W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.08.2020 CORAM HONOURABLE DR. JUSTICE ANITA SUMANTH W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 M/s.Sahana Jewellery Exports Private Limited, Represented by its Managing Director D.R.Ragunath 600, Raja Street, Coimbatore Coimbatore 641 001. .. Petitioner in WP.No.7136/2020 DAR Paradise Private Limited Rep. by its Director D.R.Ragunath 599 Raja Street, Coimbatore Coimbatore 641001. .. Petitioner in WP.No.7155/2020 Tara Jewellery Rep. by its Partner Paras K.Soni 61 West Bashyakarula Road, R.S.Puram, Coimbatore 641002. Petitioner in WP.No.7411/2020 Vs. Income Tax Officer Corporate Ward 3, Coimbatore 63 Race Course Road Coimbatore 641018. 1st Respondent in WP.7136/2020 Deputy Commissioner of Income Tax Corporate Circle 2 63 Race Course Road, Coimbatore 641018. .. 1st Respondent in WP.7155/2020 Assistant Commissioner of Income Tax, Non Corporate Circle 2 63, Race Course Road Coimbatore 641 018. .. 1st Respondent in WP.7411/2020 http://www.judis.nic.in 1 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 Principal Commissioner of Income Tax 1, 63 Race Course Road, Coimbatore 641 018. .. 2nd Respondent in all WPs Prayer in WP.No.7136 of 2020: Writ Petition filed under Article 226 of Constitution of India praying Writ of Certiorari to call for records on file of First Respondent relating to application made by Petitioner for stay of demand for assessment year 2016-17 and quash order of First Respondent in PAN AAECS7045N in DIN Letter No. ITBA / COM / F / 17 / 2019-20 / 1024361388(1) dated 28.01.2020 for Assessment year 2016- 17 along with consequential order of Second Respondent dated 09.03.2020 in C No. 117 / PCIT-1 / CBE / AAECS7045N / 2019-20 and direct First Respondent to not to treat petitioner as assessee in default pending disposal of appeal file by petitioner before Commissioner of Income Tax (Appeals) Coimbatore. Prayer in WP.No.7155 of 2020: Writ Petition filed under Article 226 of Constitution of India praying to Writ of Certiorari to call for records on file of 1st respondent relating to application made by petitioner for assessment year 2016 -17 and quash order of 1st respondent in PAN AAFCD 3066 P in DIN and Letter No.ITBA / COM / F/17/2019 -20 /1024477226 (1) dated 30/01/2020 for Assessment Year 2017 -18 along with consequential order of Second Respondent dated 09.03.2020 in C No 117/PCIT-1/CBE/AAFCD3066P/2019-20 and direct 1st respondent not to treat petitioner as assessee in default pending disposal of appeal filed by petitioner before commissioner of Income Tax (Appeals) Coimbatore. http://www.judis.nic.in 2 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 Prayer in WP.No.7411 of 2020: Writ Petition filed under Article 226 of Constitution of India praying to Writ of Certiorari to call for records on file of First Respondent relating to application made by petitioner for stay of demand for assessment year 2017-18 and quash order of First Respondent in PAN AAGFT2345B in DIN and Letter No. ITBA/ COM/ F/ 17/ 2019-20/ 1024859545 (1) dated 07.02.2020 for Assessment year 2017- 18 along with consequential order of second Respondent dated 09.03.2020 in C.No. 117/ PCIT -1/ CBE/ AAGFT2345B/ 2019-20 and direct First Respondent not to treat Petitioner as assessee in default pending disposal of appeal filed by Petitioner before commissioner of Income Tax (appeals) Coimbatore. (Prayers amended vide order dated 21.08.2020 in WMP Nos.13817. 13914 and 13782 of 2020). For Petitioner : Mr.N.V.Balaji For Respondent s : Mr.ANR Jayapratap, Standing Counsel COMMON ORDER For reasons stated in affidavit filed in support of Miscellaneous Petitions filed seeking amendment of prayer in Writ Petitions and there being no objection to same by Mr.ANR.Jayapratap, learned Standing Counsel for respondents, WMP Nos.13817, 1394 and 13782 of 2020 are ordered. http://www.judis.nic.in 3 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 2. Heard Mr.N.V.Balaji, learned counsel for petitioner and Mr.ANR.Jayaprathap, learned Standing Counsel for respondents. By consent expressed by both learned counsel these matters are taken up for final disposal. 3. petitioners challenge orders passed by Assessing Officer and by Principal Commissioner of Income Tax rejecting applications for stay of demand arising from disputed orders of assessment passed under provisions of Income Tax Act, 1961 (in short Act ). 