M/S COSMAS RESEARCH LAB LTD. vs. PRINCIPAL COMMISSIONER OF INCOME TAX-3, LUDHIANA AND ANOTHER

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CWP/6657/2018HC Punjab & HaryanaPHHC01107215201826 March 2018Bench: MR. JUSTICE A.K. SIKRI,MS. JUSTICE RITU BAHRI2 pages
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What did the High Court hold?

The High Court found that the impugned order dated 19.02.2018 did not provide any reasons for demanding 30% of the total demand, which was in excess of the percentages stipulated even in the subsequent circular dated 31.07.2017. The circulars allow for demanding a higher amount only if the Assessing Officer believes the nature of the addition warrants it. The Court directed that the petitioner would be entitled to operate its attached bank accounts upon depositing 20% of the total demand. The attached bank accounts would be permitted to be operated, subject to retaining a balance of 10% of the total demand, pending fresh orders from the TRO. Other attachments would be released if this balance was maintained. The issue of whether the 30% demand was justified in principle, beyond the circular stipulations, was not definitively decided, but the operative relief was granted based on the circulars and the petitioner's willingness to deposit 20%.

What were the facts?

The petitioner, M/s Cosmas Research Lab Ltd., is aggrieved by an order of the Tax Recovery Officer (TRO) requiring it to deposit 30% of an income tax demand to obtain a stay on the remaining 70% pending its appeal before the Commissioner of Income Tax (Appeals). The petitioner argued that a circular dated 29.02.2016 stipulated a deposit of 15%, and a subsequent circular dated 31.07.2017 increased this to 20%. The petitioner had already deposited 16% and was willing to deposit an additional amount to reach 20%. The impugned order of 19.02.2018 provided no reasons for demanding 30%, which exceeded even the later circular's stipulated percentage.

What were the issues?

1. Whether the Tax Recovery Officer was justified in demanding a deposit of 30% of the total demand for granting a stay, contrary to the prevailing circulars of the Income Tax Department? (Question of law and fact, concerning the interpretation and application of CBDT circulars). Assessee's Contention: The petitioner argued that the stay ought to have been granted upon deposit of 15% of the total demand, as per the circular dated 29.02.2016. They also noted the subsequent circular dated 31.07.2017 increased this to 20%, and they were willing to deposit 20%. The impugned order demanding 30% was arbitrary as it lacked reasons and exceeded the stipulated percentages. Revenue's Contention: The respondents contended that the amount was increased to 20% by the circular dated 31.07.2017, and this subsequent circular had no retrospective effect. The petitioner's appeal was filed prior to this circular.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH

CWP No. 6657 of 2018 (O&M)

Date of Decision: 26.03.2018

M/s Cosmas Research Lab Ltd.

…..Petitioner

versus Principal Commissioner of Income Tax-3, Ludhiana and anr.

…..Respondents

CORAM: HON’BLE MR.JUSTICE S.J.VAZIFDAR, CHIEF JUSTICE

HON’BLE MR. JUSTICE AVNEESH JHINGAN, JUDGE

Present : Mrs. Radhika Suri, Senior Advocate with Mr. M.S.Kanda, Advocate, for the petitioner(s).

Mr. Rajesh Katoch, Advocate, for the respondents.

****

S.J.VAZIFDAR, CHIEF JUSTICE The petitioner is aggrieved by the order of the Tax Recovery Officer requiring it to deposit 30% of the demand and granting a stay in respect of the balance 70% till disposal of the appeal before the Commissioner of Income Tax (Appeals). 2.

Mrs. Suri, the learned senior counsel appearing on behalf of the petitioner states that the stay against the recovery ought to have been granted on deposit of only 15% of the total demand in view of a circular dated 29.02.2016. Mr. Katoch, the learned counsel appearing on behalf of the respondents states that the amount has been increased to 20% by a circular dated 31.07.2017. The respondents’ contention is that the subsequent circular dated 31.07.2017 has no retrospective effect. The petitioner’s appeal was filed prior to the circular dated 31.07.2017. Ravinder Sharma 2018.03.27 14:35 I attest to the accuracy and integrity of this document

CWP No. 6657 of 2018 (O&M)

[2]

The petitioner claims to have deposited 16% of the total demand to date and is ready and willing to deposit an additional amount to ensure 20% of the demand stands deposited. 4.

The impugned order dated 19.02.2018 does not furnish any reason whatsoever for demanding 30% which is in excess of the amount stipulated even in the subsequent circular dated 31.07.2017. The circular provides that the amount in excess of the percentage whether 15% or 20% can be demanded only if the Assessing Officer is of the view that the nature of the addition resulting in the disputed demand is such that deposit of a higher amount is warranted. 5.

In the circumstances, the petition is disposed of by the following order:-

The petitioner shall be entitled to operate the bank accounts which have been attached upon depositing 20% of the total demand with the respondents. Further, the bank accounts which have been attached shall be permitted to be operated subject to a balance being always retained to the extent of 10% of the total demand. This order regarding the balance in the accounts shall be subject to the fresh orders to be passed by the Tax Recovery Officer regarding the quantum of deposit after hearing the petitioner. In the event of the balance being retained, as aforesaid, the other attachments would also stand released. (S.J. VAZIFDAR)

CHIEF JUSTICE

(AVNEESH JHINGAN)

JUDGE 26.03.2018 ravinder Whether speaking/reasoned √ Yes/No Whether reportable Yes/No√

Ravinder Sharma 2018.03.27 14:35 I attest to the accuracy and integrity of this document

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