Narsinh Associates Promoters Builders and Developers Vs DGIT (Investigation) (ITAT Pune)
ITAT Pune Stays Rs. 4.11 Cr Tax Demand Against Rs. 10 Lakh Payment, Citing Hardship from Frozen RERA Account
Can an assessee who failed to properly pursue its case before the lower authorities still secure a stay of a tax demand exceeding Rs. 4.11 crore? The ITAT Pune Bench has answered this in the affirmative, though subject to strict conditions. In a significant order, the Income Tax Appellate Tribunal, Pune Bench allowed two stay applications filed by a real estate developer, seeking protection against outstanding demands of Rs. 2,01,16,092 for AY 2016-17 and Rs. 2,10,20,553 for AY 2014-15. For both years, the assessments were completed ex parte under Section 144 of the Income Tax Act, 1961, with the Assessing Officer making additions in respect of the total sale consideration received during the relevant years. The assessee’s appeals before the CIT(A) were subsequently dismissed in limine due to non-appearance. However, the Tribunal has stayed outstanding tax demands of over Rs. 4.11 crore for both the AYs, subject to payment of only Rs. 5 lakh for each assessment year.
The stay assumes significance as the Tribunal granted relief despite noting that the assessee had not pursued the assessment and appellate proceedings before the CIT(A) in a serious manner. The financial hardship caused by the freezing of the assessee’s RERA-designated bank account, however, weighed in favour of granting conditional stay.
Before the Tribunal, Adv. Sachin P. Kumar, appearing for the assessee, submitted that the non-appearance before the lower authorities was due to internal disputes amongst the partners, which constituted a reasonable cause. It was contended that the assessee had consequently suffered high-pitched assessments without effectively contesting the additions.
The assessee also brought to the Tribunal’s attention the freezing of its RERA-designated bank account by the Income Tax Department. It was submitted that the assessee was engaged in ongoing construction and project development activities and that the freezing of the account had brought its business operations to a halt, resulting in severe financial difficulties. Importantly, the assessee submitted that the funds lying in the RERA-designated account were amounts received from various homebuyers and were required to be utilised strictly towards construction and development of the RERA-approved project.
The assessee also relied upon a MahaRERA order dated 27 June 2024 concerning RERA-designated collection and separate bank accounts and the restrictions applicable to such accounts. It therefore requested an early hearing of the appeals and stay of recovery of the outstanding demands.
The Tribunal, noted that the assessments were best-judgment assessments under Section 144 and that the additions related to the total sale consideration received during the respective years. The Bench specifically took note of the fact that the frozen accounts were RERA-designated bank accounts and that the funds therein were required to be used strictly for the RERA project. Accordingly, the Tribunal observed that, prima facie, the assessee’s case deserved to be considered sympathetically.
Final Judgment / Outcome:
Considering the overall facts and circumstances, the ITAT Pune Bench allowed both stay applications and stayed the outstanding demands for AYs 2016-17 and 2014-15, subject to the following conditions:
- 5,00,000/- to be paid separately for AY 2016-17; and
- 5,00,000/- to be paid separately for AY 2014-15,
with both payments to be made within two weeks from the date of the order.
Thus, against an aggregate outstanding demand of more than Rs. 4.11 crore, the assessee was required to make a total payment of Rs. 10 lakh as a condition for the stay. The stay of the balance outstanding demand was directed to remain in force for one month or until disposal of the respective appeals, whichever was earlier. The Tribunal also directed that the assessee’s appeals be taken up for out-of-turn hearing, thereby providing the assessee an early opportunity to contest the outstanding demands on merits.
The order is particularly noteworthy for the arguments made and Tribunal’s approach in balancing the assessee’s failure to diligently pursue the proceedings before the lower authorities against the genuine financial hardship arising from the freezing of RERA-designated funds belonging to an ongoing real estate project.
