableproperty. It is the petitioner’s case that the property was transferred toKukreja Trading Company Private Limited, and was used fordevelopment; the said company declared income from suchdevelopment in its annual returns; it is the company which sold theproperty to Yalamanchili Software Exports Limited for a considerationof Rs.6,10,00,000/-; they had also paid capital gains thereon; and,consequently, the petitioner cannot be held liable to pay tax, on thevery same transaction, towards capital gains. Sri A.V.Krishna Kaundinya, learned Senior Counsel appearingon behalf of the petitioner, would submit that, even otherwise, the veryfact that the Income Tax Officer did not apply his mind independentlywhile granting stay is evident from the order itself which records thatprior approval of the Commissioner was obtained as the disputeddemand was in excess of Rs.1.00 Crore. In the counter-affidavit filed on behalf of the Income TaxOfficer, it is stated that the order was passed on independentapplication of mind exercising the discretion vested in him under Section 220 (6) of the Act; he had, however, obtained administrativeapproval of the Principal Commissioner of Income Tax-I,Visakhapatnam as required under the recent instruction of thePrincipal Chief Commissioner of Income Tax, Andhra Pradesh &Telangana vide letter in F.No.Pr.CC/Tech/Stay/2015-16 dated27.07.2015; under the said instructions, where the demand involved isa sum in excess of Rs.1.00 Crore, prior approval is required to beobtained from the Principal Commissioner of Income Tax beforeorders are passed under Section 220 (6) of the Act; he had taken aliberal view, and had only directed the petitioner to pay 50% of thedisputed demand, that too in six equal monthly instalments; and theorder does not suffer either from non-application of mind or abdicationof the powers vested in him under Section 220 (6) of the Act. The order under challenge in this Writ Petition, whereby staywas granted under Section 220(6) of the Act, is an elaborate orderwhereunder the Income Tax Officer took into consideration variousaspects including the financial position of the assessee. It is not eventhe petitioner’s case that this order was passed at the dictates of thePrincipal Chief Commissioner of Income Tax. The administrativecircular issued by the Principal Chief Commissioner, Income TaxDepartment is only a check on the exercise of powers of the IncomeTax Officer; and requires stay orders to be placed before theCommissioner where the disputed demand exceeds Rs.1.00 Crore. The impugned order is elaborate, and reflects independentexercise of the mind by the assessing authority. The mere fact that heobtained prior approval from the Commissioner, in terms of theaforesaid circular, does not result in non-application of mind orsurrender of the discretion vested in him under Section 220 (6) of theAct. The very fact that the assessing officer has only directed thepetitioner to pay 50% of the disputed tax, that too in six equal monthly instalments itself shows that the exercise of discretion was fair andreasonable. The impugned order is elaborate, and reflects independentexercise of the mind by the assessing authority. The mere fact that heobtained prior approval from the Commissioner, in terms of theaforesaid circular, does not result in non-application of mind orsurrender of the discretion vested in him under Section 220 (6) of theAct. The very fact that the assessing officer has only directed thepetitioner to pay 50% of the disputed tax, that too in six equal monthly instalments itself shows that the exercise of discretion was fair andreasonable. Prima facie, transfer of the subject-immovable property by thepetitioner to Kukreja Trading Company Private Limited, by way of aBoard Resolution of the said company, is unknown to law. It is not indispute that the subject-property stands in the name of the petitioner.It is not even the case of the petitioner that he had sold the property toKukreja Trading Company Private Limited. The claimed transfer ofownership, by way of a Board Resolution, does not, prima facie, divestthe petitioner’s title over the property and he continues to remain itsowner and, as such, is liable to pay capital gains tax. As the primaryliability is that of the petitioner it is always open to the company, whichis said to have paid tax, to seek refund of tax in accordance with law.That, however, does not absolve the petitioner of his liability to pay taxon capital gains on the sale of the subject property which belongs tohim. The aforesaid observations reflect our prima facie view and theappellate authority shall consider the petitioner’s contention on itsmerits uninfluenced by the observations made in this order. We find no error in the order of the Income Tax Officernecessitating interference in proceedings under Article 226 of theConstitution of India. The Writ Petition fails and is, accordingly,dismissed. Miscellaneous Petitions pending, if any, shall also standdismissed. There shall be no order as to costs. ______________________________ RAMESH RANGANATHAN, J __________________________________ M.SATYANARAYANA MURTHY, J