L. K. S. GANEE vs ASSISTANT COMMISSIONER OF Income Tax.

ORDER (OPEN COURT DICTATION)

Per Shri George Cheriyan, (Senior Vice-President) - The two stay petitions preferred by the assessee relate to the assessment years 1984-85 and

1985-86. When the stay petitions first came up for hearing, by our order dated 12-1-1990 we had granted interim stay of proclamation of sale.

The petitions were thereafter posted for hearing on 2nd February, 1990. The Revenue thereafter filed a Misc. Petition No. 2/Mds/90 dated 18-1-

1990 where a point was sought to be made that really no appeals were pending before the Tribunal, but it would appear that only some cross-

objections were there. At one stage, the Revenue thought of putting forth an argument that this Tribunal has no powers to grant stay in a cross-

objection but has powers to grant stay only in an appeal which was filed. However, at a later stage, the learned Departmental Representative very

fairly stated that he would not take up this issue but would only take up the contention that if an assessee was really aggrieved with the order of the

first appellate authority, he would have straightway filed an appeal. The very fact that he waited for the Department to file an appeal and thereafter

alone he filed cross-objections would show that he was not convinced of the merits of the claims made in the cross-objections, and at best it has to

be construed as a half-hearted attempt to secure relief. Therefore, merely because some relief was sought by way of cross-objection that would

not be an adequate ground for granting stay or in any event, before granting stay it should be considered that apparently no appeal was filed

because the assessee did not think there was any prima facie case for securing relief.

According to the revenue, for the assessment year 1984-85 the demand outstanding is Rs. 11,92,000 and for the assessment year 1985-86 Rs.

10,19,000. The assessee filed certain computations before us. According to the assessee, if the relief as claimed in the cross-objection was

allowed, then for the assessment year 1984-85, the tax due would be only Rs. 1,12,530. Against that, it was stated that Rs. 1,94,939 had already

been paid and nothing further was due. So also for the assessment year 1985-86, according to the assessee, if the claims in the cross-objections

were accepted, there would be a deficit of Rs. 13,720 and no tax would be payable. The figures were forwarded through the learned

Departmental Representative for the comments of the assessing officer and it has been submitted before us that as far as the assessment year

1984-85 was concerned, even if the relief due in the cross-objection is allowed, still the tax outstanding would be Rs. 5 lakhs. This is because,

according to the Department, a set off had already been allowed for the amount of Rs. 6,72,740 which figures in the calculation of the assessee.

We have looked into these figures. We find that according to the revenue in the calculations made, the net increase in assets which is the starting

point before allowing the deduction of Rs. 6,72,740, is Rs. 17,68,926. According to the assessee, in the cross-objection, there were two additions

which were wrong in arriving at the net increase in assets - one was an amount of Rs. 5.96 lakhs relating to the bank balance and another was an

addition of Rs. 1.80 lakhs relating to advance to the assessees wife. Thus, according to the assessee, the actual increase in assets was only Rs.

8.73 lakhs against Rs. 17.68 lakhs which is the starting point in the Departments computation. Thus if to the figure of Rs. 8.73 lakhs, the amounts

challenged in the cross-objection of Rs. 5.96 lakhs and Rs. 1.80 lakhs are added, the figure of unexplained assets would come to Rs. 16.49 lakhs

which is near about Rs. 17.68 lakhs in the Departments computation. Hence the real difference does not arise out of the deduction of Rs. 6.72

lakhs but in what is considered to be the actual increase in assets which according to the assessee is Rs. 8.73 lakhs and according to the

Department Rs. 17.68 lakhs. The difference is subject of challenge by way of cross-objection. If we start with the figure of Rs. 8.73 lakhs, then

what would be due from the assessee would be only Rs. 1.97 lakhs, then what would be due from the assessee would be only Rs. 1.97 lakhs. Out

of this the assessee had paid Rs. 1.94 lakhs leaving aside about Rs. 3,000. This is the position for the assessment year 1984-85.

