Shree Parshwanath Corporation vs Deputy Commissioner of Income Tax (OSD)

K.A. Puj, J.—Rule. Mr. Manish R Bhatt, learned Counsel waives service of rule for respondents. At the request of the learned advocates for the parties, the matter is taken up for hearing today.

The petitioner has filed this petition under Article 226 of the Constitution of India praying for direction to the respondent No. 1 not to take any recovery proceedings against the petitioner in pursuance of the demand notice of Rs. 48,81,467/- till the disposal of its appeal by Commissioner of Income Tax [Appeals].

This Court has issued notice on 11/5/2009.

Heard Mr. J.P. Shah, learned Counsel appearing for the petitioner and Mr. Manish R Bhatt, learned senior counsel appearing for the respondents.

It is the case of the petitioner that the petitioner filed its return of income claiming carried forward of loss of Rs. 2,22,924/-. By order dated 30/3/2001 the Assessing Officer added Rs. 84,75,610/- by way of unexplained cash credit u/s 68 of the Income Tax Act [for short ''the Act''] and thus, assessed the total income of Rs. 82,52,686/-. Being aggrieved by the said order of the Assessing Officer, the petitioner preferred appeal before the Commissioner of Income Tax [Appeals], who by his order dated 8/7/2002 deleted the above addition of Rs. 84,75,610/-.

Being aggrieved by the aforesaid order of the Commissioner of Income Tax [Appeals], the respondents preferred appeal before the Income Tax Appellate Tribunal, Ahmedabad, and the Tribunal vide its order dated 11/6/2007 set aside the order of the Commissioner of Income Tax [Appeals] and remanded the matter to the Assessing Officer to decide the same afresh.

The Assessing Officer, thereafter, made reassessment on 26/12/2008 and once-again made the same addition of Rs. 84,75,610/-, which his predecessor had made and which the Commissioner of Income Tax [Appeals] deleted. Along with the assessment order, the Assessing Officer sent a demand notice of Rs. 48,81,467/- u/s 156 of the Act.

The petitioner preferred an appeal before the Commissioner of Income Tax [Appeals] on 13/1/2009. The said appeal is still pending. The petitioner addressed a letter to the respondent No. 1 praying for stay of demand notice pending the decision of the Commissioner of Income Tax [Appeals] in view of C.B.D.T circulars. The said request was, however, rejected by the respondent No. 1 vide letter dated 13/2/2009. The petitioner, therefore, preferred an application to the Additional Commissioner of Income Tax on 18/2/2009 and prayed for stay. The said request was also rejected by the Additional Commissioner of Income Tax vide letter dated 27/2/2009. The petitioner, therefore, approached the Commissioner of Income Tax relying on the same circulars on 5/3/2009 and the Commissioner of Income Tax vide his letter dated 6/3/2009 asked the petitioner to pay 40% of the outstanding demand by 15/3/2009 and on that condition the balance amount will be stayed till the decision of the appeal.

It is this communication of the Commissioner of Income Tax, which is under challenge in the present petition.

Mr. J P Shah, learned Counsel appearing for the petitioner submitted that though the Commissioner of Income Tax [Appeals] deleted the addition on the basis of certain evidence and material produced before him and though the said order was set aside by the Tribunal with a direction to the Assessing Officer to look into the matter afresh and to make reassessment after considering the said material, the Assessing Officer has passed the same order making the same addition without considering the said materials produced by the petitioner. He has further submitted that the addition was made on account of the unexplained cash credit and the details were also furnished by the petitioner. The transactions were entered into by account payee cheques. Having considered all the aspects, the additions were made, against which the appeal is pending. It is submitted to grant stay till the decision of the appeal filed by the petitioner.

Mr. Manish Bhatt, learned senior counsel appearing for the respondents, on the other hand, submitted that the circulars relied on by Mr. Shah are superseded and hence reliance cannot be placed on said circulars filed with the present petition. Based on the contentions raised in the affidavit-in-reply, he has submitted that the order passed by the Commissioner directing the petitioner to deposit 40% of the outstanding demand cannot be said to be unjust and hence no interference is called for in the present petition.

Having heard the learned advocates for the parties and having gone through their respective submissions as well as the pleadings made in the petition and in the affidavit-in-reply, the Court is of the view that the petitioner has succeeded in its appeal before the Commissioner in the first round and on remand by the Tribunal, again same addition in fresh assessment was made and the demand is raised by the Assessing Officer. The addition in question is now subject matter of appeal before the Commissioner of Income Tax [Appeals]. Keeping this fact in mind and keeping the nature of addition made as well as the evidence produced by the petitioner, the Court is of the view that till the first appellate authority will decide the matter, the recovery of entire demand should not be made, but asking the petitioner to deposit 40% of the outstanding demand by 15/3/2009 is on the higher side. Looking to the facts and circumstances of the case, the Court is of the opinion that the interest of justice would be served if the petitioner is directed to deposit Rs. 5 lacs [Rupees five lacs only] against the demand raised and balance demand is stayed till the disposal of the appeal by the first appellate authority. The first appellate authority is also directed to decide and dispose of the appeal as expeditiously as possible, and preferably within a period of six months from the date of receipt of the writ or from the date of the receipt of the certified copy of this order, whichever is earlier. The amount of Rs. 5 lacs, which is ordered to be paid, should be deposited by the petitioner before the Assessing Officer on or before 31st July, 2009. Only on this condition, the recovery of the balance amount is stayed till the disposal of the appeal.

It is made clear that the Court has not gone into the merits of the matter and has not expressed any opinion on the merits of the matter and the Commissioner of Income Tax [Appeals] should decide the appeal on its own merits without being influenced by the order of this Court granting this conditional stay.

Subject to the aforesaid directions and observations, this petition stands disposed of. Rule is made absolute to the aforesaid extent with no order as to costs.