In a major relief to M/s Tata Teleservices, the Delhi High Court has held that the payment of 20% of disputed tax demand cannot be a condition for granting stay on recovery proceedings and the rule can be relaxed in appropriate cases.
The Petitioner was held to be an assessee in default for failure to deduct tax at source whilemaking interest payments to China Development Bank (“CDB”) and accordingly, the department raised ademand of Rs.42,40,72,259/-under section 201(1)/201(1A) of the Income Tax Act, 1961.
Justice Manmohan and Justice Dinesh Kumar Sharma observed that the requirement of payment of twenty percent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases.
“The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th February, 2016 gives instances like where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the Supreme Court or jurisdictional HighCourt is in favour of the assessee,” the Court said.
The Court further observed that the impugned orders are non-reasoned orders. Neither the Assessing Officer nor the CIT have considered three basic principles i.e. the prima facie case, balance of convenience and irreparable injury while deciding the stay applications.
“Consequently, the impugned orders and notices are set aside and the matter is remanded back to the Commissioner of Income Tax for fresh adjudication in the application for stay. However, before deciding the stay application, the Commissioner of Income Tax shall grant a personal hearing to the authorised representative of the Petitioner. For this purpose, list the matter before the Commissioner of Income Tax on 18th April, 2022,” the Court said.
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