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2015 (10) TMI 1903 - GUJARAT HIGH COURT

2015 (10) TMI 1903 - GUJARAT HIGH COURT - TMI - Stay of demand - writ petition - Registration under section 12A denied - Assessing Officer assessed the total income of the petitioner as ₹ 48,22,54,670/- and raised a demand of ₹ 20,41,52,870/- in scrutiny assessment - stay petition submitted - Held that:- From the facts and contentions noted hereinabove, it is apparent that none of the exceptions laid down by in the case of Commissioner of Income Tax v. Chhabil Dass Agarwal, (2013 (8) .....

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s an efficacious alternative statutory remedy available to the petitioner and the petitioner has already availed of the same, in the opinion of this court, no case has been made out for entertaining a writ petition against the assessment order framed under section 143(3) of the Act. Besides, the question as to whether the activities carried out by the petitioner fall within the ambit of the proviso to section 2(15) of the Act, is a mixed question of fact and law and, hence, when there is a statu .....

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not inclined to entertain the petition qua the relief challenging the impugned assessment order.

Whether the petitioner is entitled to any relief under section 220(6) of the Act - Held that:- On a plain reading of the orders passed by the respondents No.1 to 3 under section 220(6) of the Act, it is manifest that such orders have been passed in a mechanical and perfunctory manner without application of mind to the relevant factors for considering the question of grant of stay and as su .....

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for grant of stay of the demand, subject to reasonable conditions. Under the circumstances, instead of remanding the matter to the respondent authorities, the court is of the view that the ends of justice would be met if the petitioner is directed to pay an amount equal to ten per cent of the demand raised by the respondents. Having regard to the facts and circumstances of the case and the quantum of the demand raised against the petitioner, the court is of the view that the Commissioner (Appea .....

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hall dispose of the appeal preferred by the petitioner under section 246 of the Act within a period of four months from the date of receipt of a copy of this judgment. - Special Civil Application No. 11001 of 2015 - Dated:- 22-9-2015 - Ms. Harsha Devani And Mr. A.G.Uraizee, JJ For the Petitioner : Mr Mihir Thakore, Senior Advocate with Mr Gursharan Singh H Virk, Advocate For the respondent : Mr Manish R Bhatt, Senior Advocate with MRS Mauna M Bhatt, Advocate JUDGMENT PER : MS. HARSHA DEVANI 1. R .....

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d thereunder. By an order dated 14.2.2007 passed by the Commissioner of Income Tax-II, Surat the petitioner was granted registration under section 12A of the Income Tax Act with effect from 1.4.2002. Subsequently, for assessment years 2009-10, 2010-11 and 2011-12, the matters were taken up for scrutiny and assessment orders came to be passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) computing the income of the petitioner as Nil . In respect of assessm .....

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so moved an application under section 220(6) of the Act before the first respondent Deputy Commissioner of Income Tax (Exemptions) praying that the demand raised pursuant to the assessment order be kept in abeyance till the final disposal of the appeal. By the impugned order dated 26.5.2015, the respondent No.1 directed the petitioner to pay the entire demand in six monthly installments of ₹ 3,40,25,000/- each. The petitioner thereafter filed an application before the respondent No.2 for s .....

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had agreed to pay six monthly installments of ₹ 50 lakh each till December, 2015 and thereafter monthly installment of ₹ 1 crore for the next three months and ₹ 1.83 crore in the next nine monthly installments covering the entire demand. Being aggrieved, the petitioner has presented the present petition challenging the assessment order dated 24.3.2015 and has prayed that the respondents be restrained from taking any coercive recovery measures pursuant to the assessment order da .....

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the carrying on of any activity in the nature of trade, commerce or business, or any activity rendering any service in relation to any trade, commerce or business or a cess or fee or any other consideration, irrespective of the nature of application, or retention, of the income from such activity. The attention of the court was invited to the scheme of the Gujarat Town Planning and Urban Development Act, 1976 with special reference to the provisions of sections 3, 12, 13, 22, 23, 25, 27, 35, 40 .....

