1 184. WP 2271.19.doc JPP IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2271 OF 2019 General Insurance Corporation of India Petitioner V/s. Assistant Commissioner of Income Tax Circle 3(1)(2) and Ors. ... Respondents. Mr. F.V. Irani i/b. Atul Jasani for Petitioner. Mr. Sham Walve a/w. Pritish Chatterjee for Respondents. CORAM : M.S. SANKLECHA & NITIN JAMDAR, JJ. DATE : 14 OCTOBER 2019. P.C. :- This Petition by Government of India undertaking under Article 226 of Constitution of India challenges order dated 12 June 2019 passed by Respondent No.1 Assessing Officer and order dated 13 August 2019 passed by Respondent No. 2 - Principal Commissioner of Income Tax ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 2 184. WP 2271.19.doc (Appeals). Both impugned orders have been passed on Petitioner s application for not being treated as assessee in default under Section 220(6) of Income Tax Act 1961(the Act), consequent to Assessment order dated 30 May 2019 relating to Assessment Year 2017-18 raising demand of Rs.3601 crores. above applications were made by Petitioner in respect of appeal from order dated 30 May 2019 which is pending disposal before Commissioner of Income Tax (Appeals). 2. By impugned order dated 12 June 2019, Respondent No.1 Assessing Officer allowed Petitioner s application for not being treated as assessee in default (stay) on condition of Petitioner depositing 20% of disputed demand of Rs.3601 crores i.e. Rs.720 crores immediately. Being aggrieved Petitioner filed further representation on 14 June 2019 before Respondent No.2 Commissioner of Income Tax under Section 220(6) of Act. This application for stay was disposed of by impugned order dated 13 August 2019 of Respondent No.2 Commissioner of Income Tax who considered each head comprising of disputed demand of Rs.3601 crores and allowed representation on deposit of Rs.439 crores. 3. impugned order dated 12 June 2019 of Respondent No.1-Assessing Officer now stands modified by ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 3 184. WP 2271.19.doc impugned order date 13 August 2019 by Respondent No.2 Commissioner of Income Tax. Thus, impugned order dated 13 August 2019 being final order would only be subject of examination in this Petition. 4. At very outset Petitioner informed us that hearing of Petitioner s appeal for assessment order dated 13 May 2019 is fixed for hearing on 21 October 2019 before Commissioner of Income Tax (Appeals). We were therefore inclined to adjourn hearing of this Petition to 22 October 2019 as Appeal itself may be disposed of in near future. This particularly bearing in mind that post 30 May 2019, Petitioner has been enjoying effective stay of demand. However, on instructions this course of action was strongly opposed by Mr. Walve, learned Counsel for Respondents. It was in above view that we took up Petition for consideration. 5. impugned order dated 13 August 2019 of Respondent No.2 Commissioner of Income Tax dealt with each head of disputed demand arising from order dated 30 May 2019 and determined quantum of deposit to be made in respect of each of them. same has been tabulated issue-wise (each head of disputed demand) as under :- ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 4 184. WP 2271.19.doc Sr. B C D E No. Nature of additions/ Amount of Issue wise total % of Demand to be disallowance addition/ demand payable demand paid as per disallowance payable Pr.CIT order as per Pr.CIT order 1. Deduction for Claims 6693,30,07,781 27,85,63,49,209 10% 2,78,56,34,921 Incurred but Not Reported (IBNR) 2. Exemption u/s 10(38) 1592,75,81.738 6,62,87,81,429 20% 1,32,57,56,286 to profit on sale of Investments 3. Disallowance u/s 36(1) 259,56,44,771 108,02,62,035 20% 21,60,52,407 (vii) of provisions for doubtful debts and provision for doubtful loans and Investments. 4. Disallowance of write- 55,64,38,885 23,15,80,149 20% 4,36,16,030 off of diminution in value of investments. 5. Amortization of 18,51,51,780 7,70,56,938 20% 1,54,11,388 Premium on securities 6. Disallowance u/s 14A 30,93,37,339 12,87,40,800 0% r.w. Rule 8D 7. TP Adjustment of 1,99,50,135 83,02,898 20% 16,60,580 Corporate Guarantee Commission Total Demand to be 8652,71,12,429 3601,10,73,457 439,08,31,611 paid Petitioner had returned income of Rs.1495 crores and Assessing Officer by his order dated 30 May 2019 assessed Petitioner to total income of Rs.10148 crores. Thus, high pitched assessment. ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 5 184. WP 2271.19.doc 6. It is case of Petitioners that so far as Serial Nos. 1 (deduction for claim incurred but not reported), 2 (Exemption under Section 10(38) of Act) and 5 (Amortization of premium) hereinabove are concerned, same stands concluded in favour of Petitioner either by virtue of decision of Income Tax Appellate Tribunal (Tribunal) or decision of this Court. Notwithstanding above, impugned order dated 13 August 2019 of Respondent No.2 - Commissioner of Income Tax has directed them to deposit 20% of disputed amounts under Item Nos.2 and 5 above and 10% of disputed amount under Item No.1 above. It is further submitted that in ordinary course by virtue of Board Circulars/Instructions, deposit of 20% of disputed demand by assessee who has filed first appeal would be entitled to stay of balance demand till disposal of Appeal by First Appellate Authority. In support reliance is placed by Petitioner upon Instruction No.1914 dated 2 February 1993 as modified by office memorandums dated 29 February 2016 and dated 31 July 2017 issued by Central Board for Direct Taxes (CBDT). 