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2015 (12) TMI 1331 - MADRAS HIGH COURT

2015 (12) TMI 1331 - MADRAS HIGH COURT - [2016] 388 ITR 410 - When tax payable and when assessee deemed in default - powers under Sections 220(3) & 220(6) - validity of CBDT Instruction - Held that:- It is incorrect to state that DBDT Instruction No.1914, dated 02.12.1993 supersedes all previous instructions. Although instruction No.1914 specifically states that it is in supersession of earlier instructions, the position obtaining after the decision of the case in Volvoline Cummins Limited Vs. D .....

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justice & sometimes may even result into insolvency or closure of the business if such power was to be exercised only in a pro-revenue manner. Hence, the powers under Sections 220(3) & 220(6) of IT Act have to be exercised in accordance with the letter and spirit of CBDT Instruction No.95 dated 21.08.1969, which is binding on all the assessing authorities created under the Act. - Therefore, the impugned order passed by the respondent without considering CBDT Instruction No.95, dated 21.08.19 .....

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of the application under Section 220(3) for stay. Hence, the impugned orders are liable to be set aside. - The respondent is directed to consider the petition filed by the petitioner under Section 220(3) and 220(6) of IT Act, in conformity with CBDT Instruction No.95, dated 21.08.1969, by providing an opportunity of being heard to the petitioner, and pass orders in accordance with law, as early as possible. - W. P. (MD). No. 10171 of 2015, M. P. Nos. 1 & 2 of 2015 - Dated:- 18-11-2015 - R. S .....

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to quash the same, with consequential direction to the respondent to consider the petition filed under Section 220(3) and 220(6) of the Income Tax Act, 1961, in conformity with the instructions of the Central Board of Direct Taxes by providing an opportunity of being heard to the petitioner. 2. The brief facts, which are necessary to decide the issue involved in this writ petition, are as follows:- 2-1. The petitioner is an assessee of income tax, having permanent account No.ADWPJ 3312 K/1(2)/M .....

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r, advance tax amount of ₹ 25,000/- was paid on 15.12.2011. Adding interest under Sections 234(B) and 234(C) of the Income Tax Act, 1961, net tax to the tune of ₹ 78,150/- was paid under Section 140-A of the Income Tax Act,1961. However, notices under Section 143(2) dated 14.08.2013 and Section 142(1) dated 14.07.2014 of the Act 1961 were issued by the respondent to the petitioner under Computer Aided Scrutiny Selection (CASS), requiring the petitioner to produce the books of account .....

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the respondent/Assessing Officer has not taken into consideration cultivation of Jasmine and teak wood in Periakooda Kovil Village, Madurai District on a leased land from the petitioner's mother in Survey No.106 and 108 in an extent of 7.22 acres and to that effect evidences were produced by way of Patta, Adangal, Sales Bills and pesticides Bills and affidavit of petitioner's mother. Though necessary documents viz., Patta, Adangal in the name of the petitioner, Sale Bills, Pesticides Bil .....

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ations in Velampadi Village in S.No.405, 406 and 411 in an extent of 19-81 acres, in which Gloriosa Superba, Drumstick, and Coconut are cultivated by the petitioner as it is evident from Patta, Adangal, Lease Deed, Sale Bills, Payment of lease rent to one Mr.A.Balaguru. Even though the Bank Statement for above payments by cheques, Certificate of Deputy Director Horticulture regarding quantity of yield, VAO Certificate to the effect that the petitioner is cultivating the land, and pesticides Bill .....

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at for the earlier assessment year 2011-2012, the respondent verified the above facts and accepted the extent of land owned and leased and crops cultivated thereon namely Jamine and Gloriosa Superba and passed orders dated 31.03.2014 under Section 143(3) of the Income Tax Act. However, for the assessment year 2012-2013, the respondent made high pitched assessment, by assessing the total income as ₹ 59,91,680/- and declined to accept the agricultural income of ₹ 45,00,000/- as well as .....

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x Act, do not confer any specific power on the Commissioner of Income Tax (Appeals), the first appellate authority, to grant stay against the recovery of disputed demand. Hence, a petition under Sections 220(3) & 220(6) of the Income Tax Act was filed by the petitioner on 29.04.2015 before the respondent seeking stay of recovery of demand amount. But, by way impugned orders the respondent disposed of the said petition filed under Sections 220(3) & 220(6) of the Income Tax Act, directing .....

