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I-T - Assessee cannot claim interim stay against recovery proceedings as a matter of right, simply on ground of his appeal pending before higher Forum: HC

 

By TIOL News Service

CHENNAI, MAY 21, 2018: THE ISSUE IS - Whether pendency of appeal before the higher authority, is no basis to grant stay on recovery of tax dues, and that too without making any pre-deposit. YES IS THE VERDICT.

Facts of the case:

The assessee is a private limited company having established Eye Care Hospitals in different cities and States. The assessment in its case for the A.Ys 2011-12 to 2016-17 was completed u/s 143(3) r/w/s 153(C) r/w/s 153A resulting in an order for provisional attachment of immovable properties held in the name of assessee company. On receipt of the order of assessment, the assessee sent a communication requesting for rectification of mistakes, alleging to be apparent from the record, by filing petition u/s 154. This petition however came to be dismissed. The assessee company, while in process of filing appeal against the assessment orders, filed petition before the AO praying for stay. The AO then referring to the revised instruction of CBDT in No.1914, directed the assessee to pay 20% of the disputed demand, within three days, failing which the stay petition would be treated as rejected, resulting in commencement of recovery proceedings. This order was also challenged in appeal by urging that high pitched additions were made in the assessment orders which could not be anticipated and the assessee was confident of substantial relief. The assessee thus, prayed for grant of stay, stating that if stay was not granted, they would be put to extreme hardship and they would find it difficult to run the day-to-day affairs of the company. The assessee also stated that they were filing a separte waiver petition for waiver of interest, charged u/s 234A, B & C. While so, the Tax Recovery Officer issued prohibitory orders against the Directors of the company. At the same time, the assessee approached this Court challenging the orders passed by AO directing him to pay 20% of the tax demanded. The petitions were disposed of without expressing any view on the merits of the claim made by assessee and only directing the Pr CIT to consider the stay applications filed by assessee within a time frame. In pursuence of the same, the Pr CIT directed the assessee to pay 30% of the disputed demand and if such payment was made, the balance shall remain stayed till the disposal of appeal.

High Court held that,

++ on a perusal of the orders passed by the authorities, it is seen that the only plea raised before them was that the assessees are in severe financial crunch due to non-support of the investors, banks, financial institutions and the proceedings initiated by the Enforcement Directorate. The assessee company stated that they have branches all over country and have employed around 5000 people, including Doctors and staff. Therefore, the said averments made by the assessee in their stay petitions, are absolutely vague and devoid of any substance and materials. The assessees failed to bear in mind that when they make a prayer for grant of stay, three principles have to be satisfied. The assessees were bound to show that they have a prima facie case; secondly they have to show that the balance of convenience is in their favour and thirdly they will have to prove that if the stay is not granted, they would be put to irreparable hardship. Unfortunately, the assessees, when they drafted the stay petitions, did not bear in mind these basic legal principles and vague averments have been set out, which appears to be not supported by any material. Thus, the assessees themselves have to be blamed for creating the present situation and there is no justification on their part to find fault with the orders passed by the authorities. On a reading of the stay petition filed before the AO and the Pr CIT, one gets an impression that the matter was not pursued seriously. Had it been done, then obviously more care would have been taken to present the petition in a proper format. Therefore, the Pr CIT was fully justified in making an observation that mere filing an appeal against the assessment, will not be a sufficient reason to stay the recovery of demand;

++ the sheet anchor of the arguments of the assessee's counsel is that the assessments are high pitched. The Revenue authorities were guided and bound by the circular instruction issued by the CBDT. The guidelines have been revised from time to time and therefore, whatever the guidelines, which are in force on the date when the petitions are considered, would alone be binding upon the AO or the Appellate Authority. The latest of such being the Office Memorandum, dated July 31, 2017, which speaks about over pitched assessments and taking note of the feed back received from the Field Authorities, the CBDT revised the standard rate prescribed in office memorandum from 15% to 20% of the disputed demand, where the demand is contested before the CIT(A). With regard to the other directions in the office memorandum dated Feb 29, 2016, the same were left in-tact. The guidelines issued by the Board, was regarding the procedure to be followed for recovery of outstanding demand, including the procedure for grant of stay of demand. Firstly the instruction states that a demand will be stayed only if there are valid reasons for doing so and mere filing an appeal against the assessment order will not be sufficient to stay of the recovery demand. The Board took note of the fact that the Field Authorities often insisted on payment of very high proportion of the disputed demand before granting stay of the balance demand, often resulting in hardship to the taxpayers and in order to streamline the process of grant of stay and standardise the quantum of lumpsum payment required to be made by the assessee as a pre-condition for stay of demand disputed before CIT(A), the modified guidelines were issued. To bring the assessee's case under such case, the assessee's should be able to show that in their case, where addition on the same issue has been deleted by the Appellate Authority or decision of a Supreme Court or jurisdictional High Court is in the favour of assessee;

++ it is admitted that no such plea has been raised by the assessees. In any event, the underlying principles which govern the matter of grant of interim orders have to be borne in mind as guiding principles for the authorities to consider the relief for grant of stay. The Circular instruction binds the AO, but not the Court. The Court can take into consideration the facts and circumstances to exercise discretion as to what would be the order, which will protect the interest of the Revenue, and at the same time grant a reasonable relief to the assessee till the appeal is heard and disposed of. The object of grant of interim order is to preserve status-quo and not to make the appellate remedy infructuous or illusory. However, this principle cannot be straight away applied to Revenue matters, where a slight departure is required to be adopted. As pointed out earlier, the assessee miserably failed to substantiate their contention that they are unable to mobilise funds to comply with the conditions nor they had brought out before the authorities as to how they have made out a prima facie case for grant of an unconditional stay or for that matter how the direction of the AO to pay 20% of the disputed demand, is an onerous condition. Mere pendency of an appeal before the CIT is no ground to state that there should be stay of the recovery of the tax demanded. So far as the plea regarding high pitched assessment, it is undoubtedly true that in some of the years, the assessments are high pitched. Nevertheless this Court cannot make a roving enquiry into the same and examine whether the additions made by AO were justified as those are issues to be adjudicated before the CIT(A). However, taking note of the fact that the assessee company has established Eye Hospitals in various parts of the State and elsewhere in the country and that there are several persons employed with them and the hospitals are functioning and there are several senior citizens, who require care and attention, this Court is inclined to grant one more opportunity to the assessee company to show their bonafide and if they do so, this court is inclined to direct the assessee company to once again approach the CIT for appropriate relief.

(See 2018-TIOL-941-HC-MAD-IT)


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