Wp/4227/2016 Of S.m.lateefuddin v. The Additional Commissiorer Of Income-Tax

THE HON’BLE SRI JUSTICE RAMESH RANGANATHANAndTHE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY WRIT PETITION No.4227 of 2016 ORDER: (per Hon’ble Sri Justice Ramesh Ranganathan) Heard Sri Abu Akram, learned counsel for the petitioner, andMs.Mamatha Chowdari, learned Senior Standing Counsel for the IncomeTax Department and, with their consent, the Writ Petition is being disposedof at the stage of admission. For the assessment year 2011-12 the assessing authority subjectedthe petitioner to tax under the Income Tax Act, 1961 (for brevity, ‘the Act’)for Rs.51,27,953/-. Aggrieved thereby, the petitioner carried the matter inappeal to the Commissioner of Income Tax (Appeals). They filed anapplication before the Income Tax Officer under Section 220 (6) of the Actrequesting him not to treat them as an assessee in default. By proceedingsdated 28.05.2015 the Income Tax Officer directed the petitioner to payRs.9,00,000/- i.e. Rs.4,50,000/- by 13.06.2014, and the balance ofRs.4,50,000/- by 11.07.2014; and kept the remaining demand in abeyance,subject to such payment, till the disposal of the appeal by the appellateauthority or 30.09.2014 whichever was earlier. The petitioner was directedto submit proof of payment of the instalments by the next working day, andwas informed that he would be liable to pay interest, under Section 220 (2)of the Act, for the entire demand; and, in the event of failure to comply withthe specified instalments granted on the dates mentioned, the petitionerwould be treated as an assessee in default, and coercive measures forrecovery of the entire amount would be taken. While Sri Abu Akram, learned counsel for the petitioner, would placereliance on the circular instructions of the CBDT dated 21.08.1969,Ms.Mamatha Chowdari, learned Senior Standing Counsel for the IncomeTax Department, would place before this Court a copy of the instructions,issued by the CBDT on 02.12.1993, to submit that the earlier circularinstructions are no longer in force. She would further submit that, after thecircular dated 02.12.1993 was issued, the CBDT had issued clarification dated 01.12.2009 to the effect that instructions dated 21.08.1969 no longerexisted, and instruction No.1914 dated 21.12.1993 holds good. In terms of the circular instructions of the CBDT dated 02.12.1993,the assessing authority is required to take into consideration certain factors while granting stay of the demand. They are:- “i. A demand will be stayed only if there are valid reasons fordoing so. Mere filing an appeal against the assessment order willnot be a sufficient reason to stay the recovery of demand. A fewillustrative situations where stay could be granted are: It is clarified that in these situations also, stay may be grantedonly in respect of the amount attributable to such disputed points.Further where it is subsequently found that the assessee has notco-operated in the early disposal of appeal or where a subsequentpronouncement by a higher appellate authority or court alters theabove situation, the stay order may be reviewed and modified.The above illustrations are, ofcourse, not exhaustive.ii. In granting stay, the assessing officer may impose suchconditions as he may think fit. Thus he may—a) require theassessee to offer suitable security to safeguard the interest ofrevenue; b) require the assessee to pay towards the disputedtaxes a reasonable amount in lumpsum or in instalments; c)require an undertaking from the assessee that he will co-operatein the early disposal of appeal failing which the stay order will becancelled; d) reserve the right to review the order passed afterexpiry of a reasonable period, say upto 6 months, or if theassessee has not co-operated in the early disposal of appeal, orwhere a subsequent pronouncement by a higher appellateauthority or court alters the above situations; e. reserve a right toadjust refunds arising, if any, against the demand. Section 220 (6) of the Act stipulates that, where an assessee haspresented an appeal under Section 246 or 246-A, the assessing authoritymay, in his discretion and subject to such conditions as he may think fit toimpose in the circumstances of the case, treat the assessee as not beingin default in the appeal, even though the time for payment has expired, aslong as such appeal remains undisposed of. While a discretion is conferred on the assessing authority underSection 220 (6) of the Act to treat the assessee as not being in default,such discretion should be exercised for just and valid reasons. Theassessing authority cannot be influenced solely by the assessment orderwhich he has passed, as the said order is the subject matter of appealbefore the Commissioner of Income Tax (Appeals). While examining whether or not the assessee should be treated as an assessee in default,in respect of the tax disputed in the appeal, the assessing authority is alsobound to safeguard the interests of the revenue, and impose such conditions as he considers it fit to impose in the circumstances of the case.In considering an application filed by the assessee, under Section 220 (6)of the Act, the assessing authority is bound to assign reasons for passingan order either with or without conditions. In the present case, while the petitioner was no doubt asked to payRs.9,00,000/- that too in two instalments, the order does not disclose thereasons why the assessing authority considered it necessary to grant stayon condition of deposit of Rs.9,00,000/-. As it is bereft of reasons, theimpugned order passed by the assessing authority, under Section 220 (6)of the Act, is set aside. The assessing authority shall, after giving thepetitioner an opportunity of personal hearing, pass an order afresh underSection 220 (6) of the Act in accordance with law. The Writ Petition stands disposed of accordingly. MiscellaneousPetitions pending, if any, shall also stand disposed of. There shall be noorder as to costs. ______________________________ RAMESH RANGANATHAN, J 16[th] February, 2016.Tsy __________________________________ M.SATYANARAYANA MURTHY, J