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er Sections 220(3) & 220(6) of the Income Tax Act, the respondent ought to have treated the petitioner as not being in default in respect of the amount in dispute; on the other hand, the respondent in a usual manner simply passed an order dismissing the petition filed under Sections 220(3) & 220(6) of the Income Tax Act, without assigning any reason in a mechanical manner. Further, Instruction No.95 of the Central Board of Direct Taxes, dated 21.08.1969, is squarely applicable to the cas .....

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r to the satisfaction of the Assessing Officer. Hence, additions were made rejecting the theory of agricultural income. The petitioner has referred the scrutiny assessment order for the Assessment year 2011-2012. Agricultural operations and income thereof varies from year to year and seasons to season. Therefore, reliance placed by the petitioner on the scrutiny assessment order for the Assessment year 2011-2012 is not relevant for the assessment year 2012-2013. Mere proof of ownership of agricu .....

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he procedure laid down in the Income Tax Act, 1961. The petitioner/assessee has not explained how the balance of convenience is in favour of him, especially when he has not proved the agricultural operations. Merely because the petitioner/assessee has filed appeal before CIT (A), a blanket stay cannot be granted automatically. The respondent/Assessing Officer has a duty to collect the taxes as per the provisions of Income Tax Act, 1961, CBDT Circulars and Principles laid down by Courts in variou .....

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Assessing Officer regarding the genuineness of agricultural operations and the income derived thereof. The petitioner had requested for a blanket stay of entire demand merely on the ground that he has filed appeal against the additions; but no reasons explaining the genuine hardship faced by him in payment of the disputed taxes have been given in the petition under Sections 220(3) & 220(6) of the Income Tax Act. Thus, the respondent sought for dismissal of the writ petition. 4. Heard the sub .....

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1,680/- and agricultural income to the tune of ₹ 45,00,000/-. After deducting rebate on agricultural income ₹ 40,80,000/- and adding education cess, the income tax was furnished by the petitoner as ₹ 96,309/-. The respondent/Assessing Officer severed notice on the petitioner requiring him the produce the books of accounts. The petitioner appeared before the respondent on the dates of hearing and produced necessary information and particulars. According to the the petitioner, wi .....

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61 do not confer any specific power on the Commissioner of Income Tax (Appeals) to grant stay against the recovery of disputed demand, the petitioner has filed a petition under Sections 220(3) & 220(6) of the Income Tax Act before the respondent on 29.04.2015, for grant of stay of collection of tax amount, pending appeal. But, the respondent rejected the said petition and directed the petitioner to pay 50% of the demand amount, pending appeal. 6. The learned counsel for the petitioner submit .....

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ting the Commissioner of Income Tax (Appeals) to dispose of the appeal preferred by the petitioner within a period of six months. Now, pending the appeal, the impugned orders have been passed by the respondent directing the petitioner to pay 50% of the demand amount as per the CBDT Instruction No.1914, dated 02.12.1993 and to pay the balance amount after the disposal of the appeal. 8. Now, it is the contention of the learned counsel for the petitioner that since the assessment made by the petiti .....

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ed 02.12.1993 and only after taking into consideration all the relevant facts of the case of the petitioner, the respondent/Assessing Officer has rejected the petition filed by the petitioner under Sections 220(3) & 220(6) of IT Act for stay of the demand, and directed the petitioner to pay 50% of the demand amount, pending the disposal of the appeal. 10. But, it is the assertive submission of the learned counsel for the petitioner that the respondent is bound to grant stay by treating the p .....

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ugh very many contentions have been raised on factual aspects, the only question that has to be decided in this case is whether CBDT Instruction No.95, dated 21.08.1969 has been superseded by CBDT Instruction No.1914, dated 02.12.1993 and whether the petitioner is entitled for grant of stay of the recovery of demand amount, by treating him as "not being in default in respect of the amount in dispute in the appeal", within the ambit of Sections 220(3) and 220(6) of the Income Tax Act, 1 .....

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(6):- Whereas assessee has presented an appeal under Section 246 (or Section 246A) the (Assessing) Officer may in his discretion 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 was expired, as long as such appeal remains undisposed of." 14. It is stated that on receipt of notice under Section 156 of the IT Act, if the a .....

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ther to extent time for payment or allow payment by installment, subject to such conditions as he may think fit to impose the circumstances of the case. 15. But, so far as the case of the petitioner is concerned, it falls within the ambit of Sections 220(3) & 220(6), in view of the pendency of the appeal, in order to treat the petitioner/Assessee being not in default, to avoid penal/interest as well as granting absolute stay, since the assessment made by the Assessing Officer is high pitched .....

