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TMI Blog2024 (3) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently been affirmed by the Commissioner of Income Tax (Appeals) [CIT (A)]. 2. Having heard learned counsels for respective sides at some length, according to us the only issue which would warrant a fresh trial by the ITAT emanates from the submission of the petitioner that it was entitled to a stay of the resultant demand upon deposit of 20% of the amount outstanding and which was cursorily rejected by the ITAT with it being observed that each application for stay is liable to be decided on its own facts and circumstances and a general prescription would not apply. Of equal significance is the fact of certain moneys having been recovered by the respondents in the interregnum and which too may have a bearing on the stand taken by the petitioners. The reasons which convince us to conclude that the above would appear to be the appropriate direction to frame stand set out in the subsequent parts of this decision. However, and before proceeding further, it would be apposite to notice the following essential facts. 3. The petitioner is stated to be a recognized National Political Party registered under Section 29A of the Representation of Peoples Act, 1951 and recognised as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "assessee in default". The petitioner admittedly failed to comply with the aforesaid condition as imposed by the AO. 6. No further steps appear to have been taken by the petitioner subsequent thereto and consequently on 09 January 2023, the respondents issued a letter requiring it to deposit and liquidate the outstanding tax liability. This led to the petitioner moving a second application for stay under Section 220(6) before the AO on 27 January 2023. However, and as would appear from the record, the appeal itself came to be dismissed by the CIT(A) on 28 March 2023. That application was thus rendered infructuous. 7. Aggrieved by the order passed by the CIT(A), the petitioner approached the ITAT and filed an appeal on 24 May 2023. During the pendency of that appeal, and more particularly on 13 February 2024, the respondents proceeded to issue demand notices under Section 226(3) of the Act. It was this action that led to the petitioner finally moving a stay application before the ITAT in its pending appeal on 14 February 2024. 8. During the pendency of the proceedings before the ITAT, the respondents, pursuant to the initiation of action under Section 226 of the Act, also appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "the due date under section 139" and a plain reading of the provisions shows that the due date for the purpose of Section 139 is defined in terms of Explanation 2 below Section 139 (1) of the Act and that such 'due date' is not controlled by the provisions of sub-section (4) of Section 139, which merely permits filing of belated returns." 10. Proceeding further, the ITAT has also on a prima facie consideration negatived the contentions which were addressed with reference to clause (d) of the First Proviso to Section 13A of the Act. While dealing with this question, it has held as under: - "39. After having perused the orders of the authorities below as well as other material, it is borne out that it is only during the assessment proceedings that the assessee has sought to make a distinction between 'voluntary contributions' and 'Donations'. The Assessing Officer has recorded a finding, after examining the books of account that all the contributions have been recorded as 'Donations' and the distinction canvassed by the assessee is not supported by the account books maintained. The report filed by the assessee with the Election Commission of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not identified as a separate head of income in Section 14 of the Act, the legislative intent was not to exclude it altogether from the taxable income. It would be excluded only subject to fulfilment of the conditions stipulated under Section 13A of the Act. It could never have been the legislative intention that voluntary contributions received by a political party that does not satisfy the requirement of Section 13A of the Act-viz., maintaining books of accounts, keeping a record of voluntary contributions in excess of Rs. 10,000 and getting the accounts audited-would be exempt from tax. If the above conditions are not fulfilled, the income of a political party by way of voluntary contributions would be included in the taxable income." 42. In the present case, the detail of Rs. 14,49,000/- clearly show that each contribution is in cash in excess of Rs. 2,000/-, thereby reflecting clear violation of clause (d) of the first Proviso. At this point, we are conscious of the statement made by the learned Senior Counsel at Bar that out of the sum of Rs. 14,49,000/, a sum of Rs. 3,00,000/- has been received by transfer through RTGS. However, even after considering the same, violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian National Congress (I) as relatable to "income from other sources". On the receipts side, the Revenue will simply have to go by whatever is disclosed by the Indian National Congress (I) as income by way of voluntary contributions in the return as originally filed and treat that as income from other sources. 