M/S PUNJAB INSTITUTE OF MEDICAL SCIENCES JALANDHAR vs. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS) CHANDIGARH AND OTHERS

CWP-25675-2016 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP-25675-2016 DATE OF DECISION: 03 .05.2017 M/S PUNJAB INSTITUTE OF MEDICAL SCIENCES … Petitioner V. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS) AND ORS. ... Respondents CORAM: HON’BLE MR. JUSTICE S.J. VAZIFDAR, CHIEF JUSTICE HON’BLE MR. JUSTICE ANUPINDER SINGH GREWAL Present: Mr. Akshay Bhan, Senior Advocate with Mr. Alok Mittal, Advocate and Mr. Abhishek Sanghi, Advocate for the petitioner. Mr. Denesh Goyal, Advocate for the respondents. **** ANUPINDER SINGH GREWAL, J. The petitioner has impugned order dated 25.11.2016 (Annexure P-1) whereby respondent No.2 has declined to stay the recovery of demand for assessment year 2013-14 during the pendency of the appeal as well as the demand notice dated 29.11.2016 (Annexure P-14). 2. The petitioner institute is a Society established by Government of Punjab on 07.07.1994 and registered under the Societies Registration Act, 1860 on 10.10.1994. It was granted registration under Section 12AA of the Income Tax Act (hereinafter referred to as ‘the Act’) on 01.11.2000 by the Commissioner of Income Tax (for short ‘CIT’), Chandigarh. The Society is said to have been set up with the object of providing education, training, research and related infrastructure in various branches of health sciences and working for Swarnjit Singh 2017.05.03 17:37 I attest to the accuracy and integrity of this document CWP-25675-2016 2 the advancement of scientific knowledge aimed at enhancing the quality of patient care. It has been filing income tax returns and claiming exemption of its entire income under Section 11 of the Act. The registration of the petitioner under Section 12AA was cancelled by the CIT by order dated 24.10.2013 (Annexure P-3). The petitioner preferred appeal thereagainst and the Income Tax Appellate Tribunal, Amritsar allowed the same on 29.09.2015. This order is stated to have attained finality. For the assessment year 2006-07, the total demand of ` 20,77,10,765/- on account of tax, penalty and interest had been raised by the Department whereagainst appeals ITA Nos.271 and 274 of 2014 preferred by the petitioner, are pending adjudication before this Court. After the cancellation of the registration of the petitioner under Section 12AA of the Act, the assessments of the petitioner for the assessment year 2007-08 to 2010-11 were re-opened and total demand of ` 72,19,07,560/- was raised. The appeals are stated to be pending before the CIT (Appeal). For the assessment year 2013-14, a demand of ` 65,13,78,090/- was raised and the appeal preferred thereagainst by the petitioner is pending before the respondent No.2. The respondents issued letter dated 03.02.2016 asking the petitioner to deposit the outstanding demand failing which recovery proceedings were to be initiated. The petitioner was also put on notice by the respondents letter dated 14.03.2016 for an outstanding amount for the assessment years 2006-07 to 2010-11 which was replied by the petitioner on 23.03.2016 (Annexure P-9 Colly.). The matter is stated to be pending before the CIT (Exemptions). Thereafter, assessment for the assessment year 2013-14 was also framed by the letter dated 30.03.2016 and further demand was created. The respondents sought the payment of outstanding amount vide order dated 04.05.2016 (Annexure P-12). The Swarnjit Singh 2017.05.03 17:37 I attest to the accuracy and integrity of this document CWP-25675-2016 3 petitioner is stated to have preferred appeal against the additional demand for the assessment year 2013-14 which is pending before the CIT. In the meantime, the petitioner preferred application for stay of the demand of ` 65,13,78,090/- for the assessment year 2013-14. This application was dismissed by the impugned order dated 25.11.2016 (Annexure P-1) by referring to office memorandum issued by Central Board of Direct Taxes (hereinafter referred to as ‘CBDT’) on 29.02.2016 modifying the Instructions No.1914 dated 21.03.1996 for deposit of at least 15% of the demand for the stay of the order till the disposal of the appeal. On 12.12.2016 it was directed by this Court that no coercive steps be taken against the petitioner. 3. Learned counsel for the petitioner has contended that the impugned order refusing to stay the demand during the pendency of the appeal has been passed arbitrarily and without application of mind and, therefore, deserves to be set aside. He further contended that the petitioner institute has been set up and is maintained by the Government for promoting the health and well being of the public. It has a good prima facie case for setting aside the raised demand and the appeal before the CIT is likely to succeed as the very basis of the demand that is the cancellation of registration granted under Section 12AA to the petitioner institute has already been set aside. In support of his submission, he has relied upon the judgment of the Bombay High Court in the case of Kec International Ltd. Versus B.R. Balakrishnan and others reported as (2001) 251 ITR 158. Per contra, the learned counsel appearing for the respondents has contended that this Court while exercising writ jurisdiction should not entertain petitions seeking stay of recovery of demand. He has also contended that in other cases pertaining to the different assessment years, the petitioner had deposited 15% of the amount and hence stay was granted in its favour. The Swarnjit Singh 2017.05.03 17:37 I attest to the accuracy and integrity of this document CWP-25675-2016 4 petitioner has not deposited any amount towards demand for the assessment year 2013-14 and therefore, in terms of office memorandum dated 29.02.2016 issued by the CBDT, the demand could not be stayed without the deposit of 15%. In support of his submissions, he has relied upon the judgment of the Supreme Court in the case of Assistant Collector of Central Excise, Chandan Nagar v. Dunlop India Ltd., and others reported as (1985) 154 ITR 172 (SC), the Division Bench of this Court in the case of Kanav Khanna v. Commissioner of Income-Tax and Others reported as (2014) 366 ITR 386 (P&H) and Madhya Pradesh High Court in the case of Air Transport Co. (Regd.) v. Income Tax Appellate Tribunal and others reported as 1994 (207) ITR 487 (MP). 4. At the outset we deem it appropriate to reproduce the relevant paragraphs of office memorandum dated 29.02.2016 (Annexure P-16) issued by the CBDT wherein Instructions No.1914 dated 21.03.1996 providing guidelines for stay of demand at the appellate stage have been modified. “4. In order to streamline the process of grant of stay and standardize the quantum of lump sum payment required to be made by the assessee as a pre-condition for stay of demand disputed before CIT (A), the following modified guidelines are being issued in partial modification of Instruction No.1914: (A) In a case where the outstanding demand is disputed before CIT (A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in para (B) hereunder. (B) In a situation where, Swarnjit Singh 2017.05.03 17:37 I attest to the accuracy and integrity of this document CWP-25675-2016 5 (a) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc.) or, (b) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.) the assessing officer shall refer the matter to the administrative Pr. CIT/CIT, who after considering all relevant facts shall decide the quantum/proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand. (C) In a case where stay of demand is granted by the assessing officer on payment of 15% of the disputed demand and the assessee is still aggrieved, he may approach the jurisdictional administrative Pr. CIT/CIT for a review of the decision of the assessing officer. (D) The assessing officer shall dispose of a stay petition within 2 weeks of filing of the petition. If a reference has been made to Pr. CIT/CIT under para 4 (B) above or a review petition has been filed by the assessee under para 4 (C) above, the same shall also be disposed of by the Pr. CIT/CIT within 2 weeks of the assessing Swarnjit Singh 2017.05.03 17:37 I attest to the accuracy and integrity of this document CWP-25675-2016 6 officer making such reference or the assessee filing such review, as the case may be. (E) In granting stay, the Assessing Officer may impose such conditions as he may think fit. He may, inter alia,- (i) require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; (ii) reserve the right to review the order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; (iii) reserve the right to adjust refunds arising, if any, against the demand, to the extent of the amount required for granting stay and subject to the provisions of section 245.” 5. From the reading of the modified guidelines, it is clear that in normal circumstances, the appellate authority would grant stay of demand during the pendency of the appeal upon payment of 15%. It has been envisaged in 4 (B) that there could be situations where an amount in excess of 15% of the demand would be required to be paid before staying the demand as well as eventualities wherein deposit of amount less than 15% of the demand would be warranted. Certain situations have been set out by way of illustration wherein amounts in excess and less than 15% of the demand could be accepted for staying the demand during the pendency of the appeal. They are of course illustrative and not exhaustive. 6. In the case of Kec International Ltd. Versus B.R. Balakrishnan and others (supra), the parameters for deciding the stay applications during the Swarnjit Singh 2017.05.03 17:37 I attest to the accuracy and integrity of this document CWP-25675-2016 7 pendency of the appeal before the appellate authority have been set out as under:- “6. At the outset, it may be mentioned that the impugned order is passed by respondent No.2 on the administrative side. It does not give any reason. However, it is important to bear in mind that in this case even the Assessing Officer has not given any reasons for rejecting the stay application. As a result of the impugned order, a garnishee notice has been issued under section 226 (3) to the Central Bank of India, J.B. Nagar Branch, Andheri (East), Mumbai. About 500 workers have not been paid salary because of the garnishee notice. This is the consequence of an order being passed without giving any reasons. Hence, we intend to lay down certain parameters which are required to be followed by the authorities in cases where a stay application is made by an assessee pending appeal to the first appellate authority. Parameters: (a) While considering the stay application, the authority concerned will at least briefly set out the case of the assessee. (b) In cases where the assessed income under the impugned order far exceeds returned income, the authority will consider whether the assessee has made out a case for unconditional stay. If not, whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order. (c) In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. (d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive Swarnjit Singh 2017.05.03 17:37 I attest to the accuracy and integrity of this document CWP-25675-2016 8 measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the