Case Law Details
Subodh Singhania Vs Union of India (Telangana High Court)
Telangana High Court set aside two impugned orders rejecting the stay of tax demand for AY 2022-23 in the case of Subodh Singhania vs. Union of India. The petitioner challenged the orders dated 14.06.2024 and 18.10.2024, arguing that they were non-speaking and failed to consider financial hardship, balance of convenience, and prima facie case. The authorities had directed the petitioner to deposit 20% of the tax demand without addressing his submissions or providing proper reasoning. Citing precedents from the Bombay High Court, the petitioner contended that the orders violated principles of natural justice and required a reasoned approach to assessing stay applications.
The High Court ruled that the orders lacked justification and failed to follow the procedural guidelines set in previous judgments. It remanded the case to the concerned authorities for reconsideration, instructing them to pass a reasoned and speaking order within three weeks after hearing the petitioner. Until then, no coercive action could be taken against the petitioner. The decision reinforced the need for tax authorities to provide detailed reasoning while rejecting stay applications and ensure due process is followed in assessing financial difficulties and legal merits in tax disputes.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
1. Learned counsel for the Respondents accepted the advance copy of the writ petition and with the consent of the respective parties, the matter is heard and disposed of finally.
2. The present petition has been filed against the order dated 18.10.2024 rejecting of review application pertaining to stay of demand for A.Y. 2022-23 preferred before respondent No. 2/Principal Commissioner of Income Tax (Central ) Bhopal on 26.06.2024 and against the order dated 14.06.2024 rejecting stay application/application not to treat assessee in default preferred by the assessee/petitioner under Section 220 sub-section (6) of the Income Tax Act before respondent No. 3/ Assistant Commissioner of Income Tax Central Circle 2 Raipur on 30.04.2024 whereby impugned orders dated 18.10.2024 and 14.06.2024 have been rejected by an cryptic manner and without appreciating the detailed submissions made by the petitioner and without looking into the financial stringency and balance of convenience and also without giving any opportunity of hearing.
3. Learned counsel for the petitioner submits that the application filed under Section 220(6) before the respondent No. 3 and also review application filed by the petitioner before the respondent No. 2, the petitioner had demonstrated its strong prima facie case, balance of convenience, financial hardship, Genuine hardship and had also offered sufficient security for safeguarding the interest of revenue. However, both the authorities without appreciating the submission made by the Petitioner and without even adverting to the contents of the said application and review application and without any application of mind to the averments and submissions, has passed the impugned order dated 14.06.2024 rejecting the stay application and has directed the petitioner to deposit 20% of the demand as per instruction no. 1914 dated 29.02.2016 and has also passed the order impugned order dated 18.10.2024 rejecting the review application and the respondent No. 2 has directed the petitioner to pay 20% amount by way of installment in 5 months.
4. Learned counsel for the petitioner further submits that the impugned order dated 18.10.2024 & 14.06.2024 are non-speaking orders as they do not reflect reasons as to why the review application and stay application of the assessee/petitioner are sans merit and how the case of the assessee/petitioner for A.Y. 2022-23 does not fall within ambit of criteria of stay set out in Office memorandum dated 29.02.2016 as amended vide office memorandum dated 31.07.2017. The impugned orders also do not even briefly set out the case of the assessee/petitioner while disposing of the review application pertaining to stay of demand for A.Y. 2022-23 and stay application pertaining to A.Y. 2022-23 which is de hors parametes laid down by the Judgment of the Hon’ble Bombay High Court in KEC International Ltd. vs. B.R. Balakrishnan and Ors. reported in 2001 SCC OnLine Bom 1229, required to be adhered to by the authorities in cases where a stay application is made by an assessee pending appeal to the first appellant authority.
5. Learned counsel for the petitioner further submits that the rejection of review application and stay application in the present case without considering submissions and indicating at lease brief reasons is impermissible as per the judgment of the Hon’ble Bombay High Court in UTI Mutual Fund vs. Income Tax Officer 13(3)(2) & Ors., reported in 2012 SCC OnLine Bom 390
6. Learned counsel for the petitioner further submits that it is the settled law that Ld. Assessing Officer and his higher authority while adjudicating the impugned orders is required to apply trinity Principle i.e. the existence of a prima facie case, financial stringency and the balance of convenience. It is only upon application of the three principle as aforementioned, the Assessing Office or Higher Authorities can exercise discretion for the grant or rejection, wholly or in part, of a request for stay of disputed demand. However in the instant case the respondent no. 2 and 3 passed the rejection orders in an illegal and cryptic manner without even taking trinity Principle and also without granting any opportunity of hearing. Thus the impugned orders dated 14.06.2024 and 18.10.2024 is illegal and passed in violation of Principle of natural justice.
7. On the other hand, learned counsel for respondent No. 1 and respondent Nos. 2 to 6 would oppose the submissions made by the learned Senior Counsel for the petitioner and would support the orders impugned.
8. I have heard learned counsel for the parties, perused the impugned orders and also went through the records with utmost circumspection.
