M/S. KERALA STATE CIVIL SUPPLIES CORPORATION LTD., vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

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WP(C)/28217/2019HC KeralaKLHC01073439201924 October 2019Author: HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court found merit in the petitioner's submission that the CIT(A) had not applied its mind to the aspects presented in the stay application, particularly the financial hardship. The Court noted that the assessment proceedings for the same year were pending before the Appellate Authority, where a stay of recovery of tax demand had already been granted. The Court held that the CIT(A) should have taken this into account when disposing of the stay application in the penalty proceedings. Consequently, the Court quashed the conditional order of stay (Ext.P6) and directed the CIT(A) to reconsider and pass orders on the appeal (Ext.P2) within six weeks after hearing the petitioner. Recovery steps for the penalty were to be kept in abeyance until the CIT(A) passed its order.

What were the facts?

The petitioner, M/s. Kerala State Civil Supplies Corporation Ltd., filed a writ petition challenging a conditional order of stay (Ext.P6) passed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The order was in relation to a stay application filed along with an appeal against an order of penalty for the assessment year 2010-2011. The petitioner argued that the CIT(A) failed to consider crucial aspects, including the severe financial hardship faced by the petitioner, and that the order was vague regarding the reason for demanding a 20% deposit of the penalty demand as a condition for stay.

What were the issues?

1. Whether the Commissioner of Income Tax (Appeals) applied its mind to the aspects raised in the stay application, including the financial hardship of the assessee, when passing the conditional order of stay? 2. Whether the conditional order of stay, which required the deposit of 20% of the penalty demand, was legally sustainable given the pendency of assessment proceedings and a stay granted therein for the same assessment year? Assessee's Contentions: The petitioner argued that the CIT(A) failed to consider the financial hardship faced by the petitioner and that the impugned order was vague. The petitioner also highlighted that assessment proceedings for the same year were pending and a stay had been granted in those proceedings, which the CIT(A) ought to have considered. Revenue's Contentions: The judgment records that the learned Standing Counsel appearing for the Income Tax Department was heard, but their specific contentions are not detailed.

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 A.K.JAYASANKARAN NAMBIAR THURSDAY, THE 24TH DAY OF OCTOBER 2019 / 2ND KARTHIKA, 1941 WP(C).No.28217 OF 2019(B) PETITIONER: M/S. KERALA STATE CIVIL SUPPLIES CORPORATION LTD., MAVELI BHAVAN, 38/812, GANDHI NAGAR, KOCHI-682020, REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR MR.K.N.SATHEESH, IAS. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SHRI.VIPIN ANTO H.M. SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA RESPONDENTS: 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(2), KOCHI-682018. 2 COMMISSIONER OF INCOME TAX (APPEALS), AREEKKAL MANSION, PANAMPILLY NAGAR, KOCHI-682036. OTHER PRESENT: SC JOSE JOSEPH THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.28217 OF 2019 2

JUDGMENT The challenge in the writ petition is against Ext.P6 conditional order of stay that was passed by the 2nd respondent in a stay application filed along with an appeal against an order of penalty under the Income Tax Act, for the assessment year 2010-2011. The learned Senior Counsel, assailing Ext.P6 order, points out that while several aspects have been pointed out in the stay application for the consideration of the 2nd respondent, including the great financial hardship that is faced by the petitioner, Ext.P6 order does not reflect a consideration of these various aspects and in particular the financial hardship faced by the petitioner. It is pointed out that the impugned order is vague and does not specifically state the reasons as to why the petitioner had to deposit 20% of the demand of penalty confirmed against him as a condition for stay of recovery of the balance amount of penalty confirmed against him.

2.

I have heard the learned counsel appearing for the petitioner and also the learned Standing Counsel appearing for the Income Tax Department. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I find force in the submission of the learned senior counsel with regard to the non-application of mind by the 2 nd respondent to the aspects pointed out in the stay application preferred by the petitioner. This is more so, because the assessment proceedings are pending

WP(C).No.28217 OF 2019 3 consideration before the Appellate Authority, where the petitioner has been granted a stay of recovery of the tax demand. As the impugned order in this writ petition is passed in an appeal against an order of penalty for the same year, the 2nd respondent ought to have taken note of the stay granted in the assessment proceedings while disposing the stay application in the penalty proceedings by Ext.P6 order. In as much as such an exercise has not been under taken by the 2nd respondent, I am of the view that Ext.P6 order cannot be legally sustained. I therefore, quash Ext.P6 order and direct the 2nd respondent to consider and pass orders in Ext.P2 appeal pending before him within an outer time limit of six weeks from the date of receipt of a copy of this judgment, after hearing the petitioner. It is made clear that till such time as orders are passed by the 2nd respondent in Ext.P2 appeal as directed, and the order communicated to the petitioner, the recovery steps for recovery of amounts confirmed against the petitioner by Ext.P1 penalty order shall be kept in abeyance. The petitioner shall produce a copy of the writ petition together with a copy of this judgment, before the 2nd respondent, for further action. A.K.JAYASANKARAN NAMBIAR JUDGE SJ

WP(C).No.28217 OF 2019 4

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE 1ST RESPONDENT'S ORDER DATED 29.03.2018 IMPOSING PENALTY. EXHIBIT P2 TRUE COPY OF APPEAL DATED 27.04.2018 PREFERRED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P3 TRUE COPY OF THE STAY PETITION DATED 26.4.2018 FILED BY THE PETITIONER BEFORE 2ND RESPONDENT. EXHIBIT P4 TRUE COPY OF JUDGMENT DATED 07.04.2017 PASSED BY THIS HONOURABLE COURT IN W.P.(C) NO.12428 OF 2017. EXHIBIT P5 TRUE COPY OF JUDGMENT IN W.P.NO.33395 OF 2018 DATED 12.10.2018 PASSED BY THIS HON'BLE COURT. EXHIBIT P6 TRUE COPY OF THE ORDER DATED 30.09.2019 PASSED BY THE 2ND RESPONDENT.

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