“AO cannot ask for payment of even 20% of Disputed Tax till the disposal of the appeal by CIT-A – Bombay HC Decision”

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“AO cannot ask for payment of even 20% of Disputed Tax till the disposal of the appeal by CIT-A – Bombay HC Decision”

This is very good decision which over rules the CBDT Circular dated 29-02-2016 in this regard. Though the judgement is a case specific, still it may be relevant for professional for other similar type of proceeding.

Petitioner Mr. Bhupendra M Shah, Well known builder in vashi-Bhumiraj

                          IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                              ORDINARY ORIGINAL CIVIL JURISDICTION

                                       WRIT PETITION NO.2157 OF 2018

                                                             AND

                                       WRIT PETITION NO.2160 OF 2018

Bhupendra Murji Shah                                                                 … Petitioner

                               Vs

Deputy Commissioner of Income Tax­15(1)(1)

and Ors.                                                                                        … Respondents

Mr.Madhur Agarwal i/b Mr.Atul K. Jasani for the Petitioner.

Mr.Suresh Kumar for the Respondents.

                                       CORAM : S.C. DHARMADHIKARI &

                                               B.P.COLABAWALLA, JJ.

                                       TUESDAY, 11TH SEPTEMBER, 2018

P.C. :

1 We have heard both sides.

2 It is undisputed that the petitioner has challenged the

demand raised in the first petition No.2157 of 2018 in the sum of

Rs.11,15,99,897/­ for Assessment Year 2015­2016 by approaching the

Commissioner of Income Tax (Appeals). Thus, an Appeal against the

Assessment Order raising this demand is filed and is pending.

3 In the meanwhile, the petitioner approached the Assessing

Officer/Deputy Commissioner of Income Tax, Circle 15(1)(1), Aayakar

Bhavan, Mumbai. He may have made an application and termed it as a

request for stay, but what essentially he was worried and concerned

about was that since the Appeal is pending and yet to be decided, nor

was there any consideration of application for stay by Appellate

Authority, this Deputy Commissioner will treat the petitioner/assessee

as ‘assessee in default’. Thereupon, he will recover the amount by

coercive means. It is in these circumstances, this letter was addressed

and we have carefully perused that letter. That records that the subject

matter of tax is in dispute. The Assessment Order is challenged. The

Appeal under Section 246­A of the Income Tax Act 1961 challenging

the Assessment Order dated 30th December 2017, received on 1st August

2018 is pending. The request of the petitioner/assessee is that the

demand be kept in abeyance till the disposal of this Appeal.

4 With marginal difference in the figures, the issue raised in

the second petition No.2160 of 2018 is also identical. Both petitions

are taken up together. It is not disputed before us that in terms of

Chapter XX styled as Appeals and Revision, the order of the Assessment

Officer is appealable under section 246 sub­section (1). Once it is an

appealable order and the Appeal has been filed, it is pending, then, the

petitioner/appellant should have been given either an opportunity to

seek a stay during the pendency of the appeal, which power is also

conferred admittedly in the Commissioner or this Deputy Commissioner

should have held the demand in abeyance as prayed by the

petitioner/assessee. He does neither, but proceeds to communicate to

the petitioner/ assessee that his application for stay is dismissed. The

petitioner/ assessee should pay 20% of the outstanding amount as

prescribed in some Circulars of the Revenue and particularly, dated 29th

February 2016 and produce the challan and seek stay of demand again,

failing which collection and recovery will continue.

5 We are not concerned here with the Circular of the Central

Board of Direct Taxes. We are not concerned here also with the power

conferred in the Assessing Officer of collection and recovery by coercive

means. All that we are worried about is the understanding of this

Deputy Commissioner of a demand, which is pending or an amount,

which is due and payable as tax. If that demand is under dispute and is

subject to the appellate proceedings, then, the right of appeal vested in

the petitioner/assessee by virtue of the Statute should not be rendered

illusory and nugatory. That right can very well be defeated by such

communication from the Revenue/Department as is impugned before

us. That would mean that if the amount as directed by the impugned

communication being not brought in, the petitioner may not have an

opportunity to even argue his Appeal on merits or that Appeal will

become infructuous, if the demand is enforced and executed during its

pendency. In that event, the right to seek protection against collection

and recovery pending Appeal by making an application for stay would

also be defeated and frustrated. Such can never be the mandate of law.

6 In the circumstances, we dispose both these petitions with

directions that the Appellate Authority shall conclude the hearing of the

Appeals as expeditiously as possible and during pendency of these

Appeals, the petitioner/appellant shall not be called upon to make

payment of any sum, much less to the extent of 20% under the

Assessment Order/Confirmed Demand or claim to be outstanding by

the Revenue.

7 We clarify that we have not expressed any opinion on the

merits. This order is passed in the peculiar facts and circumstances of

the petitioner’s case and only because Mr.Agarwal informs us that the

Appellate Commissioner has scheduled the matter for hearing shortly.

In fact, he has heard it in part. It is, therefore, clear that when the

Appeal is being heard, the demand is raised on the petitioner/assessee

by treating him as an assessee in default. We have passed this order so

that the petitioner can avail of his right of appeal. In ordinary

circumstances, we would have relegated the petitioner to the remedy of

making an application for stay before the Commissioner (Appeals) and

thereafter left it to the Commissioner (Appeals) to take an appropriate

decision thereon. However, since the Appeals are being heard, we have

passed this order. This order cannot be treated as a precedent for all

cases of this nature.

8 We direct that during the pendency of the above Appeals,

the attachment, if any, levied on the petitioner’s bank account to stand

raised forthwith. However, this is without prejudice to the power

conferred in the Revenue/Department to collect and recover taxes,

which are due and payable. We record the statement made by

Mr.Agarwal on instructions as an undertaking to this Court and to this

effect that during the pendency of the Appeals before the Commissioner

(Appeals), Income Tax, the petitioner shall not dispose of or create

third party right in respect of his movable assets and properties. This,

however, shall not prevent the petitioner/assessee from utilizing his

assets and properties in the ordinary and normal course of business.

B.P. COLABAWALLA, J.                                        S.C. DHARMADHIKARI, J..


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