4. perusal of impugned orders would show that orders are non- speaking and merely call upon petitioners to remit 20% of disputed taxes without reference to tri-fold aspects of prima facie case, financial stringency and balance of convenience. In fact, I have in order dated 13.07.2019 in W.P.No.3849 of 2019 considered similar position and have passed following order: 7. parameters to be taken into account in consideringthe grant of stay of disputed demand are well settled theexistence of prima facie case, financial stringency and thebalance of convenience. Financial stringency would include withinits ambit question of 'irreparable injury' and undue hardship as well. It is only upon application of three factors asaforesaid that assessing officer can exercise discretion for thegrant or rejection, wholly or in part, of request for stay ofdisputed demand. 8. In addition, periodic Instructions/Circulars in regard to themanner of adjudication of stay petitions are issued by CentralBoard of Direct Taxes (CBDT) for guidance of Departmentalauthorities. one oft-quoted by assessee is OfficeMemorandum F.No.1/6/69/- ITCC, dated 21.08.1969 that states as follows: http://www.judis.nic.in 4 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 '1. One of points that came up for considerationin 8th Meeting of Informal ConsultativeCommittee was that income-tax assessments wereoften arbitrarily pitched at higher figures and thatthe collection of disputed demand as result thereofwas also not stayed in spite of specific provisionin matter in s. 220(6) of IT Act, 1961. 2. then Deputy Prime Minister had observed asunder : ".........Where income determined on assessmentwas substantially higher than returned income,say twice latter amount or more, collectionof tax in dispute should be held in abeyance tillthe decision on appeal provided there were nolapses on part of assessees." 3. Board desire that above observations maybe brought to notice of all Income-taxOfficers working under you and powers of stayof recovery in such cases up to stage of firstappeal may be exercised by Inspecting AssistantCommissioner/Commissioner of Income-tax. 9. Thereafter, Instruction No.1914 was issued bythe CBDT on 21.03.1996 and states as follows: 1. Recovery of outstanding tax demands [Instruction No. 1914 F. No. 404/72/93 ITCC dated 2-12-1993 from CBDT] Board has felt needfor comprehensive instruction on subject of recovery of tax demand in order to streamlinerecovery procedures. This instruction is accordinglybeing issued in supersession of all earlierinstructions on subject and reiterates theexisting Circulars on subject. 2. Board is of view that, as matter ofprinciple, every demand should be recovered assoon as it becomes due. Demand may be kept inabeyance for valid reasons only in accordance withthe guidelines given below : A. Responsibility: i. It shall be responsibility of AssessingOfficer and TRO to collect every demand thathas been raised, except following: http://www.judis.nic.in (a) Demandwhich has not fallen due; 5 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 (b) Demand which hasbeen stayed by Court or ITAT or SettlementCommission; (c)Demand for which proper proposal for write- off has been submitted; (d) Demand stayed inaccordance with paras B & C below. ii. Where demand in respect of which recoverycertificate has been issued or statement has beendrawn, primary responsibility for collectionof tax shall rest with TRO. iii. It would be responsibility of supervisoryauthorities to ensure that Assessing Officersand TROs take all such measures as arenecessary to collect demand. It must beunderstood that mere issue of show cause noticewith no followup is not to be regarded as adequateeffort to recover taxes. B. Stay Petitions: i. Stay petitions filed with Assessing Officersmust be disposed of within two weeks of filing ofpetition by tax- payer. assessee must beintimated of decision without delay. ii. Where stay petitions are made to authoritieshigher than Assessing Officer (DC/CIT/CC), it isthe responsibility of higher authorities todispose of petitions without any delay, and inany event within two weeks of receipt of petition. Such decision should be communicated tothe assessee and Assessing Officer immediately. iii. decision in matter of stay of demandshould normally be taken by Assessing Officer/TROand his immediate superior. higher superiorauthority should interfere with decision of theAO/TRO only in exceptional circumstances; e.g., where assessment order appears to beunreasonably high-pitched or where genuinehardship is likely to be caused to assessee. Thehigher authorities should discourage assesse from filingreview petitions before them as matterof routine or in frivolous manner to gain time forwithholding payment of taxes. C. Guidelines for staying demand: i. demand will be stayed only if there are http://www.judis.nic.in validreasons for doing so. Mere filing appeal 6 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 againstthe assessment order will not be sufficient reasonto stay recovery