FULL TEXT OF THE ORDER OF ITAT PUNE
These two stay applications have been filed by the assessee for the stay of outstanding demand of Rs.2,01,16,092/- and Rs.2,10,20,553/- for AYs 2016-17 and 2014-15, respectively.
2. The Ld. Counsel for the assessee submitted that the assessment orders for both the assessment years have been passed ex-parte u/s 144 of the Act and the Ld. Assessing Officer has made the additions for the total sale consideration received during the year. Further, before the First Appellate Authority, the assessee could not appear on account of some internal disputes amongst the partners and the Ld. CIT(A) has dismissed the appeal in limine. He submitted that the reasonable cause prevented the assessee from appearing before both the lower authorities which has resulted into high pitched assessments. He further submitted that now the assessee is carrying constructions and project development business activities and the project are under-going. He submitted that the Real Estate Regulatory Authority (RERA) designated bank account of the assessee firm has been freezed due to which the business of the assessee has come to a halt and the assessee is facing severe financial crisis. He also submitted that the funds in the RERA designated bank account are received from various buyers and those funds are required to be used only for the construction activities of the RERA approved project.
3. The Ld. Counsel for the assessee further made reference to the Maharashtra Real Estate Regulatory Authority order dated 27.06.2024 in which directions have been given to the Banks to ensure that the RERA designated collection bank account and RERA designated separate bank account of the project shall be free from all encumbrances and should not be an escrow account and free from lien, loans, and third-party control i.e. lender/bank/ financial institution. It is also stated that in its order that is these two accounts i.e. RERA designated bank account and RERA designated separate bank account cannot be attached by any other Government authority/body without the order of MahaRERA. He, therefore, prayed that the appeals should be fixed at an early date and till then the stay may be granted for recovery of outstanding demand so that the freezed bank accounts can be released and can be operated by the assessee for its business purposes.
4. On the other hand, the Ld. Departmental Representative, objected to the grant of stay stating that the assessee failed to appear before both the lower authorities and that the assessments were framed in March, 2022 but the bank accounts have been freezed in March, 2026 and even when the reasonable time was available with the assessee it failed to make proper representation before the Ld. CIT(A).
5. We have heard the rival contentions and perused the record placed before us. We note that the outstanding demand of Rs.2,01,16,092/- and Rs.2,10,20,553/- pertains to AYs 2016-17 and 2014-15, respectively. Perusal of the assessment orders indicates that best judgment assessment bas been framed u/s 144 of the Act and the Ld. Assessing Officer has made the additions for total sale consideration received during each year. Further, the assessee failed to get relief from the Ld. CIT(A) due to non-appearance on account of reasonable cause. The Ld. Counsel for the assessee made reference to the guidelines of MahaRERA and their applicability on the issue stated in the instant stay applications because the bank accounts freezed by the Income Tax Department is the RERA designated bank account and the funds available therein are to be used strictly for the RERA project. Prima-facie, the case of the assessee deserves to be considered sympathetically, however, it is also evident that the assessee has not taken up the assessment and appellate proceedings before the Ld. CIT(A) in a serious manner as was required on its part. Therefore, considering the contentions of the Ld. Counsel for the assessee and this given facts and circumstances of the case, we deem it appropriate to stay the outstanding demand for the impugned assessment years subject to the payment of Rs.5,00,000/- each separately for both the assessment years within two weeks from the date of this order. Further, the stay of the outstanding demand shall remain in operation for a period of one month or till the disposal of appeal, whichever event occurs earlier.
6. We, further, direct the Registry to fix the ITA Nos. 2380 & 2129/PUN/2026 for out of turn hearing on 09.06.2026. Since, the date of hearing has been informed to both the parties in the open Court, issuing of separate notice of hearing is dispensed with. Further, in the case the assessee fails to appear on the date of hearing i.e. on 09.06.2026 without any reasonable cause then the stay order shall stand vacate.
7. In the result, both the stay applications of the assessee are allowed in terms indicated above.
Order pronounced on this 22nd day of May, 2026.