9. On perusal of records it transpires the facts that the respondent authorities has passed the assessment order dated 31.03.2024 passed under Section 143(3) of the Income Tax Act 1961 along with copy of demand notice issued under Section 156 of the Income Tax Act 1961 against the petitioner. Thereafter the petitioner has filed an application under Section 220(6) of the Income Tax Act, 1961 filed on 29.04.2024 before respondent No. 3. The respondent- No. 3 has not decided the case on the basis of prima facie case, balance of convenience, irreparable loss caused to the petitioner, Genuine hardship, CBDT instruction and hi-pitched assessment. The respondent No. 3 rejected the application without reasoned and speaking order on 14.06.2024. Subsequently, aggrieved of the same, the petitioner has filed review application before the respondent No. 2/PCIT (Central) Bhopal. The respondent No. 2 has also not decided the review application on merits and passed the order to pay 20% of the tax liability by way of installments in 5 months on. 18.10.2024. Thus, the impugned orders dated 14.06.2024 and 18.10.2024 are non-speaking orders.
10. This court in the matter of M/s Aarti Sponge & Power Ltd. V. The Assistant Commissioner of Income Tax and Others, decided on 10.04.2018 indicated the procedure to be followed by the Assigning Officer as under:-
“18. In my opinion, the said question is no longer res integra and it has been well settled by a question of Bombay High Court in the matter of KEC International Ltd. V. B.R. Balakrishnan and others in which S.H. Kapadia, J, as then His Lordship was speaking for the Bombay High Court, while considering the similar issue has laid down the following guidelines:-
“This is the consequence of an order being passed without giving any reasons. Hence, we intend to lay down certain parameters which are required to be followed by the authorities in cases where a stay application is made by an assesee pending appeal to the first appellate authority.
Parameters:
(a) While considering the stay application, the authority concerned will at least set out the case of the assessee.
(b) In cases where the assessed income under the impugned order far exceeds returned income, the authority will consider whether the assesseee has made out a case for unconditional stay. If not, whether looking to the questions involved in apeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order.
(c) In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit.
(d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order.
(e) We clarify that if the authority concerned complies with the above parameters while passing orders on the stay application, then the authorities on the administrative side of the Department like respondent no. 2 herein need not once again give reasoned order.”
11. The aforesaid guidelines have been followed later-on again by the Bombay High Court in the matter of UTI Mutual Fund V. Income Tax Officer 19(3)(2) and Others in which Dr. D.Y. Chandrachud, J(as then His Lordship was) while following the decision rendered in KEC International Ltd.(supra) again held some more guidelines as under:-
“These are, we may say so with respect, sage observations which must be borne in mind by the assessing authorities. Consistent with the parameters which were laid down by the Division Bench in KEC International and the observations in the judgment in Coco Cola, we direct that the following guidelines should be borne in mind for effecting recovery:
1. No recovery of tax should be made pending
(a) Expiry of the time limit for filing an appeal;
(b) Disposal of a stay application, if any, moved by the assessee and for a reasonable period thereafter to enable the assessee to move a higher forum, if so advised. Coercive steps may, however, be adopted where the authority has reasons to believe that the assessee may defeat the demand, in which the case brief reasons may be indicated.
2. The stay application, if any, moved by the assessee should be disposed of after hearing the assessee and bearing in mind the guidelines in KEC International;
3. If the Assessing Officer has taken a view contrary to what has been held in the preceding previous years without there being a material change in facts or law, that is a relevant consideration in deciding the application for stay;
4. When a bank account has been attached, before withdrawing the amount, reasonable prior notice should be furnished to the assessee to enable the assessee to make a representation or seek recourse to a remedy in law;
5. In exercising the powers of stay, the Income Tax Officer should not act as a mere tax gatherer but as a quasi judicial authority vested with the public duty of protecting the interest of the Revenue while at the same time balancing the need to mitigate hardship to the assessee. Though the AO has made an assessment, he must objectively decide the application for stay considering that an appeal lies against his order: the matter must be considered from all its facets, balancing the interest of the assessee with the protection of the Revenue.”
12. Reverting to the facts of the present case, it appears that Assigning Officer has not adopted the correct procedure in deciding the stay application and review application of the petitioner and has not followed the guidelines as stated by Bombay High court in KEC International Ltd. (supra) and in UTI Mutual Fund (supra) and also the decision rendered by this Court in M/s Aarti Sponge & Power Ltd. (supra).
13. In view of aforesaid discussions, the impugned orders dated 14.06.2024 and 18.10.2024 are hereby set aside and the matter is remitted to the the respondent No. 2 to consider the stay application afresh in the light of the guidelines as stated by the Bombay High Court and followed by this Court in M/s Aarti Sponge & Power Ltd. (supra) and pass a reasoned and speaking order within three weeks from the date of receipt of certified copy of this order after hearing the parties in light of the observations made for deciding the application for grant of stay of the disputed demand.
14. Also, till the decision of the stay application, no coercive steps shall be taken against the petitioner. Meanwhile, petitioner is directed to appear before the Respondent no. 2 positively on 17th of December, 2024.
15. With the aforesaid observations, the writ petitions are disposed of.
16. No order as to cost(s).
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