PPK Newsclick Studio Pvt Ltd Vs Principal Chief Commissioner of Income Tax Central Delhi And Anr. (Delhi High Court)
Conclusion: Assessee had not been able to make out a prima facie case in its favour and had a ‘lot to answer’ in the appeal. Assessee’s plea of financial stringency based on its balance-sheet also inspired no confidence as according to AO, the accounts had not been properly maintained, therefore, assessee’s application for stay of demand during the pendency of the appeal before the Commissioner of Income Tax (Appeals) against the assessment order was rightly dismissed.
Held: The present petition had been filed challenging the orders passed by the respondents whereby the assessee’s application for stay of demand during the pendency of the appeal before the Commissioner of Income Tax (Appeals) against the assessment order dated 30th December, 2022 had been dismissed. Assessee prayed for stay of demand during the pendency of assessee’s appeal before the Commissioner of Income Tax (Appeals). Assessee stated that the discretion to stay the demand during the pendency of an appeal had to be exercised judiciously and reasonably, based on relevant grounds, with due application of mind, and must not be exercised arbitrarily or capriciously or based on irrelevant considerations. He stated that the impugned order failed to consider that assessee had a strong prima facie case on merits as assessee’s Service Agreement with Justice and Education Fund Inc. (hereinafter referred to as ‘JEF’), contents supplied, receipts through proper banking channels were duly disclosed in the ITR and legitimacy of business activity, or expenditure of assessee were undisputed. He emphasized that the prices of deliverables were mentioned item wise and the proprietary rights in the articles, videos and short scripts were to belong exclusively to JEF under the Service Agreement executed between the parties. Assessee stated that the respondents erred in rejecting assessee’s application for stay by holding that assessee had not demonstrated its financial stringency, which was entirely untenable and contrary to the financial statements like balance sheet placed on record by assessee . Undoubtedly, the power vested under Section 220(6) was discretionary and it was not mandatory to pre-deposit 20% of the assessed amount to obtain stay of deposit at the stage of filing the appeal before the Commissioner of Income Tax (Appeals). It was held that AO in the assessment order had given a number of cogent findings against assessee. In fact, the Assessing Officer after analyzing a number of relevant facts had virtually held that the transaction between the assessee and the foreign entity was based on ‘reverse engineering’. The Court was of the view that assessee had not been able to make out a prima facie case in its favour. Assessee had a ‘lot to answer’ in the appeal. Assessee’s plea of financial stringency based on its balance-sheet also inspired no confidence as according to the Assessing Officer, the accounts have not been properly maintained.” Accordingly, the writ petition was dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Present petition has been filed challenging the orders dated 3rd November, 2023 and 20th February, 2023, passed by the respondents whereby the petitioner’s application for stay of demand during the pendency of the appeal before the Commissioner of Income Tax (Appeals) against the assessment order dated 30th December, 2022 has been dismissed. The petitioner further prays for stay of demand during the pendency of the petitioner’s appeal before the Commissioner of Income Tax (Appeals).
2. Learned senior counsel for the petitioner states that the discretion to stay the demand during the pendency of an appeal has to be exercised judiciously and reasonably, based on relevant grounds, with due application of mind, and must not be exercised arbitrarily or capriciously or based on irrelevant considerations. He states that in complete violation of this mandate, the impugned orders are arbitrary in nature, have been passed mechanically, and suffer from complete non-application of mind.
3. He states that the impugned order fails to consider that the petitioner has a strong prima facie case on merits as the petitioner’s Service Agreement with Justice and Education Fund Inc. (hereinafter referred to as ‘JEF’), contents supplied, receipts through proper banking channels were duly disclosed in the ITR and legitimacy of business activity, or expenditure of the petitioner were undisputed. He emphasises that the prices of deliverables were mentioned item wise and the proprietary rights in the articles, videos and short scripts were to belong exclusively to JEF under the Service Agreement executed between the parties. The relevant portion of the Service Agreement referred to and relied upon by learned senior counsel for the Petitioner is reproduced hereinbelow:-
“3. PRICES OF DELIVERABLES
a. The unit prices of deliverables are as follows:
