EUROTECH MARKETING vs. INCOME TAX OFFICER

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WP(C)/11134/2020HC KeralaKLHC01028706202008 June 2020Author: HONOURABLE MR. JUSTICE AMIT RAWAL5 pages
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What did the High Court hold?

The High Court set aside the impugned order of stay (Ext.P3). The Court directed the Commissioner of Income Tax (Appeals), Kozhikode, to hear the appeal within a period of six months as prescribed. This was made subject to the condition that the petitioner would deposit 12.5% of the demand within a period of one month from the date of the order. If the petitioner complied with this revised condition, the appeal would be heard. Otherwise, the competent authority (Commissioner) would be at liberty to pass any appropriate order in accordance with law. The Court acknowledged that the order in the writ appeal might not have been known to the Commissioner when exercising powers under Section 226(3) of the Income Tax Act, but noted that such orders imposing 20% or 25% conditions are passed. The principle established is that the appellate authority's discretion in imposing stay conditions should be exercised judiciously, considering relevant judicial pronouncements, and a revised, reduced deposit percentage (12.5%) was deemed appropriate in this case.

What were the facts?

The petitioner, Eurotech Marketing, filed a writ petition challenging an order dated March 3, 2020, passed by the Commissioner of Income Tax (Appeals). This order granted a stay on the demand arising from an assessment order dated November 30, 2018, for assessment year 2012-2013. The stay was conditional upon the petitioner depositing 25% of the demand within six months. The petitioner argued that this condition was unjustified, citing a Division Bench order in W.A.No.1536/2019 which held that a 20% deposit condition, based on a July 2017 circular, could not be imposed. The respondent (Income Tax Officer) accepted notice and submitted that the stay application had been disposed of, and the six-month period was for deciding the appeal. The respondent also highlighted the financial stringencies faced by the government due to the Covid-19 pandemic.

What were the issues?

1. Whether the condition imposed by the Commissioner of Income Tax (Appeals) for depositing 25% of the demand to grant a stay on the appeal is justified, considering the Division Bench's order in W.A.No.1536/2019 which disallowed a 20% deposit condition based on a circular? (Question of law and fact, concerning the powers of the appellate authority and the applicability of precedents). Assessee's Contention: The condition of paying 25% is not justified, relying on the Division Bench order in W.A.No.1536/2019, which held that a 20% deposit based on a July 2017 circular cannot be imposed. Revenue's Contention: The application for stay has already been disposed of, and the six-month period is for deciding the appeal. The Covid-19 pandemic has made recovery of government dues difficult, leading to financial stringencies.

Which sections of the Income-tax Act were involved?

Section 226(3)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE AMIT RAWAL MONDAY, THE 08TH DAY OF JUNE 2020 / 18TH JYAISHTA, 1942 WP(C).No.11134 OF 2020(N) PETITIONER/S: EUROTECH MARKETING CHANGHARAMKULAM, KOKUR P.O., EDAPPAL, MALAPPURAM- 679591, REPRESENTED BY ITS MANAGING PARTNER- ABDUL RASHEED M.C. BY ADV. SRI.R.JAIKRISHNA RESPONDENT/S: 1 INCOME TAX OFFICER WARD NO.IV, OFFICE OF JOINT COMMISSIONER OF INCOME TAX, TIRUR RANGE, TIRUR P.O., MALAPPURAM-676101. 2 COMMISSIONER OF INCOME TAX (APPEALS), OFFICE OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOZHIKODE P.O., KOZHIKODE-673001. OTHER PRESENT: SRI CHRISTOPHER ABRAHAM SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.06.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.11134 OF 2020(N) 2

JUDGMENT The petitioner through the instant writ petition has assailed order dated 03.03.2020 (Ext.P3) by the 2nd respondent whereby while entertaining the stay application along with the appeal preferred against the assessment order dated 30.11.2018 for the assessment year 2012-2013 the demand has been stayed subject to the condition of deposit of 25% within a period of six months. Learned counsel appearing on behalf of the petitioner submits that the condition of payment of 25% is not justified in view of the order of the Division Bench of this Court in W.A.No.1536/2019 whereby this Court had directed that while entertaining the application for stay, the condition of 20%, by relying upon the circular on July 2017 cannot be imposed.

2.

Issue notice before admission. Sri.Christopher Abraham accepts notice and submits that since the application for stay has already been disposed of, the period of six months has been given for deciding the appeal. But owing to the Covid 19 pandemic the collection or the recovery of the Government due

WP(C).No.11134 OF 2020(N) 3 from the tax has become an hardest task and the government is facing financial stringencies.

3.

I have heard the learned counsel for the parties and appraised the paper book.

4.

No doubt that in the instant case vide Ext.P3 stay application, petitioner has been directed to pay 25% of the total amount on or before 15.03.2020 and the balance amount has been stayed for a period of six months or till the disposal of the appeal whichever is earlier. The order in writ appeal cannot be said to be in knowledge or notice of Commissioner of Income Tax Appeal/the assessing officer while exercising power under Section 226(3) of the Income Tax Act. But despite that such types of orders are passed imposing a condition of payment of 20% or 25%. Be that as it may. The impugned order of stay Ext.P3 is hereby set aside and the 2nd respondent ie., Commissioner of Income Tax, Kozhikode is directed to hear the appeal within a period of six months as prescribed subject to condition that the petitioner would deposit 12.5% within a period of one month from today. In case the petitioner complies with the order, the WP(C).No.11134 OF 2020(N) 4 appeal shall be heard, otherwise the competent authority ie. the Commissioner shall be at liberty to pass any appropriate order in accordance with law. The writ petition stands disposed of. AMIT RAWAL JUDGE nak

WP(C).No.11134 OF 2020(N) 5

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT DATED 30.11.2018. EXHIBIT P2 TRUE COPY OF THE APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DATED 22.5.2019. EXHIBIT P2(A) TRUE COPY OF THE STAY PETITION FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DATED 28.5.2019. EXHIBIT P2(B) TRUE COPY OF THE DELAY PETITION FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DATED 22.5.2019. EXHIBIT P3 TRUE COPY OF THE CONDITIONAL ORDER OF STAY PASSED BY THE 1ST RESPONDENT DATED 3.3.2020.

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