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petitioner has submitted his return for the accounting period, that is 01.04.2011 to 31.03.2012 for the assessment year 2012-2013 as ₹ 4,91,680/- including agricultural income of ₹ 45,00,000/-. But, the respondent having formed adverse opinion, as set out in the assessment order dated 31.3.2015, negativing agricultural income, made additions to the tune of ₹ 55,00,000/-. Thereby, adding admitted income of ₹ 4,91,680/- with addition of ₹ 55,00,000/-, the respondent a .....

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e learned counsel for the petitioner that pending the appeal, the petitioner is entitled for stay of recovery of the demand amount, as his case falls within the ambit of Sections 220(3) & 220(6) of the IT Act. In view of the pendency of the appeal, the respondent ought to have passed an order treating him as not being in default in respect of the amount in dispute in the appeal, by placing reliance on CBDT Instruction No.95 dated 21.08.1969. But, according to the respondent, the said CBDT In .....

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f 2009, dated 24.02.2009 , the Division Bench of Delhi High Court has held as follows:- "8.Relying upon the said Instruction No. 1914 of 1993, Mr.Jolly submitted that all previous instructions stood superseded which included the supersession of said Instruction No.96. He further submitted that paragraph No.2(C), which deals with guidelines for staying demand, specifically requires that a demand be stayed only if there are valid reasons for doing so and that a mere filing of an appeal agains .....

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cally indicates that it shall be the responsibility of the Assessing Officer and the TRO to collect every demand that has been raised "except the following', which includes "(d) demand stayed in accordance with the paras B and C below". Para B relates to stay petitions. As extracted above, Sub-clause (iii) of para B clearly indicates that a higher/superior authority could interfere with the decision of the Assessing Officer/TRO only in exceptional circumstances. The exceptiona .....

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pitched. In the case before this Court in Valvoline Cummins Ltd., (supra) that assessee's income was about eight (8) times the returned income. This Court was of the view that was high pitched. In the present case, the assessed income is approximately 74 times the returned income and obviously, this would fall within the expression "unreasonably high pitched". (Emphasis supplied)." A reading of the above dictum would show that if assessment order is unreasonably high pitched o .....

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a facie case, balance of convenience, financial status of the petitioner, hardship and also the interest Revenue. In the instant case there was an order of the court restraining the accountable person from alienating/disposing of the properties of the estate. The value of the estate which was determined by the authority was much more than twice the returned value. Hence, the Instruction No.96 of August 21, 1969, was applicable. It was also established that the accountable person had no cash belo .....

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se reported in 2011 ITR 158 Bom [Kec International Ltd Vs. B.R.Balakrishnan and ors], the Bombay High Court has held as follows:- ".....Hence, we intend to lay down certain parameters which are required to be followed by the authorities in cases where a stay application is made by an assessee pending appeal to the first appellate authority. (a) While considering the stay application, the authority concerned will at least briefly set out the case of the assessee. (b) In cases where the asses .....

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see is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. (d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicat .....

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-section (6) seems to be that the lower Assessing Officer should abide by and being bound by the decision of the appellate authority, should normally wait for the fate of such appeal filed by the assessee. Therefore, his discretion of not treating the assessee in default, conferred under sub-section (6) should ordinarily be exercised in favour of assessee, unless the overriding and overwhelming reasons are there to reject the application of the assessee under Section 220(6) of the Act. The appli .....

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is not unknown and it may result in serious prejudice to the assessee and miscarriage of justice & sometimes may even result into insolvency or closure of the business if such power was to be exercised only in a pro revenue manner. It may be like execution of death sentence, whereas the accused may get even acquittal from higher appellate forums or courts. Therefore, this Curt is of the opinion that such powers under subsection (6) of Section 220 of the Act also have to be exercised in acco .....

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t it is in supersession of earlier instructions, the position obtaining after the decision of the case in Volvoline Cummins Limited Vs. DCIT (2008) 307 ITR 103 (Del) is not altered at all. This is so, the DBDT Instruction No.95, dated 21.08.1969 was issued with the consent of the informal consultative committee held on 13th May, 1969 formed under the business rules of the Parliament, which even now holds the field. 18. Hence, I am of the opinion that the tendency of making high pitched assessmen .....

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