IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K , MUMBAI Before Shri C.N. Prasad, Judicial Member, and Shri Ashwani Taneja, Accountant Member SA No.340/Mum/2016 Arising out of ITA No.884/Mum/2016 Assessment Year-2011-12 Vodafone India Ltd., ACIT Cirl. 8(3)(2) Peninsula Corporate Park, Mumbai Ganpat Rao Kadam Marg, Vs. Lower Parel, Mumbai. (Assessee) (Revenue) P.A. No.AAACH5332B Appellant by Shri P.J. Pardiwalla (AR) Respondent by Shri B.S. Bist (DR) Date of Hearing: 09/09/2016 Date of Order: 30/09/2016 O R D E R Per Ashwani Taneja (Accountant Member): This stay petition has been filed by assessee for seeking stay of total dispute demand of Rs.1,31,83,65,620/- (Inclusive of tax and interest) arising on account of assessment order passed in pursuance to directions of Dispute Resolution Panel for A.Y. 2011-12. 2 Vodafone 2. During course of hearing, it was stated at outset by Ld. Senior Counsel of assessee that in this case stay was granted earlier by AO himself vide his order dated 21.03.2006 for period of six months or disposal of appeal pending before Tribunal, whichever is earlier subject to condition of payment of 10% of total demand raised. condition was fulfilled by assessee and 10% demand was paid as was directed. Ld. Counsel also drew our attention upon copy of Challan evidencing payment of Rs.13,18,36,562/-. However, six months period expired but appeal of assessee before Tribunal was not yet disposed of, therefore another application was filed by assessee before AO for extension of stay, while all other facts and circumstances of case remained same. AO refused to grant extension of stay on ground that mere pendency of appeal against assessment order was not sufficient reason to grant stay of recovery of demand. AO also directed for taking coercive measures in case of non-payment of balance demand by assessee. AO directed assessee to pay remaining 90% of total demand before 30th September 2016. 3. In these circumstances, being aggrieved, assessee has approached Tribunal by way of present stay application. It has been vehemently argued by Ld. Counsel that since facts and circumstances of case remains same, AO should have granted extension of stay and since AO failed in his duty, Tribunal should come to rescue of assessee and grant stay of demand thereby extending stay 3 Vodafone granted by AO earlier. On merits, it was submitted by Ld. Counsel that out of total additions made by AO, major addition was on account of disallowance made u/s 14A of Act, amounting to Rs.3,57,23,70,000/-. It was submitted that most of investments were made in group companies for strategic reasons. AO had made disallowance merely relying upon judgment of Special Bench of Tribunal in case of M/s. Cheminvest Ltd. v. ITO (ITA No.87/Del/2008. It was submitted that aforesaid judgment has been reversed by Hon ble Delhi High Court in its judgment reported as Cheminvest Ltd. v. CIT 378 ITR 33(Del) wherein it has been clearly held that investment made for strategic reasons shall not be considered for computing disallowance u/s 14A. It was also shown to us by Ld. Senior Counsel that for making investment in these group companies, no borrowed funds were used by assessee. It was shown that source of investment was mainly from Right Issue of shares and Share Swap and minor amount was soured through internal cash accruals as well. Thus, in any case, disallowance u/s 14A is prima facie not sustainable and thus balance of convenience lies in favour of assessee. Reliance was placed in this regard upon another judgment of Hon ble Bombay High Court in case of CIT v. Delite Enterprise (ITA No.110 of 2009 dated 26th February 2009). It was lastly submitted that if disallowance u/s 14A is deleted, assessment would be done at loss of Rs.48.60 crores and demand shall become nil. 4 Vodafone 4. Per contra Ld. DR submitted that assessee should have first approached higher authorities e.g. Principal Commissioner of Income Tax before approaching Tribunal. He also requested for payment of some more amount by assessee for extending stay. 5. In rejoinder, Ld. Senior Counsel submitted that since circumstances were quite extreme and AO had clearly stated in his order that coercive measures shall be taken in case of non-payment of demand before 30th September 2016, therefore under these circumstances, assessee could not have taken risk of attachment of its bank account or any other similar measure by AO which may have affected business adversely causing irreparable damage to reputation of assessee and its business. Therefore, urgent intervention of Tribunal became essential in this case. Ld. Counsel summed up his argument by stating that once stay has been granted by AO and if facts and circumstances of case remains same and if there is no delay on part of assessee in hearing of main appeal, then stay must be extended. In support of his arguments, he relied upon judgment of Hon ble Bombay High Court passed in assessee s own case for A.Y. 2006-07 titled as Vodafone India Limited v. Union of India in writ petition No. 2425 of 2013 dated 23rd June 2014. 6. We have considered orders passed by AO as well as submissions made by both sides before us. It is noted that in this case AO had granted stay of recovery of pending 5 Vodafone demand vide its order dated 21.03.2016, which reads as under: As per discussion held. AR confirmed that assessee company is ready to Pay 10% of total demand raised. Subject to that stay of demand is granted till 6 month or decision of appeal whichever is earlier. assessee is requested to pay demand latest by 29.03.2016. Stay is granted subject to adherence of compliance to above payment. 