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ount to trade, commerce or business. According to the learned counsel, in the light of the statutory duties cast upon the petitioner, by no stretch of imagination can the same be considered to be trade, commerce or business. Referring to the impugned assessment order dated 24.3.2015, it was pointed out that the Assessing Officer has considered that the assessee being an urban development authority charges various types of fees from the public for providing certain amenities like roads, bridges, .....

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rust. It was pointed out that the Assessing Officer has held that the assessee is engaged in the activity of earning by charging various fees for rendering services to the general public and, therefore, is not carrying on any charitable activity and is squarely covered by the first and second provisos to section 2(15) of the Act. Thus, the Assessing Officer has held the activities of the assessee which are carried out within the statutory framework to be trade, commerce and business under the pr .....

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f Director of Income Tax (Exemption) v. Sabarmati Ashram Gaushala Trust, (2014) 362 ITR 539 (Gujarat), wherein the court has held that what emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or a .....

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ncipal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. The court after considering the object of the appellant therein noted that the objects were of general public utility and would squarely fall under section 2(15) of the Act. The court further noted that profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for the purpose of achieving the objec .....

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r General of Income Tax (Exemptions), (2013) 358 ITR 78 (Delhi), wherein the court was called upon to decide as to whether the Bureau of Indian Standards is involved in carrying on trade, commerce or business. The court observed that BIS is a statutory body established under the BIS Act and was brought into existence for the harmonious development of the activities of standardization, marking and quality certification of goods . This was, and has been, its primary and pre-dominant object. Even t .....

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s to the facts of the present case where the petitioner performs sovereign and regulatory function in its capacity as an instrumentality of the State. 3.2 Reliance was also placed upon an unreported decision of the Allahabad High Court in the case of Commissioner of Income Tax v. M/s. Lucknow Development Authority, Gomti Nagar, Lucknow rendered on 16.9.2013 in Income Tax Appeal No.149 of 2009 and other cognate matters for a similar proposition of law. 3.3 On the question of bypassing the statuto .....

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ter on the basis of the decisions of the Tribunals or other High Courts. It was submitted that the impugned order is an ex facie bad order whereby statutory activities are sought to be considered as trade, commerce or business. Therefore, having regard to the facts of the case, it is expedient that this court exercises powers under Article 226 of the Constitution to quash the impugned order of assessment. 3.4 It was further submitted that the conduct of the authority is also required to be taken .....

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der which does not take into consideration any factor relevant for the purpose of deciding the stay application. Reliance was placed upon the decision of this court in the case of Hitech Outsourcing Services v. Income Tax Officer, 2015 LawSuit (Guj) 88, wherein the court noted that in the order under section 220 (6) impugned therein, reasons were not mentioned for prima facie consideration of the merit or even on the aspect of balance of convenience. Nothing was recorded in the order as to why t .....

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order cannot be sustained. It was submitted that both, prima facie consideration and balance of convenience have not been looked into by the authorities below while directing the petitioner to pay the entire amount in installments. 3.5 Referring to the order dated 3.6.2015 of the Additional Commissioner of Income Tax, it was submitted that while considering the stay application he had not considered that there is a clear decision of the Delhi High Court on this issue nor has he considered the qu .....

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picted as being voluntary, it is an open secret that the said concurrence is nothing but a tool of coerced convenience in furtherance of general practice and procedure followed by departmental officers. It was submitted that assuming for the sake of argument (without admitting) that there was such consent from the authorised representative of the petitioner, the question of directing payment by installments does not arise in view of the fact that the statutory provision does not contemplate inst .....

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is a statutory authority, the entire demand against the petitioner be stayed. 4. Vehemently opposing the petition, Mr. M. R. Bhatt, Senior Advocate, learned counsel for the respondents raised a preliminary objection to the very maintainability of the petition by submitting that the assessee has already availed of the statutory remedy of appeal before the Commissioner (Appeals) and hence, this petition under Article 226 challenging the order of assessment is not maintainable. It was argued that .....

