Case Law Details
Baregundi Jagadhisha Yediyala Vs ITO (Karnataka High Court)
In the case of Baregundi Jagadhisha Yediyala vs. Income Tax Officer (Karnataka High Court), the petitioner challenged the Principal Commissioner of Income Tax (PCIT)’s order rejecting a stay petition. The PCIT had ordered the petitioner to pay 20% of the tax demand while the appeal was pending before the Commissioner of Income Tax (Appeals). The petitioner argued that the PCIT had failed to properly consider whether the demand was “unreasonably high pitched” or if the petitioner faced “genuine hardship,” as required by applicable circulars and previous court decisions, including the case of Flipkart India Private Limited v. Assistant Commissioner of Income Tax (2017).
The Karnataka High Court observed that the PCIT had not adequately addressed the issue of the unreasonably high demand or genuine hardship. While the PCIT noted that the petitioner did not face financial difficulties in paying the demand, this alone did not constitute a proper evaluation of hardship. Additionally, the High Court found that the PCIT had not considered whether the demand was unreasonably high in the context of the petitioner’s circumstances. As a result, the Court quashed the order and remanded the case back to the PCIT for reconsideration, directing that all relevant circulars and the Flipkart India ruling be applied. The petitioner was also allowed to submit additional documents to support their claim. Furthermore, the Court lifted the order of attachment on the petitioner’s assets, as it had not led to the appropriation of funds towards the demand.
This decision highlights the importance of considering both the financial capacity of the taxpayer and the reasonableness of the tax demand when deciding on stay petitions. The High Court’s ruling ensures that genuine hardship is given due weight and that the taxpayer’s ability to pay is not the sole criterion for assessing stay applications.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has challenged the order at Annexure-‘R’, whereby the Principal Commissioner of Income Tax has disposed off the stay petition directing the assessee to pay 20% of the demand raised while taking note that it was a case of appeal pending before the Commissioner of Income Tax (appeals).
2. Learned Senior Counsel Sri. Vikram Huilgol appearing for the petitioner submits that when the stay application is put up before the Principal Commissioner of Income Tax, is required to dispose off the same insofar as the condition of deposit is concerned by taking note of the circulars and also the law laid down by this Court in the case of Flipkart India Private Limited v. Assistant Commissioner of Income Tax in W.P.Nos.1339-1342/2017.
3. It is submitted that in terms of the applicable circulars regarding condition of deposit, the Principal Commissioner of Income Tax is to examine as to whether the assessment is ‘unreasonably high pitched’ or where ‘genuine hardship is likely to be caused to the assessee’. It is submitted that in terms of the order at Annexure-‘R’ while Principal Commissioner of Income Tax has clearly stated that there are no financial difficulties in payment of tax, the question of unreasonably high pitched demand was not considered. It is submitted that the order is a non speaking order.
4. Learned counsel appearing for the revenue would submit that the petitioner is required to furnish necessary documents to demonstrate the case of ‘unreasonable high pitched demand’ or ‘genuine hardship’ and in the absence of relevant documents placed before the Principal Commissioner of Income Tax, petitioner cannot assail such order.
5. After hearing both sides, a perusal of the order at Annexure-‘R’ would indicate that the finding as regards requirements of unreasonably high pitched demand and genuine hardship of the assessee have not been considered in proper prospective. Mere absence of financial difficulties as observed by the Principal Commissioner of Income Tax by itself does not amount to consideration of the ground of genuine hardship of the assessee, even otherwise we find that there is no finding recorded as regards unreasonably high pitched demand.
6. Accordingly, the order at Annexure-‘R’ is set aside. Matter is remanded to respondent No.2 for fresh consideration taking note of the applicable circulars including the direction of this Court in the case of Flipkart India Private Limited v. Assistant Commissioner of Income Tax in W.P.No.1339-1342/2017. During such consideration, petitioner is at liberty to produce such other documents to make out his case.
7. While noticing that the appeal is still pending consideration, the Appellate authority is permitted to expedite hearing of the appeal. Taking note of the submission made on behalf of the revenue that the attachment has not yielded any funds towards appropriation of funds towards demand, in the peculiar facts of the case, order of attachment would stand lifted and Annexures-1J1 to 1M1 are set aside while reserving liberty to the Principal Commissioner of Income Tax to pass appropriate orders after reconsidering the contentions in light of setting aside of the order at Annexure-1R1.
8. All contentions are kept open. Needless to state, there would be a direction for not to take further coercive action till the application of stay is reconsidered in light of the observations made above.
9. A.No.3/2024 is allowed. Petitioner is dispensed with production of certified copy of Annexure-R.
10. Accordingly, petition is disposed off.
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