M/s NSPIRA Management Services Private Limited vs. The Deputy Commissioner/ Assistant Commissioner of Income Tax

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WP/2452/2023HC TelanganaHBHC01004637202331 January 2023Bench: N.TUKARAMJI,UJJAL BHUYAN7 pages
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What did the High Court hold?

The High Court held that respondent No. 1 did not apply its mind while passing the order dated 16.12.2022. The Court observed that when an authority exercises quasi-judicial powers under Section 220(6) of the Act, it is not bound or confined by departmental instructions. The Supreme Court's decision in Principal Commissioner of Income Tax v. LG Electronics India Pvt. Ltd. was cited to emphasize this point. The High Court found that the order appeared to be a mechanical adherence to CBDT instructions. Consequently, the Court set aside the order dated 16.12.2022 passed by respondent No. 1 and remanded the matter back to respondent No. 1 for passing a fresh order. Respondent No. 1 was directed to pass the fresh order after giving the petitioner an opportunity of being heard, within a period of six weeks from the date of receipt of the order. The respondents were also directed not to take any coercive steps for realizing the outstanding demand for Assessment Year 2018-19 for a period of six weeks.

What were the facts?

The petitioner, M/s NSPIRA Management Services Private Limited, is an assessee under the Income Tax Act, 1961. For Assessment Year 2018-19, the assessee filed a return declaring a total income of Rs. 1,17,17,09,420.00. Following limited scrutiny, an assessment order was passed on 21.01.2021, quantifying the total taxable income at Rs. 1,56,93,33,105.00. The petitioner filed an appeal against this assessment order before the Commissioner of Income Tax (Appeals) under Section 246A of the Act. However, the respondent No. 1, the Deputy Commissioner/Assistant Commissioner of Income Tax, issued an order dated 16.12.2022, directing the petitioner to pay 20% of the disputed demand pending disposal of the appeal, citing instructions from the Central Board of Direct Taxes (CBDT). The petitioner challenged this order before the High Court.

What were the issues?

1. Whether the order dated 16.12.2022 passed by respondent No. 1, directing the petitioner to pay 20% of the disputed demand pending disposal of the appeal, is arbitrary, illegal, bad in law, bereft of any reasons, and violative of principles of natural justice, under Article 226 of the Constitution of India. Assessee's Contentions: - The assessee argued that the order directing payment of 20% of the disputed demand was arbitrary, illegal, and violative of natural justice. - The assessee contended that the respondent No. 1 mechanically followed CBDT instructions without applying its mind to the quasi-judicial powers vested under Section 220(6) of the Act. - The assessee relied on the Supreme Court's decision in Principal Commissioner of Income Tax v. LG Electronics India Pvt. Ltd. (2020) 116 taxmann.com 419 (SC) to support the argument that quasi-judicial powers require independent application of mind. Revenue's Contentions: - The revenue, represented by Ms. Sapna Reddy, argued that the respondent No. 1 followed instructions from the CBDT dated 31.07.2017, which mandate payment of 20% of the disputed demand when an appeal is pending before the appellate authority.

Which sections of the Income-tax Act were involved?

Section 220(6),Section 246A

AI-generated summary — verify with the full judgment below

t 3311 I HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE THIRTY FIRST DAY OF JANUARY TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE N.TUKARAMJI WRIT PETITION NO: 2452 OF 2023 Between: M/s NSPIRA Management Servrces Private Limited, 1oth Floor, Melange Towers, Pathrika Nagar, Madhapur, Hyderabad - 500 081, Telangana Represented by its Managing Director, Mr. K Puneeth, S/o Mr. Bipin Gopalakrishna. ...PETITiONER AND 1. The Deputy Commissioner/ Assrstant Commissioner of lncome Tax, , Circle 5('1), Room No. 344, 3rd Floor. I T Towers, AC Guards, Masab Tank, Hyderabad - 5O0 084, Telangana. 2. The Additional / Joint / Deputy / Assistant Commissioner of lncome Tax / lncome Tax Officer, , National e-Assessment Center, New Delhi, Room No.. 401,2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, New Delhi - 110 003. ...RESPONDENTS Petition Under Article 226 of the Constrtution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ, Order or Drrection, one, more particularly in the nature of Mandamus declaring the order of the 1 st Respondent, dated '16.12.2022, vide DlN. ITBA/COM|F|17|2022- 23t1048O62826(1), directing the Petitioner to pay 20percent of the disputed demand, pendrng disposal of the appeal of the Petitioner before the 1st Appellate Authority, for the Assessment Year 2018 - 19, as arbitrary, illegal, bad in law. bereft of any reasons, violative of principles of natural justice and to consequently set-aside the same and grant stay of recovery, pending disposal of the Petitioner's appeal before the 1st Appellate Authority, in the interests of justice i I I ! I I

