A Division Bench of the Telangana High Court quashed assessment order passed on mechanical exercise of power.
The Petitioner, NSPIRA Management Services Pvt Ltd, is an assessee under the Income Tax Act, 1961 having the status of a company. For the assessment year 2018-19 the petitioner submitted return of income declaring deemed total income of Rs.117 Crores. The case was selected for limited scrutiny whereafter, the assessment order was passed whereby and whereunder total assessed income was quantified at Rs.356 Crores.
The Petitioner filed appeal against the aforesaid order of assessment before the Commissioner of Income Tax (Appeals) under Section 246A of the Income Tax Act, which is pending. Following the assessment order, notice of demand under Section 156 of the Income Tax Act was issued to the petitioner.
The Petitioner submitted an application for stay of recovery of demand before the respondent under Section 226 of the Act which was taken up along with applications for stay for other assessment years.
The Bench comprising Chief Justice Ujjal Bhuyan and Justice N Tukaramji observed that the respondent had not followed the instructions of the Central Board of Direct Taxes (‘CBDT’) dated 31.07.2017 to the effect that where outstanding demand is disputed before the appellate authority, the assessee has to pay 20% of the disputed demand. Accordingly, petitioner has been directed to pay 20% of the outstanding demand.
The Court further noted that “We are afraid respondent did not apply his mind while passing the order dated 16.12.2022. It appears to be a mechanical exercise of power. When the Income Tax authority exercises jurisdiction under Section 220(6) of the Income Tax Act, he exercises quasi-judicial powers. While exercising quasi-judicial powers, the authority is not bound or confined by departmental instructions.”
The Court also remanded back the matter to the respondent for fresh consideration in accordance with law after giving due opportunity of hearing to the petitioner.
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