Madras High Court
M.G.M. Transports (Madras) (P) Ltd. vs Income Tax Officer And Anr. on 14 March, 2007
Author: K. Raviraja Pandian
Bench: K. Raviraja Pandian
ORDER K. Raviraja Pandian, J.
1. The writ petition is filed seeking for the relief of issuance of a writ of certiorarified mandamus to call for the records of the first respondent in Coy. W IV (D/AACCM 5458M/500-M/2004-05/Stay relating to the application made by the petitioner for stay of demand under Section 220(6) of the IT Act, 1961, and quash the order dt. 5th March, 2007 rejecting the stay petition and direct the first respondent to pass orders thereon after affording opportunity of hearing and to grant stay of demand relating to the assessment order for the asst. yr. 2004-05, pending disposal of the appeal before the second respondent.
2. The petitioner is a private limited company and assessee under the IT Act. For the asst. yr. 2004-05, the petitioner filed a return declaring a total loss of Rs. 8,49,603. The petitioner having regard to the provisions of Section 115JB of the IT Act, 1961 declared in the Minimum Alternate Tax payable at Rs. 3,47,829 initially. However, the first respondent-AO passed a high pitch assessment raising a huge demand of Rs. 1,40,25,762. Aggrieved by the assessment order, the petitioner has filed an appeal before the second respondent-CIT(A) on 29th Jan., 2007 challenging the various aspects of the assessment order. The petitioner also applied to the first respondent under Section 220(6) of the IT Act for stay of the demand raised by the first respondent. The first respondent rejected the same by order dt. 5th March, 2007 as the petitioner had no valid reason to have an order of stay of demand. The correctness of the said order is now canvassed before this Court.
3. I heard Mr. Rajan, learned Counsel appearing for the petitioner as well as Mr. J. Nareshkumar, learned Counsel appearing for the Department.
4. The counsel for the petitioner very heavily relied on the instructions issued by the CBDT, which reads thus:
Stay in cases of harsh assessments - One of the points that came up for consideration at the 8th meeting of the informal consultative committee was that income-tax assessments were arbitrarily pitched at high figures and that the collection of disputed demands as a result thereof was also not stayed in spite of the specific provision in the matter in Section 226(6) of the IT Act, 1961.
2. The then Dy. Prime Minister had observed as under:
...where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapse on the part of the assessee.
3. The Board desire that the above observations may be; brought to the notice of all the ITO's working under you and the powers of stay of recovery in such cases upto the stage of first appeal may be exercised by the IAC/CIT." (Instruction No. 96 F. No. 1/6/69-ITCC, dt. 21st Aug., 1969) and also the judgments of N. Rajan Nan vs. ITO and Mrs. R. Mani Goyal v. CIT .
5. However, the learned Counsel appearing for the respondents submits that as the petitioner has not co-operated in any manner to complete the assessment and he has not produced any accounts, necessarily the AO has to complete the assessment and the petitioner having failed to co-operate with the Department, he cannot now complain about the assessment order.
6. I heard the argument of the learned Counsel on either side and perused the materials on record.
7. It is not as if the correctness of the assessment order is put in issue before this Court. During the pendency of the appeal or even prior to that, after passing assessment order, the petitioner as per law prayed for stay of recovery. The CBDT has issued instructions as above referred to. In this case, it is not in dispute that a high pitch assessment has been made assessing a sum of Rs. 5,01,132,504. Hence, I am of the view that the instructions would squarely apply to the case of the petitioner. The mere statement in the impugned order without any factual foundation that the "no valid reason has been stated for stay of the demand" by the AO cannot be appreciated. When the petitioner has relied on the Department's own guidelines, the AO would have rejected the circular by giving reasons for coming to the conclusion that the circular would not be applicable to the petitioner or accept the same and grant the relief as prayed for by the petitioner. Without doing so, by simply saying that the assessee had no valid reason for the grant of stay order cannot be legally sustainable. It is submitted across the bar that after passing of the assessment order, the AO has forcibly withdrawn a sum of Rs. 7.5 lakhs from the bank account of the petitioner. The said payment is recorded.
8. Having regard to the above said facts and circumstances of the case, with particular reference to the instructions issued by the Central Board of Direct Taxes, which is extracted above, I am of the view that the petitioner is entitled to stay of the collection till orders are passed in the appeal, subject to making certain payment.
9. Accordingly, the writ petition is disposed of and there will be an order of stay of collection of demand of tax for asst. yr. 2004-05 till orders are passed in the appeal, subject to the petitioner making payment of a sum of Rs. 20 lakhs on or before 31st March, 2007. No costs. Consequently, the connected MP No. 1 of 2007 is closed.