l Ii ! t Ii i i |.A.NO:1 OF 2023 Petition Un jer Section 151 CPC praying that in the c rcumr;tances stated in the affidavit fil€ d in support of the petition, the High Cour: nray be pleased to grant stay of all ft rther proceedings, including any recovery, l)ondrng disposal of the above writ pet tion. Counsel for the P )titioner : SRI.A.V.A.SM KARTTKEYA Counsel for the R )spondents : Ms.SAPNA REODY, ADV FOlt t;Rt.J.V.PRASAD (Sr. SC FOR INCOME rAx) The Court made t re following ORDER

I Icard Mr. ,\.\'..\.Sir,a l!lrtikcr rr, lcerncd c()unscl [rrr rhe pctili()ncr ar-rcl \1s. Sapna llcdrlr, lcrrncd counscI reprcscnting THE HON'BLETHE CHIEF USTICE UIIAL BHUYAN AND THE HON'BLE SRI IUSTICE N.TUKARAMII W.P.No.2452 of 2023 O.-RQLI.R, i/,", r, Ilon'ble rlr (./,ut .lt,rt,L t .iti lli,rl rr l NIr..f .V.Prasad, lcarncd Standing (.ounscl, Incomc l ax Deparrment frrr thc respondcnts (-onstitution of India assailing lcselirr tnd validin, of the ordcr J.t tcd 16.12.2022 passcd bv rcsporrrle nr \o.1 frrr rhe asscssnrernt vcar 2018 19. 2. 'l'his pctitt>n has becn filccl r.rnclcr .lrticle 226 oi thc 3. Pet-itioner is an asscsscc untlcr rhr lncon-rc 'l'ax AcL, 19(rl (bricfly 'the :\ct' hercinaftcr) h:n irrq rhc sr:1rLrs ()l a cornpanr,. Iirr thc asse ssment ycar 20113 19, pctirioncl h:Ld sr-rbmittccl rcturn <>F utc()lrtc on 23.10.201U dcc]:rrrnr' ,.lccrncd r()r1rl rncomc of Its.1,17,17,.{(),9+2.0(1. '['hc cl:t u:r: >r']r'crcd ior lir-nrtccl scrulinv rr.i-tct'caFtcr, thc asscssmcut ( )r'(lcr \\ rr: p:rsscd ()n 21.01.2021 t hcrcbv and u,hcrcur'rdcr tot:Ll lr:s( 5sccl 1nc( )nlc \\'11s quandficd ar

) Its.1.56,93,33:105.00. Pcuuoner has filcd appo.l elatnst thc aft>rcsaicl ord :r o1- assessment bclorc thc ComLrissior'cr , )i [.c, )rlc 'l ax (.\ppeals untler Sccdon 2464 of the i\ct, *,hich ['lowever, in respect of asscssmcrr: i car ]() I E 19, pc ncltrru 1. [;ollorv n1; lhe assessmcnt order, notlcc ()f <llutt:.rr,.l Lnrrlcr Sccririn f .i(r of thc Act clatccl 21.01.2021 u,rs Lr.sLrrii t,, rlrc pctitr()n('r. P :tttroncr submitfed an appLicatlon fOr : t.,t i I lcL-, ,\ ('r-\ oi cicrnand b :forc rcspondent No.1 under Section .]. 16 , ri rhc \ct ,,', hich u as tr licn up akrng with applicatlons [or rl:rr i-or .lhcr drc f r r1lr.,n'rr-r.q or dr:r camc to bc passcd on 1.6.12.21)21'. ASSCSSIllCOt \'( ATS t ( ).\t. pcrrd tlcm: ()11 P \1)It 1 i.e.. I in.t rt.tr lrlIar lt thc ,\sscsstncnt ycar 2018 '19, rs pt'r I lil) I in t.No.404/72/93 ITLC. darcd il.(t lirl-. n11 Frrst appeal, stay against tollcc,,,,1 ,,1 nci bl the Asscssing Officcr can bc griurt.]ri , )nl\ L\'rn(:nt of 20o/o of the demand rarsccl. I I :nc c. rc rr:qucsted to pay 20o/o o[ thc dc manci Lr.rsc l. 0"6 of l{s.69,96,03,180/- i.e., Its l l,9').1 ).',1(r rliately and request for stav o[ -,,,,,'.;,,,r ,rt :e dcmand. .;. l r.611 a pcr:sal 9[ thc impugncd ordcl ciat1,cl l(, l] l( rll. rL rs sccn thlr rt's1 ondent No.1 had follou,ed rnstructi()r); ,ri rrc (-t'rtr'.tl

