INDIAN MEDICAL TRUST vs. PRINCIPAL COMMISSIONER OF INCOME TAX

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CW/11119/2018HC RajasthanRJHC02024680201820 July 2018Author: SANJEEV PRAKASH SHARMA4 pages
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What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal (ITAT) had misinterpreted the High Court's interim order dated 01.06.2018. The High Court clarified that its order was specifically to stay the direction for the petitioner to deposit an additional Rs. 10 crores, as per the ITAT's order dated 27.04.2018. The Tribunal's interpretation that the entire stay order was vacated was found to be perverse and not the intention of the High Court. The Court directed that the appeal before the ITAT be heard expeditiously, preferably within three months, by a bench that does not include the members who passed the order based on the misinterpretation. The remaining payment was also stayed until the disposal of the appeal. The application for clarification/modification was allowed, and the writ petition was disposed of.

What were the facts?

The petitioner, Indian Medical Trust, challenged an order by the Principal Commissioner of Income Tax canceling its registration under Section 12-AA(3) of the Income Tax Act, 1961, effective from April 1, 2006. This cancellation led to revised assessment orders and a demand of Rs. 73,71,46,730/-. The petitioner argued that registration could not be canceled retrospectively and that the actual tax liability was only Rs. 2.75 crores, despite a deposit of Rs. 24,50,46,874/- as per a Settlement Commission order. The Income Tax Appellate Tribunal (ITAT) had deferred hearing the stay application and directed the petitioner to deposit an additional Rs. 10 crores by July 13, 2018. The petitioner filed a writ petition seeking clarification/modification of the High Court's interim order dated June 1, 2018, as the ITAT had allegedly misinterpreted it.

What were the issues?

1. Whether the Income Tax Appellate Tribunal (ITAT) misinterpreted the High Court's interim order dated 01.06.2018 by staying the entire stay order granted by the Tribunal, thereby vacating its own order dated 27.04.2018, which was contrary to the High Court's intention. Assessee's Contention: The petitioner argued that the High Court's order dated 01.06.2018 was intended only to stay the direction for depositing an additional Rs. 10 crores, not to vacate the ITAT's order dated 27.04.2018 entirely. The ITAT's interpretation was perverse and arbitrary, as it led to the vacating of the stay order and a failure to hear the appeal urgently. Revenue's Contention: The judgment does not record specific contentions from the revenue regarding the interpretation of the High Court's order. However, the revenue was represented by counsel.

Which sections of the Income-tax Act were involved?

12-AA(3)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Civil Writs No. 11119/2018 Indian Medical Trust, B-4 Govind Marg, Adarsh Nagar, Jaipur Rajasthan ----Petitioner Versus Principal Commissioner Of Income Tax (Central), Jaipur, New Central Revenue Building, Statue Circle, Bhagwan Das Road, Jaipur. ----Respondent For Petitioner(s) : Mr. Sandeep Taneja, Adv. For Respondent(s) : Mr. Siddharth Bapna, Adv. for Mr. Anil Mehta, Adv. HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA

Order 20/07/2018

1.

The matter comes up on the application moved by the petitioner for seeking clarification/modification of order dated 01.06.2018 as the interim order passed by this Court has been interpreted differently by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur.

2.

Vide order dated 01.06.2018 this Court passed following order:- “Notices were issued to the department, however, taking into consideration the urgency of the matter, the case was directed to be listed on today. Service has already been effected on the respondent but no one appears on behalf of the department even in the second round.

(2 of 4) [CW-11119/2018] Petitioner submits that they have challenged the order passed by the Principal Commissioner of Income Tax under Section 12- AA(3) of the Act of 1961 whereby registration of the assessee trust has been canceled by invoking Section 12-AA(3) of the Act of 1961 w.e.f. 01.04.2006 vide order dated 16.01.2018.

The appeal against order dated 16.01.2018 is pending before the Income Tax Appellate Tribunal. On the basis of the order dated 16.01.2018, the respondents have revised the assessment orders for the various years and deposit the total demand of Rs. 73,71,46,730/- has been raised. It is submission of the petitioner that registration of trust could not be canceled from retrospective date and the petitioner has also deposited a sum of Rs. 24,50,46,874/- as per the order of Settlement Commission, although, it is submitted that the Settlement Commission has failed to take notice of the losses incurred for the various years and as per the petitioner, the total demand of outstanding tax comes to amount of Rs. 2.75 crores only. The petitioner further submits that the ITAT vide order dated 27.04.2018 has deferred the matter for passing the orders on stay application for 02.07.2018 with a direction that the petitioner shall further deposit a sum of Rs. 10 crores. It is submitted that there is no reason coming out forward for directing the petitioner to deposit the sum of Rs. 10 crores on or before 13.07.2018 and the order passed by the ITAT is arbitrary. Taking note of the aforesaid submissions, this court finds that once the Tribunal is ceased

(3 of 4) [CW-11119/2018] with the matter relating to the question whether an order of cancellation of registration could be passed with retrospective effect, there was no reason for the Tribunal to have directed the petitioner to deposit additional sum as directed vide its order dated 27.04.2018. Taking note of the fact that the petitioner has already deposited the sum of Rs. 24.50,46,874/-, the effect and operation of order dated 27.04.2018 is stayed, during the pendency of the writ petition.”

3.

The Tribunal was thus restrained from directing the petitioner to deposit additional sum as directed vide order dated 27.04.2018, by staying the effect and operation of the order dated 27.04.2018 obviously entire interim order of this Court refers to only the direction again by the Tribunal for directing the petitioner to deposit sum of Rs.10 crore. It appears that the concerned members of the Income Tax Appellate Tribunal seem to have interpreted the interim order passed by this Court to mean that the order of stay granted by the Tribunal would mean that the entire stay order shall remain stayed and have interpreted that the said order dated 27.04.2018 stood vacated which could not have been the intention of this Court nor such directions were issued. The interpretation taken by the Tribunal is wholly perverse.

4.

The Tribunal is required to interpret Court orders in the tenor in which they are passed. It appears that the concerned Members of the Tribunal have further proceeded not to hear the appeal urgently and have left the appeal to be heard in ordinary course. Taking note of the manner and method in which the order has been passed while clarifying that the interim order passed by this Court is only with reference to the direction of payment of Rs.10

(4 of 4) [CW-11119/2018] crores which is restrained, the appeal of the petitioner shall be heard by Bench which shall not be presided by Vijay Pal Rao and Vikrem Singh Yadav and they shall not be part of it.

5.

With the aforesaid directions, the order is clarified.

6.

The application for clarification/modification is allowed. It is further clarified that the remaining payment shall remain stayed, till the disposal of the appeal.

7.

At this stage, both the counsel submit that writ petition be disposed of in the aforesaid terms and observations and time period be laid down for disposal of the appeal.

8.

Taking note of the submissions of both the counsel, it is directed that the appeal be heard expeditiously and if possible be decided not later than three months.

9.

The writ petition is accordingly disposed of. (SANJEEV PRAKASH SHARMA),J R.Vaishnav 50.

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