The Delhi High Court (HC) has held that the Power to Grant a Stay with a Pre-Deposit of 20% of Disputed Demand is a directory in Nature, not Mandatory.
Dr B L Kapur Memorial Hospital, the assessee has challenged the orders dated 06th September 2022 and 07th November 2022, rejecting the applications filed by the petitioner and directing the petitioner to make payment to the extent of 20% of total tax demand arising under Section 201(1) of the Income Tax Act, 1961, (for short ‘the Act) for Assessment Years 2013-14 and 2014-15.
It was observed that respondent No.2 passed orders dated 30th March 2021 under Section 201(1) / 201(1A) of the Act holding the petitioner to be an ‘assessee-in-default’ for short deductionof tax at source and total tax liability was computed at Rs.16,47,35,035/- and Rs.20,09,39,099/- for Assessment Years 2013-14 and 2014-15 respectively.
Respondent No.2 passed the orders dated 06th September 2022, whereby the stay applications filed by the petitioner were dismissed in a non-speaking manner and the petitioner was directed to pay twenty per cent of the disputed demand.
It was contended that the respondents while disposing of the petitioner’s applications failed to appreciate that the condition under the impugned Office Memorandum dated 31st July 2017, read with the Office Memorandum dated 29th February2016, stating that, “the assessing officer shall grant a stay of demand till disposal of the first appeal on payment of twenty per cent of the disputed demand”, is merely directory in nature and not mandatory.
The Court viewed that the requirement of payment of twenty per cent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending the firstappeal in all cases. The said pre-condition of a deposit of twenty per cent ofthe demand can be relaxed in appropriate cases.
The Court comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that impugned orders are non-reasoned orders. Neither the Assessing Officer nor the Commissioner of Income Tax has either dealt with the contentions and submissions advanced by the petitioner or has considered the three basic principles i.e. the prima faciecase, balance of convenience and irreparable injury while deciding the stay application.
The impugned orders and notices are set aside by the Court and the matters are remanded back to the respondent No.1-Commissioner of Income Tax for fresh adjudication in the application for stay.
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