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2016 (9) TMI 1194 - PUNJAB AND HARYANA HIGH COURT

2016 (9) TMI 1194 - PUNJAB AND HARYANA HIGH COURT - [2017] 391 ITR 42 - Application to stay the recovery of the demand - Held that:- In the present case by the impugned order dated 14.06.2016 the petitioner was required to deposit 15% of the outstanding demand, namely, ₹ 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 .....

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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. - We quite see the force in Mr. Putney’s contention that the department must safeguard its interest and that its interest may be jeoparadized if the petitioner .....

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that the future refunds can be adjusted only to the extent of the balance amount directed to be paid as a condition for the stay. - Civil Writ Petition No. 13146 of 2016 - Dated:- 21-9-2016 - MR. S.J.VAZIFDAR, CHIEF AND MR. DEEPAK SIBAL, JJ. For The Petitioner : Mr. Ajay Vohra, Senior Advocate with Mr. Rohit Jain, Advocate For The Respondent : Mr. Yogesh Putney, Advocate S.J.VAZIFDAR, CHIEF JUSTICE The petitioner has challenged an order of respondent No.1- Principal Commissioner of Income Tax ( .....

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ssioner of Income Tax (Appeals). In 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 ₹ 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 .....

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pplication 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 that in any event the same would be contrary to the instructions issued by Central Board of Direct Taxes (CBDT) dated 29.02.2016 which modified the circular dated 02.02.1993. 3. As the petitioner seeks a stay of the demand, it is necessary to refer to .....

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re produced and checked. He also relied upon the assessment order in so far as it dealt with the petitioner s case for deductions under sections 80IA and 80IB of the Act in considerable detail. The petitioner s claim for deduction under section 80IA of ₹ 429 crores was restricted to ₹ 203.80 crores. Similarly, the petitioner s claim for deduction under section 80IB was restricted to ₹ 65.75 crores. 5. The petitioner s appeal against the assessment order was disposed of by the o .....

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ceedings were barred. 6. By a letter dated 24.03.2015 the Assessing Officer informed the petitioner that he had reason to believe that its income for the assessment year 2008-09 had escaped assessment within the meaning of section 147 of the Act. The assessee was directed to file a return within 30 days. 7. Under cover of a letter dated 23.07.2015 the Assessing Officer forwarded to the petitioner the reasons recorded for reopening the assessment. The petitioner s objections were invited by 27.07 .....

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s 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 pr .....

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ing Officer dismissed the objections by an order dated 28.03.2016. Thereafter the Assessing Officer passed the reassessment order dated 31.03.2016 disallowing the entire claim for deduction under section 80IA and 80IB of an aggregate amount of about 492 crores. 10. We do not wish to express any opinion on the correctness of these grounds of challenge as they are the subject matter of appeal before the CIT(A) against the order dated 28.03.2016 dismissing the petitioner s objections and the reasse .....

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t order dated 31.03.2016. 13. On 29.04.2016, the petitioner made an application for stay before the Assessing Officer which was disposed of by an order dated 09.05.2016. The order contains no reasons whatsoever. It only observed that the mere filing of an appeal did not entitle the appellant to a stay. It is not necessary to deal with the correctness of this order for ultimately the petitioner carried the matter to the first respondent-Principal, Commissioner of Income Tax, Gurgaon (Pr. CIT) who .....

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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. 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 recove .....

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e 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 granting stay, the field officers may require the assessee to offer a sui .....

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ssee as a pre-condition for stay of demand disputed before CIT (A), the following modified guidelines are being issued in partial modification of Instruction No. 1914: A) In a case where the outstanding demand is disputed before CIT (A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in para (B) here under. (B) In a situation where, (a) the assessing officer is of the view th .....

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ing in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.), the assessing officer shall refer the matter to the administrative Pr. CIT/CIT, who after considering all relevant facts shall decide the quantum/proportion of demand to be paid by the assesse .....

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r 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 can .....