As far as the assessment year 1985-86 is concerned, according to the Department, there is no deficit and there would be an income of Rs.

13,000. On an income of Rs. 13,000, at best the tax would be about Rs. 6,000. The assessee contests this computation also and states that

nothing is payable but taking the Departments figures, if the assessees claims in the cross-objection are allowed, by about Rs. 6,000 will be due.

The main plank of the argument of the Department centers around a note recorded by the CIT which was signed by the assessee as well as the

assessing officer on 5-9-1989 and which reads as under.

The assessees petition for payment of tax was discussed with the assessee and Shri K. C. Radhakrishnan, Assistant Commissioner today. The

assessee has filed a cash flow statement, from which it is seen that the net surplus available in the business owned by him is only around Rs. 30,000

per month and whole thing is absorbed for repayment of term loan to the bank. The assessee, however was informed that as the demand is more

or less admitted to be payable, it is not possible to give time for payment on prolonged basis. After considerable discussion the assessee has

agreed to pay a lump sum amount of Rs. 10 lakhs by the first week of December, 1989 by raising loan, etc. The assessees request for payment of

Rs. 30,000 per month for September, October and November may be allowed. If the amount of Rs. 10 lakhs is not paid before the 1st week of

December, 1989 the assessees business known as L. K. S. Ganee Complex may be sold in public auction and the proceeds adjusted towards tax

dues. The assessee agrees for this.

Communicate the above orders to the Assistant Commissioner, Deputy Commissioner and T. R. O. concerned.

Sd/-

CIT. 5-9-1989

Seen

Sd/-

L. K. S. Ganee

5-9-1989

Sd/-

Radhakrishnan

5-9-1989.

According to the learned Departmental Representative, this note is clearly an agreement on the part of the assessee that he would pay Rs. 30,000

per month in September, October and November and thereafter Rs. 10 lakhs would be paid before the first week of December, 1989 failing

which the business known as L. K. S. Ganee Complex would be sold in public auction. The learned Departmental Representative submits that only

Rs. 20,000 was paid, the amount of Rs. 10 lakhs was not paid and, therefore, in terms of the agreement, the Department was amply justified in

issuing the proclamation for sale. This he submitted was the effect of the agreement. He relied on the decision of the Madras High Court in the case

of Ramanlal Kamdar Vs. Commissioner of Income Tax, to submit that if an agreement was arrived at by an assessee with the Revenue, then the

assessee could have no grievance and the assessee was shut out from raising any plea to resile from what had been agreed to. The second

contention of the learned Departmental Representative was that if the assessee could not conform to the terms of the agreement, he should have

approached the Commissioner which he did not do and, therefore, it was not a case for any interference. Lastly, he submitted on the basis of

statements in a paper book that there is no prima facie case made out to show that there is reasonable chance of success in the cross-objection.

For all these reasons he stated that we should vacate our order of interim stay particularly in view of the observations of the Supreme Court in the

case of Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and Others, .

The learned counsel for the assessee, on the other hand, stated that bringing the property to sale would result in irreparable damage or injury to

the assessee and success in the cross-objection would then become illusory. He also submitted that there is no merit in the contention that just

because the assessee did not file an appeal, what was contended for in the cross-objection would lose force or would have less force than if it had

been taken in the form of grounds in an appeal itself. For these reasons, he submitted that the stay of proclamation of sale should not be interfered

with.

We have considered the rival submissions. The decision in the case of Ramanlal Kamdar (supra) is authority for what would happen where an

assessee agreed to certain additions and then tried to contest the same by way of appeal. The ratio of that decision cannot be pressed into service

for considering the facts whether stay should be granted or not in the present case, where on facts the assessee contested the additions by way of

cross-objections, which in law the statute enables him to do and which statutory right he has already exercised. As far as the decision in the case of

Dunlop India Ltd. (supra) is concerned, the Supreme Court has laid down that ""there can be and there are no hard and fast rules. But prudence,

discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There are

many such factors worthy of consideration."" (See page 179). The manner of approach which has been laid down by the aforesaid judgment of the

Supreme Court is certainly binding on us and we are bound to follow the same and it is in the light of these criteria that we proceed to consider this

case.

