SHRI DALPATSINH UKABHAI VASAVA vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX 2

Facts

The assessee, Shri Dalpatsinh Ukabhai Vasava, filed a writ-application challenging an order dated March 26, 2019, by the Principal Commissioner of Income Tax (Respondent No. 1), which rejected his stay application. The assessment year in question is 2016-17. The Assessing Officer (Respondent No. 2) added Rs. 3,79,92,500 to the assessee's total income under Section 56(2) of the Income Tax Act, 1961, treating the purchase of agricultural land as a sham transaction. The assessee appealed this assessment order and applied for a stay of the demand. The stay application was rejected, leading to this writ petition. The petitioner sought quashing of the orders and a direction to decide the appeal without insisting on a 20% payment of the demand.

Held

The High Court held that while courts are generally hesitant to interfere with discretionary powers, the total tax demand in this case was substantial, and the issues were at the first appeal stage. The court noted that 20% of the disputed tax dues amounted to approximately Rs. 34 lakh. Considering the overall circumstances, the Court reduced the requirement for depositing disputed tax dues to enable the writ-applicant to obtain a stay pending appeal to 10%. Additionally, the Court imposed a condition that the assessee must offer immovable security for the remaining 10% of the demand to the satisfaction of the assessing authority. The order passed by the concerned authority was modified accordingly. The conditions were to be satisfied by July 31, 2019, with an affidavit from the assessee by July 5, 2019, confirming compliance. Failure to comply would result in the withdrawal of the relief granted.

Key Issues

1. Whether the impugned order dated March 26, 2019, passed by Respondent No. 1, rejecting the stay application, is illegal, invalid, and violative of Articles 14 & 19 of the Constitution of India? (Question of law and fact). 2. Whether the impugned orders dated February 11, 2019, and May 10, 2019, passed by Respondent No. 2, are illegal, invalid, and violative of Articles 14 & 19 of the Constitution of India? (Question of law and fact). Assessee's Contentions: The assessee argued that the assessment was high-pitched and that he was in poor financial condition, making the deposit of 20% of the demand impossible. He relied on the principles laid down in Circular No. 1/2019, which provides guidelines for granting stay of demand, suggesting flexibility in the percentage of deposit required. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions regarding the rejection of the stay application. However, the context implies the revenue likely upheld the Assessing Officer's decision and the requirement of a 20% deposit.