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TMI Blog2016 (9) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... the alternative and based on instructions issued by the CBDT dated 29.02.2016 the petitioner sought a stay of the demand upon its paying a reasonable part of the demand not exceeding 15% of the total demand. By the main order dated 14.06.2016, the petitioner was granted a stay subject to it depositing Rs. 41.64 crores which constituted 15% of the total demand. The order further permitted the Assessing Officer to adjust any refund which may arise in favour of the assessee company in any assessment year. The petitioner contends that this right to adjust the refund is limited to the amount of Rs. 41.64 crores directed to be deposited as a condition of stay. The authorities, however, interpreted the order to authorize them to adjust any refund against the total tax demand of about Rs. 277 crores. The petitioner, therefore, sought a clarification of the order dated 14.06.2016. By an order dated 26.08.2016, respondent No.1 while rejecting the application did not interpret the order dated 26.08.2016 but instead relying upon the instructions dated 02.02.1993 issued by the CBDT held that the Assessing Officer/Department may reserve the right to adjust the refund against demand. We have held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of coal mines, rejected coal, cost of steam, direct and overhead expenses had been computed and that there were no details and bills/vouchers (with costing) in respect of the coal and iron-ore purchases and unitwise use thereof. The Assistant Commissioner of Income Tax also mentioned that there was no record to show that various aspects had been examined before the Assessing Officer made the original assessment order. He stated that he had reason to believe that on account of the petitioner having failed to disclose fully and truly all material facts necessary for its assessment the income had escaped assessment for the assessment year 2008-09. 8. The petitioner filed its objections. The petitioner inter-alia contended that the claim for deduction under section 80IA and 80IB had been verified during the original assessment proceedings as also in respect of the previous assessment years commencing from 2000-01; that there was no failure to disclose the material facts; that the reassessment was based only on change of opinion; that the reassessment was barred under the third proviso to section 147 in view of the order of CIT(A) dated 11.07.2011 and that the reassessment was barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. The Central Board of Direct Taxes (CBDT) had initially issued instruction No. 1914 dated 02.02.1993 which was clarified by instructions dated 21.03.1996. They contain the guidelines issued by the Board regarding the procedure to be followed for recovery of the outstanding demand including the procedure for grant of stay of demand. Further instructions titled 'Office Memorandum (F.No.404/72/93-ITCC) dated 29.02.2016 were issued in order to streamline the process of grant of stay. It is necessary to set out the entire Office Memorandum for this matter turns essentially on our interpretation of it. It reads as follows:- "OFFICE MEMORANDUM [F.NO.404/72/93- ITCC], DATED 29-2-2016 Instruction No. 1914 dated 21-3-1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand. 2. In part 'C' of the Instruction, it has been prescribed that a demand will be stayed only if there are valid reasons for doing so and that mere filing of an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. It has been further prescribed that while grantin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer. (D) The assessing officer shall dispose of a stay petition within 2 weeks of filing of the petition. If a reference has been made to Pr. CIT/CIT under para 4 (B) above or a review petition has been filed by the assessee under para 4 (C) above, the same shall also be disposed of by the Pr. CIT/CIT within 2 weeks of the assessing officer making such reference or the assessee filing such review, as the case may be. (E) In granting stay, the Assessing Officer may impose such conditions as he may think fit. He may, inter alia,- (i) require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; (ii) reserve the right to review the order passed after expiry of reasonable period (say 6 months) or if the assessee has not co-operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; (iii) reserve the right to adjust refunds arising, if any, against the demand, to the extent of the amount required for granting stay and subject to the provisions of section 245." 16. We will interpret the circular after re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to maintain separate books of account to maintain a claim for a deduction thereunder. Nor do we find anything in the section that implies such a requirement. So long as an assessee fulfills all the conditions stipulated in sub-section (2), the section would be applicable. These conditions do not require an assessee to maintain separate books of account in respect of the new undertaking. Nor does sub-section (3), stipulate such a condition. As we will shortly see, where an assessee is required mandatorily to fulfill a particular condition, the legislature expressly included a condition to that effect. 31. As we mentioned earlier, where an assessee keeps separate books of account that fact would, along with other facts, be relevant while considering whether the assessee fulfills all the conditions of Section 80-IB and, in particular, sub-section (2) thereof. It would be relevant, for instance, while considering whether the industrial undertaking concerned is formed by splitting up or a reconstruction of a business already in existence or not. If separate books of account are kept in respect of the new industrial undertaking, it would certainly be a factor in favour of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the challan before the AO. On payment of 15% of outstanding demand as stated above, the assessee shall not be treated as the assessee in default in respect of the balance demand till the disposal of appeal of the learned CIT(A) and the AO shall not take any coercive measure to recover the said demand. However, the Assessing Officer is free to adjust any refund which may arise in favour of the assessee company in any assessment year. 6. In case the assessee company does not comply with the above directions and does not adhere to the above payments of installments, the AO shall be free to take steps as per law to recover the demand." 21. It is clear that the stay was granted subject to the assessee paying the said amounts which constituted 15% of the total demand and nothing more. There is, however, a dispute regarding the last sentence in paragraph-5. It entitles the Assessing Officer "to adjust any refund which may arise in favour of the assessee company in any assessment year". The petitioner contends that this liberty to adjust is only in respect and to the extent of the balance of the said 15%, namely, Rs. 26.18 crores which was to be paid in the said installments and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 does not construe the further Office Memorandum dated 29.02.2016. The Office Memorandum forms a part of the original instruction No. 1914 dated 02.02.1993. This is clear from paragraphs-1 and 4 thereof. Paragraph-4 expressly states that the modified guidelines contained in the Office Memorandum were being issued "in partial modification of the instruction No.1914". Instruction No. 1914 dated 02.02.1993 as clarified by instruction No.1914 dated 21.03.1996 must, therefore, be read together with the Office memorandum dated 29.02.2016. 24. It is necessary now to interpret the Office Memorandum dated 29.02.2016. Under clause-4A where the outstanding demand is disputed before the CIT(A), the Assessing Officer "shall" grant a stay of the demand on payment of 15% of the disputed demand unless the case falls in para-B of Clause-4. In the case before us, the demand is disputed before the CIT(A). The present case does not fall under para(B) either. Clause-4(B)(a) provides that in a situation where the Assessing Officer is of the view that the nature of the addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand, namely, Rs. 41.64 crores. This figure attained finality. At the cost of repetition, the Assessing Officer did not refer the matter to the Administrative Pr.CIT for an amount higher than 15% of the amount to be deposited as a condition for stay. This infact indicates that the last sentence in paragraph 5 of the order dated 14.06.2016 granted the Assessing Officer the right to adjust any refund which may arise in favour of the assessee in respect and to the extent of the said 15% of the demand only. In any event, even if it entitles the Assessing Officer to adjust any refund against the entire tax demand, it would be contrary to the instructions of the CBDT contained in the Office Memorandum dated 29.02.2016. 28. Lastly, Mr. Putney submitted that the Assessing Officer has unbridled powers under section 220(6) of the Act. However, in view of the circular dated 02.02.1993 as clarified by the circular dated 21.03.1996 and modified by the Office Memorandum dated 29.02.2016 the Assessing Officer's powers have been circumscribed to the extent provided therein. 29. We quite see the force in Mr. Putney's contention that the department must safeguard its interest and that its intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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