Gujarat High Court
Ashokbhai Jagubhai Kheni vs Dy. Commissioner Of Income Tax Central ... on 12 March, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/1918/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 1918 of 2018
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ASHOKBHAI JAGUBHAI KHENI
Versus
DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-II
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Appearance:
MR.S.N.SOPARKAR, LD. SENIOR COUNSEL, with MR B S SOPARKAR
(6851) for the PETITIONER(s) No. 1
DS AFF.NOT FILED (N)(11) for the RESPONDENT(s) No. 1,2
MR.MANISH BHATT, LD. SENIOR COUNSEL with MRS MAUNA M
BHATT(174) for the RESPONDENT(s) No. 1
NOTICE SERVED BY DS(5) for the RESPONDENT(s) No. 1,2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 12/03/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Petitioner has challenged separate orders passed by the Assessing Officer of 28.06.2016 insisting the petitioner must pay 15% of the disputed tax demand pending appeals to enjoy stay of further recoveries. The petitioner has also challenged a common order dated 08.08.2016 passed by the Principal Commissioner of IncomeTax, Surat, who refused to modify this condition imposed by the Assessing Officer.
2. Brief facts are as under.
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3. Petitioner is an individual. During the search and seizure operation carried out in case of third party, various documents, papers, harddisks and pen drives were seized. On the basis of such material, the department built a case of nondisclosure of income by the assessee in course of several land deals in and around the city of Surat. Individual assessments for the concerned assessment years were made. In all three of these assessment years i.e. 201112, 201314, and 201415, there were huge tax demands against the petitioner raised by the Assessing Officer by his assessment order dated 28.06.2016. The total principal tax demand combined between these three assessment years comes to Rs.30 crores. The petitioner first approached the Assessing Officer and requested for stay of such demand pending appeals that he had filed before the Commissioner of Income Tax (Appeals). The Assessing Officer, as noted, required the assessee to deposit 15% of the disputed tax demand, upon which, the recovery of the remaining amount would be stayed. Not satisfied with such condition, the petitioner approached the Principal Commissioner of Incometax, Page 2 of 10 C/SCA/1918/2018 ORDER who by the impugned order, refused to grant any further relief to the petitioner. Hence, this petition.
4. Learned counsel for the petitioner took us through the orders of assessment passed by the Assessing Officer as well as the material on record before him for raising the tax demands. His contention was that the tax demands were highly exaggerated. Exfacie, much of the demands would not sustain legal scrutiny. Insisting on a condition of depositing 15% of the disputed tax even at the first appellate stage would be extremely harsh and unreasonable. Counsel submitted that the Assessing Officer as well as the Principal Commissioner had the necessary discretion to stay the recovery pending appeals. Neither the statute nor the CBDT circular provides for any rigid formula of 15% of the disputed tax demand to be deposited for enjoying stay. He submitted that the Commissioner completely failed to exercise the discretion vested in him. The import of the Commissioner's order is that he was powerless to reduce such demand below 15%.
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5. On the other hand, learned counsel Shri Bhatt opposed the petition contending that the Assessing Officer as well as the Principal Commissioner have exercised their discretionary powers. Facts on record do not justify any further relief. The petitioner was found to be indulging in large cash transactions in buying and selling lands. When confronted with the seized documents and materials, the petitioner refused to cooperate disowning such material. The Appellate Commissioner would examine all aspects in the assessee's appeal. However, at this stage, no case for unconditional stay has been made out.
6. The issue of granting stay pending appeals is governed principally by the two circulars issued by CBDT. First circular was issued way back on 02.02.1993 being instruction no.1914. The circular contained guidelines for staying the demand pending appeal. It was stated that the demand would be stayed if there are valid reasons for doing so and mere filing of appeal against the order of assessment would not be sufficient reason to stay the recovery of demand. The instructions issued under office Page 4 of 10 C/SCA/1918/2018 ORDER memorandum dated 29.02.2016 are not in supersession of the instruction no.1914 dated 02.02.1993 but are in partial modification thereof. The preamble of these instructions provide that in order to streamline the process of grant of stay of standardization of quantum of lumpsum payment to be made as a precondition for stay of demand of dispute before the Commissioner of Income Tax (Appeals), such modified guidelines were being issued. Relevant portion of these instructions read as under:
4. In order to streamline the process of grant of stay and standardize the quantum of lump sum payment required to be made by the assessee as a precondition for stay of demand disputed before CIT(A), the following modified guidelines are being issued in partial modification of Instruction No.1914:
(A) In a case where the outstanding demand is disputed before CIT (A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in para (B) hereunder.