of demand. few illustrativesituations where stay could be granted are: It is clarified that in these situations also, stay maybe granted only in respect of amountattributable to such disputed points. Further whereit is subsequently found that assessee has notco-operated in early disposal of appeal or wherea subsequent pronouncement by higher appellateauthority or court alters above situation, thestay order may be reviewed and modified. Theabove illustrations are, of course, not exhaustive. ii. In granting stay, Assessing Officer mayimpose such conditions as he may think fit. Thus hemay a. require assessee to offer suitablesecurity to safeguard interest of revenue; b.require assessee to pay towards disputedtaxes reasonable amount in lump sum or ininstalments; c. require undertaking from theassessee that he will co-operate in earlydisposal of appeal failing which stay order willbe cancelled. d. reserve right to review theorder passed after expiry of reasonable period,say up to 6 months, or if assessee has not cooperatedin early disposal of appeal, or where asubsequent pronouncement by higher appellateauthority or court alters above situations; e. reserve right to adjust refunds arising, if any,against demand. iii. Payment by instalments may be liberally allowedso as to collect entire demand within areasonable period not exceeding 18 months. iv. Since phrase stay of demand does not occurin section 220(6) of Income-tax Act, theAssessing Officer should always use in any orderpassed under section 220(6) [or under section220(3) or section 220(7)], expression thatoccurs in section viz., that he agrees to treat theassessee as not being default in respect of theamount specified, subject to such conditions as hedeems fit to impose. v. While considering application under section220(6), Assessing Officer should consider allrelevant factors having bearing on http://www.judis.nic.in 7 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 demandraised and communicate his decision in form ofa speaking order. D. Miscellaneous: i. Even where recovery of demand has been stayed,the Assessing Officer will continue to review thesituation to ensure that conditions imposed arefulfilled by assessee failing which stay orderwould need to be withdrawn. ii. Where assessee seeks stay of demand fromthe Tribunal, it should be strongly opposed. If theassessee presses his application, CIT shoulddirect departmental representative to requestthat appeal be posted within month so thatTribunal s order on appeal can be known withintwo months.iii. Appeal effects will have to be givenwithin 2 weeks from receipt of appellateorder. Similarly, rectification application should bedecided within 2 weeks of receipt t hereof.Instances where there is undue delay in giving effectto appellate orders, or in deciding rectificationapplications, should be dealt with very strictly bythe CCITs/CITs. 3. Board desires that appropriate action istaken in matter of recovery in accordance withthe above procedure. Assessing Officer or theTRO, as case may be, and his immediatesuperior officer shall be held responsible forensuring compliance with these instructions. 4. This procedure would apply mutatis mutandis todemands created under other Direct Taxesenactments also.' 10. Instruction 1914 was partially modified by OfficeMemorandum dated 29.02.2016 taking into account fact thatAssessing Officers insisted on payment of significant portions of thedisputed demand prior to grant of stay resulting in extremehardship for tax payers. Thus, in order to streamline grant ofstay and standardize procedure, modified guidelines wereissued which are as follows: '....... (A) In case where outstanding demand is disputedbefore CIT (A), assessing officer shall grant stay ofdemand till disposal of first appeal on payment of 15% of disputed demand, unless case falls in categorydiscussed in pars (B) hereunder. http://www.judis.nic.in (B) In situation where, 8 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 (a) assessing officer is of view that nature ofaddition resulting in disputed demand is such thatpayment of lump sum amount higher than 15% is warranted (e.g. in case where addition on same issuehas been confirmed by appellate authorities in earlier yearsor decision of Supreme Court /or jurisdictional HighCourt is in favour of Revenue or addition is based oncredible evidence collected in search or survey operation,etc.) or, (b) assessing officer is of view that nature ofaddition resulting in disputed demand is such thatpayment of lump sum amount lower than 15% iswarranted (e.g. in case where addition on same issuehas been deleted by appellate authorities in earlier years orthe decision of Supreme Court or jurisdictional HighCourt is in favour of assessee, etc.), assessingofficer shall refer matter to administrative Pr. CIT/CIT, who after considering all relevant facts shall decidethe quantum/ proportion of demand to be paid by theassessee as lump sum payment for granting stay of thebalance demand.' 