Flipkart India Private Limited vs. ACIT (Karnataka High Court)
The applicant raised the contentions in support of the petition for stay of demand:
The Issue: Whether an assessee can be granted stay of demand especially in Unreasonably high pitched assessments
Firstly, though the provisions of Section 246 of the Income Tax Act, and Section 246A deal with orders which are appeal-able, neither of the provisions of the sections of the Income Tax Act impose any kind of liability upon the taxpayer for depositing any sum before filing the appeals. The issue is with respect to the amount of money to be deposited, and the power to stay the demand for depositing was dealt with by the Circular No.1914. The said circular deals with “Collection and Recovery Income Tax dues”. The said circular also deals with the “Stay Petitions”, which can be filed before the A.O., although an appeal is required to be filed before the relevant Appellate Authority. The instruction no. 2-C of the said circular also deals with the “Guidelines for staying the demand”. As per the Senior Counsel, a decision in the matter of stay of demand shall generally be taken by the A.O., who is the instantaneous superior. However, a superior authority is authorized to interfere the decision of the A.O.in some extraneous conditions, namely in case of Unreasonably high pitched assessments, or “where sincere and bonafide hardship is expected to be affected to the assessee”. Moreover, as per the Instruction No.2-C of the aforesaid Circular, few guidelines have been provided, which undoubtedly demarcate the situations in which the stay can be granted.
Modification of Circular No 1914 by CBDT- assessee in certain cases may deposit even lesser than 15% of the demand raised
Secondly, the said Circular No.1914 was partially modified by the Circular dated 29.2.2016. The partial variation merely indicates to restructuring the process of granting the stay and for establishing a standard for the lump sum payment required to be paid by the taxpayer as a pre-condition for the stay of the demand before the Commissioner of Income Tax (Appeals). Furthermore, as per the learned Counsel, with the Instruction No.4(A) in the said Circular likely to recommend the assessee to deposit minimum percentage as 15% of the disputed demand, however, the Instruction Nos.4(B)(a), and Instruction No. 4(B)(b) sufficient discretionary power to either request for a higher than 15%, or a lower percentage than 15%, respectively. But, in the instant case, the A.O. was to demand less than 15 percent; he is required prior permission from the Principal Commissioner of Income Tax.
Aggrieved with Department’s insistence to pay minimum 15% of the demand, assessee approached High Court
Thirdly, in the instant case, by order the A.O. had directed the concerned assessee to deposit 15% of such disputed demand for the AY 2014-15, and for the AY 2015-16, despite the request of the assessee that less than 15 percent of the disputed demand should be required. Since, aggrieved by both the orders, the petitioner had approached the Principal Commissioner of Income Tax. However, the CIT without examining the interrelationship between Circular dated 29.2.2016 and Circular No.1914, has dismissed the petition filed by the petitioner.
AO has to support his contention that No Hardship Exists while refusing stay of demand
Fourthly, in the orders, the A.O. has opined that “no hardship existed” in the instant case, the opinion of the A.O. is merely a conclusion, which was without any support by any reason. Therefore, this part of the disputed orders is a non-speaking order. Lastly, even the order is legally unmanageable. For, the learned principal Commissioner of Income Tax has failed to notice the interrelationship between the two above mentioned Circulars. Further, the learned principal Commissioner of Income Tax has relied upon a pronouncement in the case of M/s.Teleradiology Solutions Pvt. Ltd., v. DCIT Circle-12(4) & Others (Writ Petition NO.26370/2015. But, the said pronouncement does not deal with the issue raised before the Principal CIT. Hence, the impugned orders deserve to be interfered with by this Court.
HELD by the High Court allowing the petition:
Undoubtedly, the instant case raises the issue to balance the interest of the assessee and the interest of the Revenue. Unnecessary to say, the department does have the obligation to realize the assessed amount of income tax from the concerned assessee. However, while trying to realize the said assessed income tax amount, the department can’t be permitted, and the same has not been permitted by above mentioned the Circulars, to act like a Shylock. It is indeed to balance the interests, Circular No.1914, and Circular dated 29.2.2016 has prescribed certain guidelines.