3 B<>ard of Drrect '['axcs (brieflv '(]BI) t' hcrcinafter) crcrcisc ()f p()wer. \Yhcn tlrc Incomc 'l:rx :ruthorin cxcrciscs tlrrcd 31.07.2017 to thc cflcct that rvhcrc outstrlrrdins dcmand is disputcd bc[crre the appcllatc authorin,, fhc asscsscc has t<., pav 2070 of the disputed demand. Accordingly, pctitioncr has bccn drrected o pat 20oh of thc ourstanding de mand 6. We are afraid rcspondent No.1 did nor rpph his mrnd while passing chc ordcr dated 1,6.1,2.2022. It appcurs ro bc fl mcchanical furisdicuon under Sect-ion 220(6) of thc -\cr, hc cscrctscs quast- iudicial powcrs. While exercising tlursi itrtlici:tl pos'crs, the authoritv is not bound or confined bv dcprrnttcrtt;ll lrr:tructr()ns 'this position has been well se trlcd br rhc :Lrprcrnc (-ourt in \ { Principal Commissioner of Income Tax r'. LG Electronics India Pvt. Ltd.l 2attcr back to rcspondcnt Ntt.1 tirr J)xssrrlg rt ti'csh t,rdcr 8 'l'hat being the position, \\ c :cr :rsiclc' thc ordcr cletccl 16.12.2022 passcd bt' rcsporrdcrrt \r,. I :trttl rcmltncl thc {2O rrJ) r 2 rTR-OL 334 (SC) tn

4 xcc( )r.darrcc r irh [ari aftcr givrnu clr,rc opportur.riti r l rcarirrt, r, rlrt PCtnioncr'. hLs shall lrc donc u,itltin a pcrirrd ol :;t\ lr-onr rhc clar:,rf rcccipt oIa copy ()f this ordcr. litL th.. liirr.cs:rirl .( )6) .r .t k,. pcriocl ()t sl i c( )crcr\'(' stc rs lirr rcalizrng thc outstandirrg clt,n.an,1 for rlrc ilsscs\nrcnt i r ;rr. 2018 19 () \\ nr I)r I 1on is acc()rdingh allt>wcd. [[<,rvt:r,cr. thcrcr shrrll lrt rt() ()fLlcr its t( c()StS \. a s,'gLrcl, r-r-risccllancous pctillons, pcndlna if ,rnr. srrntl c loscr l (06) rvcel<s, respondents are direct:c: n)t r() rlli(, To Sd/.MOHD SI,N AU I.LAH-ANSARI ASSI!iI'ANT REGISTRAR //TRUE COPY// L. St:CTION OFFICER lommissioner/ Assistant Commissioner of ln:c,ne Tax. Circle 'lo. 344, 3rd Floor, lT Towers, AC Guards, Masab fank, 500 084, Telangana. I / Joint / Deputy / Assistant Commissioner of lnconre Tax / lffrcer, , National e-Assessment Center, Neu, [.,elh , Room No cr E-Ramp, Jawaharlal Nehru Stadium, Ne!! lelhi - 1 10 003 Rl A V A SIVA KARTIKEYA, Advocate [OPU::] RI J V PRASAD, (Sr SC FOR INCOME TAX) l,lPtJCl res )py 1 The Deputy 5(1), Room Hyderabad. 2 he Addition€ lncome Tax 401 2nd Flc 3 OneCCtoS 4 OneCC toS 5 Two CD Col 6 One spare c S.A BS BSK

HIGH COI,IRT DATED:31 tO1tZO23 ORDER WP.No.24S,t- of 2021 ALLOWING HE W.P WITHOUT COSTS. B k,i, B R,*1,_1,. .

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