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after referring to the impugned order dated 14.06.2016 read with the order dated 26.08.2016 on the petitioner s application for modification/clarification. These orders were passed on the petitioner s application dated 16.05.2016 to the first respondent. The application inter-alia referred to the stay application dated 29.04.2016 filed before the Assessing Officer and various instructions/circulars issued by the CBDT. It stated that the said order passed by the Assessing Officer dated 09.05.2016 .....

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petitioner submitted that the stay may be directed to be granted subject to its meeting a reasonable part of the demand not exceeding 15% of the demand. This case was based essentially on the aforesaid circulars and in particular the instructions contained in the Office Memorandum dated 29.02.2016. 17. We mentioned earlier that one of the main reasons for rejecting the assessee s application for deduction under sections 80IA and 80IB was that it did not maintain separate books of account. We ha .....

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as no statutory provision making it mandatory for an assessee to maintain separate books of account. That it may be easier for an assessee to establish a claim for deduction under Section 80- IB in the event of separate books of account being maintained is another matter altogether. That is a question of evidence and not a legal obligation. 30. Section 80-IB itself does not expressly require an assessee to maintain separate books of account to maintain a claim for a deduction thereunder. Nor do .....

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o 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 kep .....

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ngraded the petitioner s rating to the default category. These aspect would in our opinion justify a partial stay but not a stay of the entire demand. 19. Firstly, the petitioner s financial difficulties indicate a need to secure the Revenues outstanding claims. More important, prima-facie at least even assuming that our judgment is applicable to the petitioner s case, it is possible that the appellate authorities may remand the matter to enable the Assessing Officer to consider the application .....

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he facts of the case, the financial position of the petitioner and having regard to the said guidelines dated 29.02.2016, the Pr.CIT granted the petitioner a stay of the demand till the disposal of the appeal before the CIT(A) subject to the petitioner paying 15% of the outstanding demand, namely, ₹ 41.64 crores in the installments stipulated. In paragraph-5, the petitioner s request for adjusting a refund of ₹ 15.14 crores in respect of the assessment year 2008-09 was accepted. The .....

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the copy 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 wit .....

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r . The petitioner contends that this liberty to adjust is only in respect and to the extent of the balance of the said 15%, namely, ₹ 26.18 crores which was to be paid in the said installments and on the other it could be to the extent of the entire demand. The Assessing Officer, however, interpreted the order to mean that he was entitled to adjust the refund that the petitioner may be entitled to against the entire demand. This compelled the petitioner to seek a clarification before the .....

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b) Require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in installments; c) Require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; d) Reserve the right to review the order passed after expiry of reasonable period, say upto 6 months, or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority o .....

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the above, the request of the assessee company to amend the stay order dated 14.06.2015 is hereby rejected. 22. The order dated 26.08.2016 does not clarify the order dated 14.06.2016. It does not state that the order dated 14.06.2016 entitled the Assessing Officer to adjust the refunds against the entire demand. The order merely states that in view of Clause-C of the original instructions dated 02.02.1993 the Department has a right to do so. This was not a clarification. 23. We will assume that .....

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93 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 pr .....

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a stay of the balance demand. Admittedly, a reference under clause 4(B)(a) was not made by the Assessing Officer to the Pr.CIT. In that event, Clause-4(A) alone would operate. As we mentioned earlier, clause 4(A) provides that where the outstanding amount is disputed before the CIT(A), the Assessing Officer shall grant stay of demand till disposal of the first appeal on payment of 15% of the disputed demand. In other words, the Assessing Officer is bound to grant a stay of the entire demand on p .....

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adjust the refunds arising to the extent of the amount required for granting stay……… Therefore, the right to adjust the refund is limited to the amount to be deposited by the assessee as a condition for the stay. 26. The Assessing Officer in the order dated 26.08.2016 referred to guidelines-C(ii)(e) which we set out earlier. It provides that in granting a stay the Assessing Officer may impose such conditions as he may think fit and that he may reserve a right to adjust the .....

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1993 stood modified by para-4(e)(iii) of the Office Memorandum. 27. As we observed earlier in the present case by the impugned order dated 14.06.2016 the petitioner was required to deposit 15% of the outstanding demand, namely, ₹ 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 .....

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