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n the decision of the Supreme Court in the case of Commissioner of Income Tax v. Chhabil Dass Agarwal, (2013) 357 ITR 357, wherein the assessee instead of exhausting the statutory remedy available under the Act, that is, the statutory appeal before the statutory appellate authority had approached the High Court under Article 226 of the Constitution of India. The court noticed that the writ court had delved into the merits of the case and thought it fit to quash the order of the Assessing Officer .....

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2012) 11 SCC 651, wherein the court had reminded itself of the observations made by it in Munshi Ram v. Municipal Committee, Chheharta, (1979) 3 SCC 83, wherein it was observed that when a revenue statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be sought in that forum and in that manner, and all the other forums and modes of seeking remedy are excluded. The court observed that while it can b .....

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by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. The court in the facts of the said case observed that the Act provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the revenue authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of th .....

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there is no general exemption merely because an authority is carrying out statutory functions. It was submitted that the activities carried out by the statutory authority has to fall within the exemption provisions and merely because the authority is carrying out various statutory functions does not mean that it falls within the ambit of section 2(15) of the Act. It was submitted that whether the petitioner carries on trade, commerce or business is primarily a question of ascertaining facts and .....

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as invited to the decision of the Jammu and Kashmir High Court in the case of Jammu Development Authority v. Union of India and another rendered on 7.11.2013 in ITA No.164 of 2012. It was submitted that the said decision supports the stand of the Assessing Officer. It was further pointed out that the said decision came to be challenged by the assessee before the Supreme Court and the special leave petition came to be dismissed by an order dated 21.7.2014. It was submitted that, therefore, the de .....

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dents. The attention of the court was invited to the CBDT Circular No.1914 dated 2.12.1993 Annexure-R1 to the petition to point out that the CBDT has prescribed certain guidelines for staying demand and that the orders passed by the respondents No.1 to 3 under section 220(6) of the Act being in consonance with such guidelines, there is no warrant for interference by this court. It was pointed out that the guidelines permit the respondents to grant installments to the assessee on an application u .....

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titioner to deposit some reasonable amount with a direction to the Commissioner (Appeals) to decide the appeal within stipulated time frame. 5. In rejoinder, Mr. M. J. Thakore, learned counsel for the petitioner submitted that the Assessing Officer has not considered the ratio of the decision of the Division Bench of this High Court in Director of Income Tax (Exemption) v. Sabarmati Gaushala Trust (supra) while passing the impugned assessment order which is, therefore required to be struck down .....

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icer under section 143(3) of the Income Tax Act, 1961. From the facts and contentions noted hereinabove, it is apparent that none of the exceptions laid down by the Supreme Court warranting interference by the High Court in exercise of powers under Article 226 of the Constitution have been made out in the facts of the present case. It is not the case of the petitioner that the impugned order has been passed in breach of the principles of natural justice or that the statutory authority has not ac .....

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arried out by the petitioner fall within the ambit of the proviso to section 2(15) of the Act, is a mixed question of fact and law and, hence, when there is a statutory remedy available and which has been resorted to by the petitioner under the provisions of the Act, this court would be loathe to interfere in exercise of its extraordinary powers under Article 226 of the Constitution. In the opinion of this court, the decision of the Supreme Court in the case of Commissioner of Income Tax v. Chha .....

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to 3 under section 220(6) of the Act. The first order which has been made by the first respondent Deputy Commissioner of Income Tax (Exemptions) on 26.5.2015, merely says that looking to the facts and circumstances of the case, issues involved and reasons given for stay of demand, the petitioner is requested to pay the entire demand of ₹ 20,41,52,870/- in six monthly installments of ₹ 3,40,25,000/- each. The second respondent Additional Commissioner of Income-tax (Exemptions) in the .....

