what are the remedies available in case of High pitched assessments ?

what are the remedies available in case of High pitched assessments ?

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ISSUE: Stay and recovery – what are the remedies available in case of High pitched assessments apart from other meritorious grounds such financial hardship, favorable judgments of higher authorities etc.?

  1. Para B, Cl. III of the instruction No. 1914 dt. 02-12-1993 issued by the CBDT state that, ‘the stay can be granted where the assessment order appears to be unreasonably high pitched or where genuine hardship is likely to be caused to the assessee

  1. Further, the summary of Instruction no. 96 dt. 21/08/1969 is as under:

“where the income determined on assessment was substantially higher than the returned income, collection of the tax in dispute should be held in abeyance till the decision of  the appeal provided there were no lapses on the part of the assessee.”

In Taneja Developers & Infrastructure vs ACIT (2009) 222 CTR 521 , Delhi High Court held that in the case of an high pitched assessment , the recovery needs to be stayed in view of the CBDT Instruction No. 96 dt. 21/08/1969. The Delhi High Court also considered the Instruction No. 1914 dt. 02/12/1993 and held that Instruction No. 96 would still apply where unreasonably high demands are made.

  1. Similar references:
  • In high-pitched assessments, AO must ordinarily grant stay of demand:: “The tendency of making high pitched assessments by the AO 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, the powers u/s 220 (6) has to be exercised in accordance with the letter and spirit of Instruction No. 96 dated 21.08.1969 which holds the field and is biding on the AO. [Maheshwari Agro Industries v. UOI (Rajasthan HC)]

 

  • ……….where the income determined is substantially higher than the returned income, that is, twice the latter amount or more, then the collection of tax in dispute should be held in abeyance till the decision on the appeal is taken. In this case, as we have noted above, the assessment is almost 8 times the returned income. Clearly, the above extract from Instruction No. 96, dt. 21st, 1969 would be applicable to the facts of the case”. [Valvoline Cummins Ltd. v. DCIT (2008) 307 ITR 103 (Delhi HC), Charu Home Products P. Ltd. v. CIT]

 

  • “Where income assessed by Assessing Officer was four times higher than income returned by assessee and, further, DRP had not disposed of objections taken by assessee against assessment order in a significant manner, on facts, balance of convenience was clearly in favour of assessee and assessee’s application seeking stay of demand during pendency of appeal before Tribunal, was to be allowed” [Birlasoft (India) Ltd v. DCIT [2011] 10 taxmann.com 220 (Delhi – ITAT)]

 

  • IT : In case of high pitch assessment i.e. assessed income was 14 times higher than returned income, assessing officer should followInstruction No. 96 to grant stay of demand in view of the pendency of the appeal. Instruction No. 96 was not superseded by subsequent Instruction No. 1914. [2015] 64 taxmann.com 339 (Madras)], etc.

 

  1. Please note that the above ratios are still valid post new stay guidelines by CBDT vide notification dated 29.02.2016.

 

Flipkart India (P) Ltd. vs. ACIT [2017] 79 taxmann.com 159 (Karnataka)

*HELD:*

“Circular No. 1914 deals with collection and recovery of income tax, however it does not standardize the quantum of lumpsum payment required to be made by asssessee as a pre-condition of stay of disputed demand before Commissioner (Appeals). Circular dated 29-2-2016 being a partial modification of Circular No. 1914 merely prescribes the percentage of the disputed demand that needs to be deposited by assessee. 

Thus, although process for granting stay was streamlined, and standardized by Circular dated 29-2-2016 but it could not mean that Instruction No. 2-B(iii) contained in Circular No. 1914 dealing with situation of unreasonably high pitched or dealing with situation of genuine hardship caused to assessee was erased by Circular dated 29-2-2016, therefore, both these factors should have been considered by both, Assessing Officer as well as Principal Commissioner before requiring the assessee to deposit 15 per cent of the disputed demand amount”

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