126. Consequently, the court disagrees with the decision of the Commissioner of Income-tax (Appeals) restricting the expenditure of the assessee to 60 per cent of the amount claimed and order of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal to that extent are set aside." (underlined for emphasis by us)" Although an appeal against the aforenoted judgment of this Court appears to have been preferred before the Supreme Court, undisputedly no interim order operates thereon. The respondents also assert that the petitioner had failed to maintain a distinction between voluntary contributions and donations in its books of account. 12. Arguments also appear to have been addressed before the ITAT of the action initiated by the respondents being actuated by mala fides. Dealing with the aforesaid, the ITAT has noted as under: - "47. We may now ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where a delay can be expected in the determination of the pending Appeal in the due course. So however, in the instant case, the delay in determination of Appeal, if any, is not attributable to the Revenue." 13. Having perused the judgment rendered by the ITAT, we find that it has accorded due consideration upon the merits of the challenge which stood raised. It would, therefore, be incorrect to accept the submission that the ITAT had failed to apply its judicial mind for the purposes of a prima facie evaluation of the questions which stood posited. We are cognizant of the ITAT while considering an application for stay being obliged to consider the existence of a prima facie case, undue hardship as well as examining the likelihood of the assessee ultimately succeeding in its challenge. At this stage, the ITAT is called upon to only examine and assess the challenge raised by the assessee from a prima facie point of view and in order to form a tentative opinion with respect to the merits of the case. That formation of opinion is what enables it to consider the grant of stay and the terms, if any, on which the assessee is liable to be placed. Tested on those principles, we fail to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en taken or pursued for almost two years till a demand letter came to be issued on 09 January 2023. Although, the CIT(A) had dismissed the appeal on 28 March 2023 and the petitioner had instituted the appeal before the ITAT on 24 May 2023, a stay application in that appeal came to be filed only on 14 February 2024. This would clearly appear to suggest that the petitioner has been far from vigilant and clearly lax in pursuing the legal remedies which were otherwise available. 18. As we read the impugned order, what ultimately appears to have weighed upon the ITAT is of the petitioner having firstly been remiss in taking peremptory steps in respect of a demand which had remained outstanding right from 2021. It failed to abide by the conditions which had been imposed by the AO while considering its application under Section 220(6) of the Act. The petitioner appears to have fallen into deep slumber and stood reawakened only in January 2023 when a notice of demand came to be raised. Even though an appeal against the order of the CIT(A) came to be instituted before the ITAT in May 2023, it chose to move a stay application in that pending appeal only in February 2024. The problems that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t liable to be viewed as a condition etched in stone or one which is inviolable. The OM merely seeks to provide guidance to the authorities to bear in mind certain aspects while considering applications for stay of demand pending an appeals remedy being pursued. The OM is not liable to be read as conferring an indefeasible right upon the assessee to claim a stay of a tax liability by merely offering or consenting to deposit 20% of the outstanding liability. Ultimately, it is for the authorities to examine and consider what amount would be sufficient to securitise the interest of the Revenue and thus a just balance being struck. The quantum of the deposit that would be required to be made would ultimately depend upon the facts and circumstances of each case. This is evident from the order of the Supreme Court in Principal Commissioner of Income Tax 5 and others Vs. LG Electronics India Private Limited (2018) 18 SCC 447 and which is extracted hereunder: - "1. Delay condoned. Leave granted. 2. Having heard Shri Vikramjit Banerjee, learned ASG appearing on behalf of the appellant, and giving credence to the fact that he has argued before us that the administrative circular will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding demand. 26. In the end, we take note of an amount of Rs. 65.94 crores having been recovered by the respondents in the interregnum and that amount translating to roughly 48% of the outstanding demand. This changed circumstance is an aspect which, in our considered opinion, would merit consideration by the ITAT in case the petitioner chooses to move a fresh application for stay. 27. Notwithstanding the refrain of the ITAT and which had also taken note of the continued adjournments which were sought by the writ petitioner as well as it having turned down its offer for the appeal itself being put down for final hearing, we deem it appropriate to accord liberty to the writ petitioner to move a fresh application for stay before the ITAT bearing in mind the developments which have occurred in the meanwhile including that of an amount of Rs. 65.94 crores having been recovered by the respondents pursuant to encashment of the bank drafts. 28. Whether the aforesaid circumstance would merit protective measures being granted in respect of the balance outstanding demand, and if so to what extent, is an issue which must necessarily be considered by the ITAT in the first instance it bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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