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s authorised representative and considering the issues involved, merits of the cases, financial condition of the assessee and extant instructions with regard to grant of stay of demand, the assessee is requested to pay the demand in equal quarterly installments of ₹ 3.5 crore each. The third respondent in the order dated 4.6.2015 has, as recorded in detail hereinabove, recorded that the authorised representative of the assessee agreed to pay installments. As noted earlier, the petitioner- .....

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iscretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. Thus, section 220(6) enacts that where an assessee has preferred an appeal to the first appellate authority disputing any part or the whole of the demanded amount, the assessee may make an application to the .....

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ation under section 220(6) of the Act. However, the discretionary power conferred by section 220(6) upon the Assessing Officer is coupled with a duty, and if he does not exercise it when the occasion calls for it or if he exercises it in such a manner that it is no discretion at all, he can be compelled to discharge his duties [see Saurashtra Cement and Chemical Industries Ltd. v. Commissioner of Income Tax, Gujart, (1978) 115 ITR 27]. This court in Wood Polymer Limited, In re v. Bengal Hotels P .....

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t to be achieved while conferring power would be achieved or not. Exercise of discretionary power stands on the same footing. Whenever a court or authority is invested with discretionary power, it is implicit therein that the power must be exercised reasonably, meaning thereby in a reasonable manner, and it must be exercised for the purpose for which it is conferred. 10. In Gujarat State Fertilizers and Chemicals Ltd. v. Deputy Commissioner of Income Tax (Assessment), (1997) 226 ITR 270, the pet .....

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utstanding demand under the order made by the Deputy Commissioner of Income Tax under section 220 (6) of the Act. 11. This court in the case of Hitech Outsourcing Services v. Income Tax Officer, (supra), has held that the authority is required to prima facie consider the merits and balance of convenience as also irreparable injury. Therefore, in order to decide whether the assessee has made out a prima facie case or not for grant of stay, the authority considering the application for grant of st .....

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r all the relevant aspects before rejecting such an application, or imposing conditions, while treating the assessee as not being in default. If all the relevant aspects are taken into consideration, then it can be said that he has properly exercised his discretion. In the facts of the said case, the court did not find any material on the basis of which it could be said that he did consider all relevant aspects before imposing the condition of making 50% payment of the tax dues for the assessmen .....

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, financial condition of the assessee and extant instructions with regard to grant of stay of demand, the assessee is requested to pay the demand in equal quarterly installments of ₹ 3.5 crore each. There is no discussion whatsoever as regards prima facie case, balance of convenience or regarding conflicting decisions of different High Courts on the issue in controversy. The third respondent once again has disposed of the application by recording consent of the authorised representative wi .....

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re stay can be granted are narrated therein. One of which is if the demand in dispute has arisen because the Assessing Officer has adopted an interpretation of law in respect of which there exist conflicting decisions of one or more High Courts but not of the High Court under whose jurisdiction the Assessing Officer is working, or if the High Court having jurisdiction has adopted a contrary interpretation but the department has not accepted that judgment. Thus, while considering the application .....

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solve the authorities from not examining the case in the light of the guidelines to examine as to whether blanket stay should be granted or whether the stay could be granted on condition of suitable security to safeguard the interest of the revenue or on payment towards the taxes a reasonable amount in lump sum or in installments, etc. 15. In the facts of the present case, as is evident from the submissions advanced by the learned counsel for the respective parties, there exist conflicting decis .....

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as been categorically stated that while considering an application under section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. While the respondents place reliance on the CBDT circular in support of the request for payment of the entire demand in installments, they seem to have ignored the other part of such circular which imposes a duty upon them to consider all relevant fact .....

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and perfunctory manner without application of mind to the relevant factors for considering the question of grant of stay and as such cannot be sustained. Ordinarily, this court while setting aside the order passed under section 220(6) of the Act, would remand the matter to the concerned authority for the purpose of re-deciding the application under section 220(6) taking into consideration the relevant factors. However, having heard the learned counsel for the respective parties on the merits of .....

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