We are unable to subscribe to the view that because certain contentions are raised in the cross-objection, they lose force or have lesser force

than what would have happened if they were taken as grounds of appeal in an appeal filed by an assessee. In order that litigation may come to an

end, an assessee may choose not to file an appeal knowing the cost of litigation, etc. even though the assessee is prima facie dissatisfied with

certain relief which was not allowed to him by the first appellate authority. But if the litigation is to be prolonged by the Revenue filing an appeal,

then the assessee may consider that he is left with no option but to pursue with what he considers to be his legitimate right and due. Therefore, in

our view, contentions raised in cross-objection have to be considered on the same basis as contentions raised in a ground of appeal and the criteria

applied to both would be the same because the Act states that cross-objection is considered as an appeal filed. Therefore, we proceed on the

basis that the contentions raised in the case, though by way of cross-objection, would have to be considered as if they were contentions raised in

an appeal.

If the contentions raised in the cross-objection by the assessee are successful, as already pointed out, for the assessment year 1984-85, only

Rs. 1,97,000 is due out of which Rs. 1,94,000 has been paid. For the next year, on a total income of about Rs. 13,000, the tax due would be

about Rs. 6,000. So the tax that would be due from the assessee if the assessee is totally successful would be about Rs. 10,000. This the assessee

has to pay.

Coming to what is termed by the Revenue as ""agreement"", no doubt the assessee had promised and had agreed to a scheme of payment. This

agreement was on the basis of the assessee being informed that the demand is more or less admitted to be payable as seen from the note of 5-9-

1989. Prior to this itself, the assessee had filed in August, 1989 the cross-objection. Therefore, the question of the assessee being informed that the

demand was more or less admitted to be payable does not arise. According to the learned Departmental Representative, the assessee should have

pointed out that the cross-objections had been filed. The filing of cross-objection is a statutory right exercised by him and merely because,

according to the Revenue, no relief may have been due that would not alter the legal position of the assessee to have his cross-objections heard on

merits. The entire agreement of 5-9-1989, if it may be so called, proceeded on the basis that the demand was more or less admitted to be

payable. In the light of the cross-objections which were filed earlier, this, in our view, was not a correct premise. That apart, the agreement itself

shows that the entire surplus available to the assessee was only Rs. 30,000 per month and the whole amount was to be absorbed for repayment of

term loans to the bank. If at all the assessee was to have paid Rs. 10 lakhs, it was by borrowing funds. It was submitted that the assessee could

not secure these funds by taking loans particularly when the Revenue had started recovery proceedings against the assessee. The department

wants to exercise its option to bring to sale the assessees business known as L. K. S. Ganee Complex. If the business is sold, naturally there would

be, to quote from the judgment of the Supreme Court itself on which the Revenue placed reliance, irreparable injury, if the assessee succeeds in the

cross-objections. We have to consider the question of irreparable injury. We have also to consider the question of public interest on which the

learned Departmental Representative placed stress. What we have stayed is only the proclamation of sale. We have not stayed any other mode of

recovery except the proclamation of sale which, if put into effect, would cause irreparable injury to the assessee. We have considered the question

of balance of convenience and the balance of convenience is that the irreparable injury to the assessee should be prevented. It is urged before us

that the issues in the cross-objections are such that prima facie no stay should be granted. We find that the assessing officer has prepared a

painstaking note to support the stand. But, in our view, the facts are such which have to be gone into and it cannot be stated that the contentions

urged are beyond the pale of debate. In these circumstances, we make absolute our orders of interim stay, namely, that the proclamation of sale

made will stand stayed till the disposal of appeal by the Tribunal. This is of course subject to the assessee paying Rs. 10,000 by the 23rd March,

1990. The appeals themselves as well as the C. Os. will be posted for hearing on the 24th April, 1990. The result is the stay petitions are allowed

and the Misc. Petition is treated as dismissed for statistical purposes.