7. So far as Item Nos. 3,4 and 7 of above chart are concerned, Petitioner only for purposes of stay does not dispute direction to deposit 20% of disputed demand in impugned order dated 13 August 2019 of Respondent No.2 - Commissioner of Income Tax. This of course is what prejudice to its ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 6 184. WP 2271.19.doc contention that no amount is payable under above heads, which is being impugned in appeal. It is thus submitted that complete stay of demand attributable to Item No.1,2 and 5 be granted and that time be given to pay amount of 20% payable in respect of Item Nos.3,4 and 7 above. 8. On other hand, Mr. Walve, learned Counsel appearing for Respondents supports impugned order and states that it is very fair and called for no interference. This fairness he submits is evident from fact so far as Item No.6 of above chart i.e. disallowance of Section 14A of Act is concerned, Commissioner of Income Tax has directed complete stay in view of fact issue stood covered in favour of Petitioner by virtue of Tribunal decisions in Petitioner s own case for earlier Assessment Years 2006-07 to 2011-12. So far as other claims are concerned, Mr. Walve invited our attention to impugned order so far as Item Nos.1,2 and 5 are concerned. On reading of same, it is submitted that direction of deposit of 10% and 20% is reasonable as there are decisions contrary to this Court and Tribunal (Mumbai Bench) being relied upon by Petitioner for grant of stay. In above circumstances, he submits that there is no warrant to interfere with impugned order dated 13 August 2019 of Respondent No.2 Commissioner of Income Tax. Thus he submits that Petition be dismissed. ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 7 184. WP 2271.19.doc 9. Before dealing with rival submissions it would be useful to set out parameters to be borne in mind while disposing of stay application as laid down by this Court. We refer to following extract of decision of this Court in Mumbai Metropolitan Region Development Authority v/s. Deputy Director of Income Tax (WP(L) No. 2348 of 2014) rendered on 29 October 2014 as under :- 11. We have today, disposed of another Petition bearing No. 2542 of 2014 filed by Slum Rehabilitation Authority and set out parameters in deciding stay application as laid down by this Court in KEC International Limited v/s. B. R. Balakrishnan 251 ITR 158; UTI Mutual Funds v/s. ITO 345 ITR 71 and UTI Mutual Fund v/s. ITO in W.P.(L) No.523 of 2013 rendered on 6 th March 2013 which can for purposes of disposing application of stay can be summarized as under: (a) order on stay application must briefly set out issue and submission of assessee/ applicant in support of stay; (b) In cases where assessed income under impugned order far exceeds returned income so as to make demand arbitrary or issue arising for consideration stands concluded by decision of higher forum or where order appealed against is in breach of Natural Justice or view taken in order being appealed against is contrary to what has been held in preceding previous years ( even if issue pending before higher forum ) without there being material change in facts or law, stay should normally be granted; ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 8 184. WP 2271.19.doc (c) If not, whether looking to questions involved in appeal, keeping in view likelihood of success in appeal what part of demand whole(in case issue covered against applicant by decision of higher forum) or part of it and must be justified by short reasons in order disposing of stay application; (c) Lack of financial hardship would not be sole ground to direct deposit/payment of demands if assessee/applicant has strong arguable case on merits; (d) In cases where assessee/applicant relies upon financial difficulties, authority concerned should briefly indicate whether assessee is financially sound and viable to deposit amount or apprehension of revenue of non recovery later. Thus warranting deposit. This of course, if case is not otherwise sustainable on merits; (d) authority concerned will also examine whether time to prefer appeal has expired. Generally, coercive measures may not be adopted during period provided by statute to go in appeal. However, if authority concerned comes to conclusion that assessee is likely to defeat demand, it may take recourse to coercive action for which brief reasons may be indicated in order (e) In exercising powers of stay, Authority should always bear in mind that as quasi judicial authority it is vested with public duty of protecting interest of Revenue while at same time balancing need to mitigate hardship to assessee. Though assessing officer has made assessment, he must objectively decide application for stay considering that appeal lies against his order; ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 9 184. WP 2271.19.doc application for stay must be considered from all its facets and order should be passed, balancing interest of assessee with protection of Revenue. above guidelines are only illustrative and authority concerned would have to have exercise his discretion in matters of stay on facts of case before him. Keeping in view of above broad parameters we shall now examine whether authorities have properly exercised their jurisdiction. Besides above, we shall also keep in mind Circulars/Instructions issued by CBDT from time to time, directing Officers of Revenue to manner in which stay applications are to be disposed of. These circulars/instructions are binding upon Officers of Revenue. Reference will be made to appropriate Circulars/Instructions while considering submissions. 