7. Thereafter assessee paid requisite amount as was directed and there is no dispute on that. Subsequently, it is noted that since appeal of earlier year 2005-06 was still pending, therefore, appeal of impugned year could not be disposed at level of Tribunal within six months period as was granted by AO. Therefore, assessee made request for extension of stay granted by AO vide its application dated 15th September, 2016.The reasons for asking for stay have been summarized by AO in order passed by her as under: i) Filing of appeal before Hon ble ITAT against order u/s.143(3) r.w.s. 144(1) dated 28.01.2016 and stay order had been passed by AO up to 21.09.2016. ii. Assessee has already paid 13,18,36,562/- as per condition of fist stay granted by AO while granting first stay dated 21.03.2016. iii. Delay in disposal of appeal is not attributable to assessee. iv. No adverse change in facts and circumstances. 8. But, Ld. AO was not, inclined to extend her stay order and therefore, vide her order dated 19.09.2016 passed u/s 220(6) of Act, she rejected prayer of assessee without assigning any reason and directed assessee to pay remaining 90% of demand before 30th September 2016. It 6 Vodafone was also stated by her in rejection order that in absence of full payment before said date coercive measures shall be taken by AO. It has been stated before us that facts and circumstances of case are same and reasons for non- disposal of appeal are not attributable of assessee. These facts have not been disputed by Ld. DR. Under these circumstances, we find that AO was not justified in refusing to extend stay. It is noted that Hon ble Bombay High Court in assessee s own case in Vodafone India Limited v. Union of India for A.Y. 2006-07 vide its order dated 23rd June, 2014 extended stay on same logic by observing as under: We find that impugned order dated 20 September 2013 making variation in conditions of stay already granted was not at all justified. This is for reason that at that point of time there was not apparent change in facts and circumstances of case from 17 May 2013 when stay was granted earlier. Therefore, we are of view that order dated 20 September 2013 is unsustainable in law taking into consideration facts of present case. We therefore, modify impugned order dated 20 September 2013 and do away with variation of terms of stay granted by Tribunal. (emphasis laid upon letters in bold) 9. We find force in argument of Ld. Senior Counsel that once AO have himself granted stay and all conditions and other facts and circumstances of case remains same, then stay must be extended as per principles of natural justice and fair play. Further, if we take into account merits of case also, we find that major disallowance is on account of section 14A. It has been contended by Ld. Counsel that prima facie balance of convenience of merits 7 Vodafone of disallowance lies in favour of assessee, in view of various judgments of few High Courts available on this issue. Though, legal position cited by Ld. Counsel was not disputed by Ld. DR, but we are not going into same at this stage. It is noted by us that in case disallowance made u/s 14A is deleted, then taxable income of assessee gets converted into loss and therefore no demand would be left as payable. Therefore, totality of facts of case suggests that as on date prima facie case and balance of convenience lies in favour of assessee. Thus, it is fit case for grant of stay. 10. other argument taken by Ld. DR was that before approaching Tribunal for seeking stay, assessee ought to have exhausted all remedies by approaching higher authorities i.e. Principal Commissioner of Income Tax for purpose of seeking stay and assessee has not done same and therefore Tribunal should not intervene in matter as of now. In this regard, it is noted by us that AO had given very short time for payment of balance entire demand of 90%. On this issue, Ld. Senior Counsel has relied upon judgment of DHL Express (India) (P) Ltd. v. Additional Commissioner of Income Tax 140 TTJ38(Mum) as well as Honeywell Automation India Ltd. v. Dy. CIT 138 TTJ 373(Pune) wherein it was held that there is no requirement of law that assessee should first necessarily approach CIT and wait for its decision before approaching Tribunal for grant of stay. We have gone through these judgments and find that it has further been held in these judgments that seeking stay before lower 8 Vodafone authorities is directory and not mandatory. Thus, our understanding of issue is that if circumstances suggest that intervention should be done by Tribunal, then assessee should not be compelled to first approach CIT for seeking stay. 11. Further, we find that facts and circumstances of case before us are straight and simple. stay has been granted by AO himself which has been declined to be extended without assigning any reasons. Thus, order dated 19.09.2016 u/s 220(6) of AO is unfair, arbitrary, unjustified and contrary to law and facts. Thus, taking into all facts and circumstances of case, assessee is hereby granted stay of recovery of balance demand for period of six months or disposal of appeal pending before Tribunal, whichever is earlier. assessee is directed to not to seek adjournment unless there are some reasons which are beyond control of assessee. Further our stay order shall have no bearing on merits of additions/ disallowance made by AO in assessment order. Thus, with aforesaid directions, stay petition is treated as allowed. 12. In result, stay petition filed by assessee is allowed. Order was pronounced in open court at conclusion of hearing on 30th September, 2016. Sd/- Sd/- (C.N.Prasad) (Ashwani Taneja) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 30/09 2016 9 Vodafone ct x ? P.S/. Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT, Mumbai. 4. CIT(A)- , Mumbai 5. , DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Vodafone India Ltd. v. ACIT, Cirl. 8(3)(2), Mumbai