(B) In a situation where,
(a) the assessing officer is of the view that the nature of addition resulting int eh disputed demand is such that payment of a lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of Page 5 of 10 C/SCA/1918/2018 ORDER Revenue or addition is based on credible evidence collected in a search or survey operation, etc.), or
(b) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.), the assessing officer shall refer the matter to the administrative Pr.
CIT/CIT, who after considering all relevant facts shall decide the quantum/proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.
(C) In a case where stay of demand is granted by the assessing officer on payment of 15% of the disputed demand and the assessee is still aggrieved, he may approach the jurisdictional administrative Pr. CIT/CIT for a review of the decision of the assessing officer.
(D) The assessing officer shall dispose of a stay petition within 2 weeks of filing of the petition. If a reference has been made to Pr. CIT/CIT under para 4 (B) above or a review petition has been filed by the assessee under para 4 © above, the same shall also be disposed of by the Pr. CIT/CIT within 2 weeks of the assessing officer making such reference or the assessee filing such review, as the case may be. (E) In granting stay, the Assessing Officer may impose such conditions as he may think fit. He may, inter alia,
(i) require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled;
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(ii) reserve the right to review the order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations;
(iii) reserve the right to adjust refunds arising, if any, against the demand, to the extent of the amount required for granting stay and subject to the provisions of section 245.
7. This circular thus lays down 15% of the disputed demand to be deposited for stay, by way of a general condition. The circular does not prohibit or envisage that there can be no deviation from this standard formula. In other words, it is inbuilt in the circular itself to either decrease or even increase the percentage of the disputed tax demand to be deposited for an assessee to enjoy stay pending appeal. The circular provides the guidelines to enable the Assessing Officers and Commissioners to exercise such discretionary powers more uniformly.
8. We have perused the impugned order passed by the Principal Commissioner. We do not find that even he has understood the contents of the two circulars issued by the CBDT as leaving no option, no discretion to him to deviate this standard formula of Page 7 of 10 C/SCA/1918/2018 ORDER 15% of the disputed tax dues to be deposited. He has examined the issues at hand and refused to exercise any further discretion to reduce the demand below 15% of the disputed tax dues.
9. Ordinarily, the Court would be slow in interfering with such discretionary exercise of powers by the Commissioner. However, in the present case, the total tax demand is quite high. The issues are at the first appellate stage. Even 15% of the disputed tax dues would run into several crores of rupees. With this background, we had also heard learned advocates for the parties and the nature of additions made by the Assessing Officer and fleetingly had a look at a material at his command in order to do so. Since the issues are pending before the Commissioner of Income Tax (Appeals), we would show restraint in making any observations even of primafacie nature which may have the propensity of influencing the mind of the Commissioner of Income Tax (Appeals) who would eventually decide such appeals. However, guardedly, we are of the opinion that some of the additions made by the Assessing Officer would be arguable. At the same time, several Page 8 of 10 C/SCA/1918/2018 ORDER of the oppositions of the assessee to such additions also, going by the material that the Assessing Officer has taken into consideration, cannot be discarded out of hand. Considering such facts and circumstances, we reduce the requirement of depositing the disputed tax dues to enable the assessee to enjoy stay pending appeals before the Commissioner to 7.5%. This would however be on a further condition that he shall offer immovable security for the remaining 7.5% to the satisfaction of the assessing authority. The order passed by the Principal Commissioner stands modified accordingly. Both these conditions shall be satisfied latest by 30.04.2018. The petitioner shall file an affidavit before the registry whether he would abide by these conditions and undertake to fulfill them within the time permitted. Such affidavit shall be filed latest by 16.03.2018.
10. It is clarified that either if the petitioner does not file any such affidavit, or in such affidavit declares that he does not wish to be bound by such conditions or having in such affidavit agreed to fulfill the conditions, fails to do so by Page 9 of 10 C/SCA/1918/2018 ORDER 30.04.2018, the relief granted under this order would stand automatically withdrawn and the impugned order of the Principal Commissioner would revive.
11. Petition is disposed of accordingly.
(AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 10 of 10