Case Law Details
HIGH COURT OF DELHI AT NEW DELHI
W.P.(C) 5149/2014 and CM Nos. 10267-68/2014
CHARU HOME PRODUCTS PVT LTD
versus
COMMISSIONER OF INCOME TAX-1, NEW DELHI and ORS.
CORAM:
HONORABLE MR. JUSTICE BADAR DURREZ AHMED
HONORABLE MR. JUSTICE SIDDHARTH MRIDUL
O R D E R
This writ petition is directed against the order dated 06.08.2014 passed by the Additional Commissioner of Income Tax with the approval of the CIT, Delhi-I, New Delhi. By virtue of the said order dated 06.08.2014 the stay application filed by the petitioner has been rejected. We have gone through the impugned order dated 06.08.2014. The learned counsel for the petitioner has also taken us through the instruction No. 96 of 1969 as well as instruction No. 1914 of 1993. We have also examined the decision of this court in the case of Soul v. DCIT: 323 ITR 305 (Delhi) and, in particular, paragraph 8 thereof where the above mentioned two instructions have been considered as also the earlier decision of this court in Valvoline Cummins v. DCIT: 307 ITR 103 (Delhi). Considering the same, we feel that it would be appropriate if the ACIT reconsiders the application of the petitioner for stay in the light of the observations contained in the said decision [Soul v. DCIT (supra)]. This is so because according to the petitioner the assessment is a high pitched one inasmuch as it is approximately 17 times of the returned income. Consequently, we set aside the impugned order dated 06.08.2014 and remit the matter to the ACIT, Range-3, New Delhi for a fresh consideration of the stay application filed by the petitioner after taking into account the above mentioned decision of this court.
The writ petition stands disposed of. All pending applications stand disposed of.
BADAR DURREZ AHMED, J
SIDDHARTH MRIDUL, J
AUGUST 13, 2014
It is excellent judgment in present days, where it is normal to make high pitched assessment
In this regard also read the following judgments wherein the high pitch demand has been stayed till the disposal of first appeal:
In the case of Rajan Nair vs. ITO (1987) 165 ITR 650(Ker), the Kerala High Court has held that in exercise of power under Section 220 (6) of the Act, the ITO should not act as a mere tax gatherer but as a quasi-judicial authority vested with the power of mitigating hardship to the assessee. More so, in the case of Gajan and Agencies Vs. ITO (1994) 121 CTR (Ker), it was held that ITO directing payment of demand installments is only another mode of recovery and cannot be treated as on order under Section 220 (6).
In the case of Maheshwari Agro Industries v UIO (S.B. CWP No. 1264/2011 dated 15/12/2011): The assessee offered Rs. 3.48 lakhs. The AO made a “high-pitched” assessment of Rs. 1.44 crores. The AO rejected the assessee’s stay application and issued s. 226(3) garnishee notices. The assessee filed a Writ Petition to challenge the rejection of the stay application. HELD by the High Court allowing the Petition:
(i) U/s 220 (6) the AO has the discretion not to treat the assessee as being in default during the pendency of the appeal. The AO has to normally use this discretion in favour of assessee particularly when high pitched assessments are made and the demand of tax is several times the declared tax liability in the spirit of Instruction No.95 dated 21.08.1969 and grant stay. The mandate of Parliament in s. 220 (6) is that the AO should normally wait for the fate of the appeal filed by the assessee. Therefore, the discretion conferred by s. 220(6) of not treating the assessee in default should ordinarily be exercised in favour of assessee unless there are overriding and overwhelming reasons to reject the assessee’s stay application. The application cannot normally be rejected by merely describing it to be against the interest of Revenue if recovery is not made, if tax demanded is twice or more of the declared tax liability. The very purpose of filing of appeal, which provides an effective remedy to the assessee, is likely to be frustrated, if such a discretion was always to be exercised in favour of revenue rather than assessee.
TANEJA DEVELOPERS AND INFRASTRUCTURE LTD. Vs ACIT AND OTHERS (324 ITR 247 (DELHI))
The return for the year 2005-06 filed by the petitioner declared total income of Rs. 46,41,070/- while the assessment order in respect of the year assessed the income at Rs. 1.67.02.35.990/- which was almost 350 times the returned income. On a write petition stating that the order dated January 7, 2009, by the Commissioner directing the deposit of 50% of the outstanding demand as per schedule laid done in the order was contrary to the circular of the department.
Held, allowing the petition, that CBDT instruction no. 1222 specifically stated that where the income determined is substantially higher than the returned income, that is, twice the latter amount or more, then the collection of tax in dispute should be held in abeyance till the decision on the appeal is taken. It was held in SOUL Vs Deputy CIT (2010) 323 ITR 305 (Delhi) that this instruction had not been superseded by instruction no. 1914 of 1993. Consequently, the operation of the order was to be stayed till the disposal of the writ petition. The natural consequence would be that any attachment order in pursuance of the order would not have any effect.
Therefore, considering the facts of the case and circumstances the high pitch demand ought to be stayed till the disposal of appeal and should not treat the assessee in default.