10. We shall now examine impugned order dated 13 August 2019 of Respondent No.2 Commissioner of Income Tax bearing in mind yardstick laid down in above decisions and Circulars/Instructions of CBDT in context of submissions made by parties. We are also taking into account fact that appeal before Commissioner of Income Tax (Appeals) is ripe for hearing and is in fact fixed on 21 October 2019. Thus appeal itself is in all likelihood will be decided in near future. ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 10 184. WP 2271.19.doc 11. So far as Issue No.1 above is concerned, Petitioner submits that same stands concluded in its favour by virtue of decision dated 11 October 2017of Mumbai Bench of Tribunal in DCIT Circle 3(1)(2) vs. ECGC IT No. 7657/Mum/2014 and Kolkata Bench of Tribunal in case of DCIT v/s. Mutual Insurance Co. Ltd. 2016 (72) Taxmann.Com 116 in favour of Petitioner. However, impugned order still directed deposit of 10% of disputed demand on this Court in view of decision of Chennai Bench of Tribunal in case of United India Insurance v/s. JCIT (2018) 97 Taxmann.com 466 . We note that Chennai Bench decision of Tribunal has ignored co-ordinate bench decision of Mumbai and Kolkata benches of Tribunal. Therefore, prima facie per incurium. In any case CBDT Circular No. 530 dated 6 March 1989 states that stay of demand be granted where there are conflicting decisions of High Court. This principle can be extended to conflicting decisions of different benches of Tribunal. Thus, in above facts complete stay of demand on above head i.e. Item No.1 of above chart was warranted in Petitioner s favour. 12. So far as Issue No.2 of above table is concerned, it is case of Petitioner that issue is covered by decision of this Court in PCIT v/s. New India Assurance Co. Ltd. 91 Taxmann.Com 433. Revenue contended that ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 11 184. WP 2271.19.doc Commissioner of Income Tax (Appeals) for earlier Assessment Years i.e. A.Y. 2006-07 to 2011-12 had taken view adverse to Petitioner and thus follows it. However, we are informed that on further Appeal to Tribunal, demand attributable on aforesaid head had been stayed on partial deposit and Appeal is now fixed for hearing on 11 December 2019. However, we note fact that while impugned order of Commissioner of Income Tax directed Petitioner to pay 20% on this issue, it has not indicated reason it has chosen to follow decision of Commissioner of Income Tax (Appeals) for earlier Assessment Year in preference to decision of this Court in New India Assurance (Supra). This when it is Petitioner s contention that amendment made in Rule 5 of 1 st Schedule to Act will not affect claim for deduction under Section 10(38) of Act. No prima facie view on this is taken by impugned order. Besides decision of jurisdictional High Court is binding upon Authority. Therefore, in above view, no deposit should have been directed on this head of disputed tax. unconditional stay of this demand at Item No.2 of chart in present fact was warranted. 13. So far as Issue No.5 in above chart is concerned, we find that impugned order dated 13 August 2019, does record Petitioner s submission that this issue stands concluded in its favour by decision of Mumbai Bench of Tribunal in case of ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 12 184. WP 2271.19.doc Tata AIG General Insurance Co. Ltd. v/s. ITA (ITA No. 2543 of 2009). Nevertheless aforesaid binding decision is ignored on ground that Chennai Bench of Tribunal in Chennai United India Insurance v/s. JCIT has taken different view. There is no discussion as to why Chennai Bench decision of Tribunal is to be preferred in Mumbai Bench decision of Tribunal. In this case also CBDT Circular No. 530 dated 6 March 1989 while stating that stay of demand be granted if there are conflicting views of High Court. This in our view could be extended to conflicting view of different benches of Tribunal. In above view, impugned order directing deposit of 20% on this head was also not justified. unconditional stay of this demand at Item No.5 of chart, in present facts is warranted. 14. In above view, we modify impugned order dated 13 August 2019 of Respondent No.2 Commissioner of Income Tax to extent that there shall be complete stay of demands made on Item at Serial Nos. 1,2 and 5 of chart hereinabove. Petitioner will deposit balance amount as directed by Commissioner of Income Tax (Appeals) of Rs.26.40 crores with Respondents within period of four weeks from today. 15. It is made clear that one of factors which weighed with us in passing this order was hearing of appeal is now ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: 13 184. WP 2271.19.doc fixed before Commissioner of Income Tax (Appeals) on 21 October 2019 and Petitioner s undertaking to us that it will co- operate with Commissioner of Income Tax (Appeals) in early disposal of appeal. 16. It is made clear that observations made herein are only in context of order of stay passed under Section 220(6) of Act. Our observations are only prima facie view for limited purpose of disposal of stay application. It would not have impact/influence on Commissioner of Income Tax (Appeals) while considering Petitioner s appeal on merits for order dated 30 May 2019 of Assessing Officer. Commissioner of Income Tax (Appeals) will dispose of appeal on its own merits without in any manner being influenced by any observation in this order. 17. Petition is disposed of in above terms. NITIN JAMDAR, J. M.S. SANKLECHA, J. ::: Uploaded on - 16/10/2019 ::: Downloaded on - 24/10/2019 15:02:46 ::: General Insurance Corporation of India v. Assistant Commissioner of Income-tax Circle 3(1)(2) and Or