11. Instruction 1914 was further modified by OfficeMemorandum bearing number F.No.404/72/93 ITCC dated 31.07 2017 as follows: 'OFFICE MEMORANDUM F. No. 404/72/93- ITCC dated 31.07.2017 Subject: Partial modification of Instruction No. 1914 dated 21.3.1996 to provide for guidelines for stay of demand at first appeal stage. Reference: Board s O.M. of even number dated 29.2.2016Instruction No. 1914 dated 21.3.1996 contains guidelinesissued by Board regarding procedure to be followed forrecovery of outstanding demand, including procedure forgrant of stay of demand. Vide O.M. N0.404/72/93-ITCC dated 29.2.2016 revisedguidelines were issued in partial modification of instructionNo 1914, wherein, inter alia, vide para 4(A) it had been laiddown that in case where outstanding demand isdisputed http://www.judis.nic.in before CIT(A), Assessing Officer shall 9 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 grantstay of demand till disposal of first appeal on payment of15% of disputed demand unless case falls in thecategory discussed in para (B) thereunder. Similarreferences to standard rate of 15% have also beenmade in succeeding paragraphs therein. 2. matter has been reviewed by Board in lightof feedback received from field authorities. In view of theBoard s efforts to contain over pitched assessments through several measures resulting in fairer and morereasonable assessment orders, standard rate of 15% ofthe disputed demand is found to be on lower side. Accordingly. it has been decided that standard rateprescribed in O.M. dated 29.2.2016 be revised to 20% ofthe disputed demand, where demand is contested before CIT(A). Thus all references to 15% of disputeddemand in aforesaid O.M dated 29.2.2016 hereby standmodified to 20% of disputed demand. Other guidelinescontained in O.M. dated 29.2.2016 shall remainunchanged. These modifications may be immediately brought to thenotice of all officers working in your jurisdiction for proper compliance.' 12. Circulars and Instructions as extracted above are in thenature of guidelines issued to assist assessing authorities in thematter of grant of stay and cannot substitute or override basictenets to be followed in consideration and disposal of staypetitions. existence of prima facie case for which someillustrations have been provided in Circulars themselves, thefinancial stringency faced by assessee and balance ofconvenience in matter constitute trinity , so to say, and areindispensable in consideration of stay petition by authority. Board has, while stating generally that assessee shall becalled upon to remit 20% of disputed demand, granted amplediscretion to authority to either increase or decrease thequantum demanded based on three vital factors to be takeninto consideration. 13. In present case, assessing officer has merelyrejected petition by way of non-speaking order reading asfollows: 'Kindly refer to above. This is to inform you that merefiling of appeal against said order is not ground forstay of demand. Hence your request for stay of demandis rejected and you are requested to pay demandimmediately. Notice u/s.221(1) of Income Tax Act, 1961is enclosed http://www.judis.nic.in herewith.' 10 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 14. disposal of request for stay by petitioner leavesmuch to be desired. I am of categoric view that AssessingOfficer ought to have taken note of conditions precedent for thegrant of stay as well as Circulars issued by CBDT andpassed speaking order. Of course petition seeking stay filedby petitioner is itself cryptic. However, as noted by theSupreme Court in case of Commissioner of Income tax vsMahindra Mills, ((2008) 296 ITR 85 (Mad)) in context of grantof depreciation, Circular of Central Board of Revenue (No.14 (SL- 35) of 1955 dated April 11, 1955) requires officers ofthe department to assist taxpayer in every reasonable way,particularly in matter of claiming and securing reliefs. ....Although, therefore, responsibility for claiming refunds andreliefs rests with assessees on whom it is imposed by law, officersshould draw their attention to any refunds or reliefs to which theyappear to be clearly entitled but which they have omitted to claim forsome reason or other...... . Thus, notwithstanding that assesse may not have specifically invoked three parameters for thegrant of stay, it is incumbent upon assessing officer to examinethe existence of prima facie case as well as call upon theassessee to demonstrate financial stringency, if any and arrive atthe balance of convenience in matter. 