MASCOT CONSTRUTION CO PARTNERSHIP FIRM THROUGH ITS MANAGING PARTNER KHAJA AMINUDDIN SHAIKH MEHBOOB vs. PR COMMISSIOENR OF INCOME TAX 2 AND OTHERS

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WP/13233/2018HC BombayHCBM03016093201810 April 2019Author: HON'BLE SHRI JUSTICE S V GANGAPURWALA,HON'BLE SHRI JUSTICE ARUN M. DHAVALE4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court quashed and set aside the impugned orders. The Court held that while it is within the authority's discretion to direct payment of a particular percentage of the amount as a pre-condition for stay, the prima facie case put forth by the parties must be considered. The authority must deal with the contentions raised by the parties to demonstrate application of mind, as reasons are a pillar of natural justice. The Court found that the authority had not dealt with the petitioner's case in the impugned order to substantiate the discretion exercised. Therefore, the authority was directed to consider the stay application on its own merits, taking a decision that prima facie meets the case put forth by the petitioner. The petitioner was directed to appear before the authority on 15.04.2019 for expeditious disposal. The issue of whether the retracted disclosure during the survey was considered was noted as not having been addressed by the authority.

What were the facts?

The petitioner, Mascot Construction Co. Partnership Firm, filed a writ petition challenging two orders: one rejecting its application for a stay and another order passed in review of the stay application. The petitioner argued that the authority incorrectly relied on CBDT guidelines (Instruction No. 1914, dated 31.07.2017) which mandated a 20% deposit of the tax demanded as a pre-condition for granting stay, thereby restricting discretionary powers. The revenue contended that the authority had considered the petitioner's case and the order was not solely based on the CBDT circular. The petitioner cited the Supreme Court judgment in Principal Commissioner of Income Tax vs. LG Electronics India (P) Ltd. and a Delhi High Court order in the same case.

What were the issues?

1. Whether the authority erred in rejecting the stay application by strictly adhering to the CBDT guidelines (Instruction No. 1914) mandating a 20% deposit of tax demanded as a pre-condition for stay, thereby potentially restricting its discretionary powers, under Section 220(6) of the Income Tax Act, 1961? Assessee's Contentions: - The CBDT circular cannot restrict the discretionary powers of the authority. - The authority failed to consider the petitioner's case and relied solely on the CBDT guidelines. - Relied on the Supreme Court judgment in Principal Commissioner of Income Tax and Ors. Vs. LG Electronics India (P) Ltd. and the Delhi High Court order in LG Electronics India (P) Ltd. Vs. Principal Commissioner of Income Tax and Ors. (2018) 168 DTR (Del) 354. Revenue's Contentions: - The authority considered the petitioner's case and the order was not solely based on the CBDT circular. - The authority considered that the petitioner had made a declaration during the survey.

Which sections of the Income-tax Act were involved?

Section 220(6)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
(1)   56­wp­13233­2018 IN THE HIGH COURT OF JUDICATURE AT BOMBAY  BENCH AT AURANGABAD 56 WRIT PETITION NO.13233 OF 2018 MASCOT CONSTRUTION CO PARTNERSHIP FIRM THROUGH ITS  MANAGING PARTNER  ..PETITIONER VERSUS PR COMMISSIOENR OF INCOME TAX 2 AND OTHERS ..RESPONDENTS      … Mr.   Raviraj   R.   Chandak,   Advocate   for   the Petitioner.  Mrs.   Kalpalata   Bharaswadkar   Patil   and   Mr.   A.   R. Kale, Advocate for Respondents No.1. …             CORAM : S. V. GANGAPURWALA &                           A. M. DHAVALE, JJ.      DATED : 10th APRIL, 2019.  PER COURT:­  1. Heard learned counsel for the petitioner and respondents. 2. The petitioner assails the order rejecting the application for stay, so also the order passed in review on the application for stay. 3. The   learned   counsel   for   the   petitioner submits   that   the   authority   has   proceeded   on   the premise   that   in   view   of   CBDT   guidelines   bearing instruction   no.1914,   (office   memorandum   dated 31.07.2017) the stay cannot be granted without the assessee depositing 20% of the tax demanded.   The assessee has to deposit 20% of the tax demanded as pre­condition for grant of stay.  According to the learned counsel the CBDT circular cannot restrict the   discretionary   powers   of   the   authority.     The (2)   56­wp­13233­2018 learned counsel relies on the judgment of the Apex Court   in   case   of   the  Principal   Commissioner   of Income Tax and Ors. Vs. LG Electronics India (P) Ltd.  dated 20.07.2018 and the order of the Delhi High Court in case of LG Electronics India (P) Ltd. Vs. Principal Commissioner of Income Tax and Ors. reported in (2018) 168 DTR (Del) 354.  According to the   learned   counsel   the   case   put   forth   by   the petitioner has not been considered. 4. Mrs.   Bharaswadkar  Patil,   learned   counsel for the respondent submits that the authority has considered the case put forth by the petitioner and it is not only on the basis of CBDT circular the order has been passed.  It has been considered that the petitioner had made a declaration during the survey.  It cannot be said that the authority while passing the impugned order has not considered the case put forth by the petitioner. 5. The   Apex   Court   in   a   case   of  Principal Commissioner   of   Income   Tax   and   Ors.   Vs.   LG Electronics   India   (P)   Ltd.  (supra)   has   observed that the administrative circular does not operate as fetter on the powers of CIT since it is a quasi­ judicial authority.   The Apex Court has clarified that in all cases like the present case, it will be open to the authorities, on the facts of individual cases,   to   grant   deposit   orders   of   lesser   amount than 20 per cent, pending appeal. (3)   56­wp­13233­2018 6. The general direction appears to have been

given by the Apex Court in the said judgment.

7.

The   authority   in   the   impugned   order observes that the office memorandum has streamlined the procedure for considering stay petition and it lays   down   payment   of   20%   of   tax   demand   as   pre­ condition for grant of stay on demand.  One rider was attached in the order that in view of nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 20% is not warranted.

8.

The order passed in review reiterates the same.   It is further observed in said order that the assessee himself voluntarily disclosed certain amount of income over and above the regular income during the course of survey proceedings.  The case of the petitioner appears to be that the same has been   retracted.     The   said   aspect   has   not   been considered by the authority.

9.

It   is   discretion   of   the   authority   to direct   payment   of   particular   percentage   of   the amount as a pre­condition for stay.  However while considering the stay petition the prima facie case put   forth   by   the   parties   is   required   to   be considered.     The   authority   has   to   deal   with   the contentions raised by the parties so as to disclose the   application   of   mind   by   the   authority   to   the contention put forth by the parties.   Reasons are required to be given.   Reasons now are considered

(4) 56­wp­13233­2018 to   be   one   of   the   pillar   of   the   principles   of natural justice.

10.

We do not find that the case put forth by the petitioner has been dealt with while passing impugned order so as to substantiate the discretion exercised by him.   If after considering the case put forth by the petitioner, the authority may come to the conclusion about the quantum of the amount the   petitioner   is   required   to   deposit   as   a  pre­ condition for stay.

11.

In light of the above, the impugned orders are   quashed   and   set   aside.     The   authority   shall consider   the   stay   application   filed   by   the petitioner   on   its   own   merits   and   take   decision prima facie meeting out the case put forth by the petitioner.  The petitioner shall appear before the authority   on   15.04.2019   and   shall   cooperate   in expeditious disposal of the said petition.

12.

Writ Petition accordingly disposed of.  No costs. (A. M. DHAVALE)             (S. V. GANGAPURWALA) JUDGE JUDGE Devendra/April­19

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