HIGH COURT OF DELHI
Virgin Mobile India (P.) Ltd.
versus
Assistant Commissioner of Income-tax
W.P.(c) NO. 4983 of 2012
August 17, 2012
JUDGMENT
S. Ravindra Bhat, J. – Issue Notice. Mr. Abhishek Maratha, Sr. Standing Counsel accepts notice on behalf of respondent. With the consent of the counsel, the petition was taken up for disposal.
2. The petitioner prefers the present proceedings under Article-226, questioning the order dated 19.7.2012 issued by the Assessing Officer.
3. The brief facts are that the petitioner, an incorporated company engaged in the business of trading of telecom products and also providing consultancy services, had entered into the understanding with another service provider which had a valid telecom license. This was to provide services in designing, marketing and servicing of the brand “Virgin Mobile Products”. The petitioner claims that its relationship with its distributors is on principal to principal basis under which the property in goods are transferred by it to the distributors through valid invoices by charging applicable VAT. For the concerned assessment year, the AO after a survey conducted on 18.11.2011 in terms of Section- 133A of the Income Tax Act collected material and sought a response from the writ petitioner by its show cause notice dated 12.01.2012 as to why it should not be treated as an assessee in default for non-compliance with Section-194H of the Income Tax Act. The petitioner responded to the notice on 23.1.2012. Ultimately, by the order dated 28.3.2012, the AO rejected the petitioner’s contentions and imposed a TDS liability for the sum of Rs.3,78,88,166/- under Section 194H and also demanded Rs.4,13,440/- on account of defaults; proceedings under Section-271C of the Act were also initiated.
4. The Writ Petitioner preferred an appeal under Section-246A before the CIT (A) and during the pendency of those proceedings, moved an application for stay before the AO under Section 220 (6), on 2.7.2012.
5. On 19.7.2012, the AO by an unreasoned order which was not preceded by any hearing, rejected the application under Section 220 (6) stating as follows: –
“Sir,
Sub: Application for stay of demand for the FY 2009-10 reg.
Please refer to your application for stay of demand dated 2.7.2012 for F.Y. 2009-2010 on the ground that the deductor assessee is under appeal against the order passed for the said financial year.
2. In this regard, it is informed that simply filing an appeal before the appellate authority cannot be taken as a ground for granting stay of demand.
3. Your application for stay of demand is hereby rejected with the above remarks at this stage and you are directed to pay the demand immediately failing which coercive measures shall be taken to recover the demand.
Yours faithfully”
6. It is contended that the impugned order is in flagrant violation of the principles of natural justice besides not disclosing any application of mind. Learned counsel contended that Section 220 (6) of the Income Tax Act pre-supposed an application of mind by the concerned authority invested with the power, when it talked of use of discretion. Counsel also relied on a Division Bench ruling of this Court in KLM Royal Dutch Airlines v. Dy. DIT [2011] 332 ITR 224 (Delhi) in support of the contention that the order should be a composite one and specifically deal with various elements such as existence of prima facie case etc.
7. Learned counsel for the Revenue contended that the proceedings under Section-220(6) provide for an efficacious alternative remedy especially with a higher authority i.e. the administrative Commissioner of Income Tax can be approached for suspension of the default demand. In this regard, counsel relied upon certain instructions and Circular, notably, the CBDT’s letter dated 21.08.1969 F.No.1/6/69-ITCC- Instructions No.96). The said instructions read as follows: –
Board’s letter F.No.1/6/69-ITCC (Instruction No.96)
Minutes of the 8th Meeting of the Informal Consultative Committee held on 13th May, 1969 – Implementation of assurance given regarding stay of recovery in certain cases – Sec. 220(6) of the IT Act, 1961
“RECOVERY
SECTIONS 220,
One of the points that came up for consideration in the 8th Meeting of the Informal Consultative Committee was that income-tax assessments were often arbitrary pitched at higher figures and that the collection of disputed demand as a result thereof was also not stayed inspite of the specific provision in the matter in s. 220(6) of the IT Act, 1961.
2. The then Deputy Prime Minister had observed as under:
“Where the income determined on assessment was substantially higher than the returned income, say twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeal provided there were no lapses on the part of the assessees.”
3. The Board desire that the above observations may be brought to the notice of all the ITOs working under you and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the IAC/CIT.