15. I thus set aside impugned order dated 25.01.2019. TheAssessing Officer is directed to pass orders de novo on stayapplication filed by petitioner in light of discussion asaforesaid, after hearing petitioner, within period of fourweeks from date of receipt of copy of this Order. I have, for theaforesaid reason, consciously and deliberately refrained fromreferring to or making any observation on merits of theassessment. 5. In present matters, sample of impugned orders (W.P.No.7136 of 2020) are extracted below to show cursory manner in which stay applications have been disposed. GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF INCOME TAX OFFICER CORP WARD 3, CBE TO SAHANA JEWELLERY EXPORTS PRIVATE LIMITED http://www.judis.nic.in 11 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 SAHANA JEWELLERY EXPORTS PRIVATE LIMITED, 600, RAJA STREET, COIMBATORE 641 001, Tamil Nadu India PAN: Assessment Dated: DIN & Letter No: AAECS7045N Year: 28/01/2020 ITBA/COM/F/17/2019- 2016-17 20/ 1024361388(1) Sir/Madam/M/s. Subject: Payment of outstanding tax-PAN: AAECS7045N-AY 2016-17- Regarding Ref: Your petition dated 27-01-2020 Your petition regarding stay of recovery of disputed tax and case laws quoted by you are perused. However as per Boards instruction no.1914, which is modified by Para 2 of OM dated 31/07/2017 stay of disputed demand be granted if 20% of same is paid and stay requested. Hence your request for permanent stay of recovery of disputed tax till disposal of first appeal by Commissioner of Income Tax (Appeal), Coimbatore is hereby rejected. You are requested to pay 20% of demand outstanding immediately and file fresh petition for stay balance demand to avoid coercive action. SILUVAI ANTHONY JOSEPHINE MARY CORP WARD 3, CBE GOVERNMENT OF INDIA OFFICE OF PRINCIPAL COMMISSIONER OF INCOME TAX-1 NO 63, RACE COURSE, COIMBATORE-641 018 C.No.117/PCII-I/CBE/AAECS7045N/2019-20 Dated: 09/03/2020 PROCEEDINGS OF PRINCIPAL COMMISSIONEROF INCOME TAX-1 COIMBATORE Present: Shri G.R.Reddy, http://www.judis.nic.in Principal Commissioner of Income Tax-1 12 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 Coimbatore Sub: Stay of payment of tax in case of Sahana Jewellery Exports Private Limited, 600 Raja Street, Coimbatore 641 001 AY:2016-17 PAN : AAECS7045N Reg. Ref: Assessee s Petition dated 31/01/2020 ********** ORDER: aforesaid assessee has filed petition dated 31/01/2020 requesting to grant stay of demand which was raised by Assessing Officer vide order dated 30/12/1999 passed u/s 143(3) of Income Tax Act 1961 for assessment year 2016-17. 2.0 assessee s stay petition, facts of case and assessment records have been carefully perused. Considering facts of case and in view of Instruction No.1914 issued by Central Board of Direct Taxes (CBDT) dated 31/07/2017, assessee is directed to remit 20% of demand raised within 5 days from date of receipt of this order. Assessing Officer shall monitor payment of 20% of disputed demand and thereafter, stay balance 80% of disputed demand till disposal of appeal by Commissioner of Income Tax (Appeals), Coimbatore. 3.0 petition of assessee stands disposed accordingly. (G.R.REDDY) Pr. Commissioner of Income Tax-1 Coimbatore 6. Evidently, matter needs more application of mind than what is seen above. In aforesaid circumstances, impugned orders are set aside. Orders shall be passed afresh by 2nd respondent after hearing petitioners either virtually or by way of physical hearing as may be mutually convenient to parties within period of six (6) weeks from date of uploading of this order. Till such time, recovery proceedings are kept in abeyance. http://www.judis.nic.in 13 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 7. These Writ Petitions are disposed as above. No costs. Connected Miscellaneous Petitions are closed. 21.08.2020 Sl Index:Yes/No Speaking order/Non-speaking order Note: Registry is directed to upload this order today. To 1.Income Tax Officer Corporate Ward 3, Coimbatore 63 Race Course Road Coimbatore 641 018. 2.Deputy Commissioner of Income Tax Corporate Circle 2 63 Race Course Road, Coimbatore 641018. 3.Assistant Commissioner of Income Tax, Non Corporate Circle 2 63, Race Course Road Coimbatore 641 018. 4.Principal Commissioner of Income Tax 1, 63 Race Course Road, Coimbatore 641 018. http://www.judis.nic.in 14 W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 Dr.ANITA SUMANTH, J. sl W.P. Nos.7136, 7155 & 7411 of 2020 and WMP.Nos.8505, 8506, 13817, 8535, 8536, 13914, 8874, 8875 & 13782 of 2020 21.08.2020 http://www.judis.nic.in 15 Sahana Jewellery Exports Private Limited v. Income-tax Officer Corporate Ward 3, Coimbatore