BEST LABORATORIES PVT. LTD. vs. PR. COMMISSIONER OF INCOME TAX- 1 & ORS.

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W.P.(C)/3757/2024HC DelhiDLHC01012866202413 March 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV4 pages
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What did the High Court hold?

The Delhi High Court allowed the writ petitions, quashing the impugned order dated January 15, 2024. The Court found that both the Principal Commissioner of Income Tax (PCIT) and the Assessing Officer (AO) failed to record any cogent reasons while disposing of the applications for stay of demand. The Court relied on the Supreme Court's judgment in Commissioner of Income Tax vs. LG Electronics India (P) Ltd., which emphasized that authorities have the discretion to grant deposit orders of a lesser amount pending appeal, implying a requirement for reasoned decisions. The matters were remitted to the PCIT to consider the applications for stay afresh and in accordance with law. The Court made no observations regarding pending applications under Section 154 of the Act, leaving it open for the petitioner to pursue them independently.

What were the facts?

The petitioner, Best Laboratories Pvt. Ltd., filed two writ petitions before the Delhi High Court challenging orders related to the stay of demand for a total disputed demand of Rs. 7,47,30,070/-. The Assessing Officer (AO) rejected the petitioner's application for a stay on recovery, directing a deposit of 20% of the outstanding demand. Subsequently, the Principal Commissioner of Income Tax (PCIT) disposed of the petitioner's application for stay, noting that Rs. 21,57,000/- had already been collected through bank attachment. The PCIT directed the petitioner to deposit Rs. 10 lacs per quarter until the disposal of the first appeal or September 30, 2024, whichever was earlier, to get the balance demand stayed. The petitioner argued that both the AO and PCIT failed to record cogent reasons for their orders.

What were the issues?

1. Whether the orders passed by the Assessing Officer and the Principal Commissioner of Income Tax, rejecting the application for stay of demand without recording cogent reasons, are sustainable in law, particularly in light of the Supreme Court's decision in Commissioner of Income Tax vs. LG Electronics India (P) Ltd. (Section 220(6) of the Income Tax Act, 1961)? Assessee's Contentions: The petitioner argued that both the AO and the PCIT failed to record any cogent reasons while disposing of the applications for stay of demand. They relied on the Supreme Court judgment in Commissioner of Income Tax vs. LG Electronics India (P) Ltd., which clarified that authorities can grant deposit orders of a lesser amount than 20% pending appeal, implying a need for reasoned orders. Revenue's Contentions: The judgment does not record specific contentions from the revenue regarding the reasoning for the orders passed by the AO and PCIT. However, the orders themselves indicate a reliance on CBDT instructions and a requirement for a 20% deposit.

Which sections of the Income-tax Act were involved?

Section 220(6),Section 220(4),Section 220(2),Section 154

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

W.P.(C) 3757/2024
W.P.(C) 3758/2024

Read from the judgment's own cause title. This page is filed under one of them.

$~120 & 121 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 3757/2024 & CM APPL 15447/2024

BEST LABORATORIES PVT. LTD. ..... Petitioner

Through: Mr. V.P. Gupta and Mr.Anunav

Kumar, Advocates

Versus

PR. COMMISSIONER OF INCOME TAX- 1 & ORS. ..... Respondents

Through: Mr. Sanjay Kumar, Ms. Easha

and Ms. Hemlata Rawat,

Advocates 121

+ W.P.(C) 3758/2024 & CM APPL 15451/2024

BEST LABORATORIES PVT. LTD. ..... Petitioner

Through: Mr. V.P. Gupta and Mr.Anunav

Kumar, Advocates

Versus

PR. COMMISSIONER OF INCOME TAX- 1 & ORS. ..... Respondents

Through: Mr. Sanjay Kumar, Ms. Easha

and Ms. Hemlata Rawat,

Advocates

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

13.03.2024

1.

These writ petitions have been preferred seeking the following reliefs:- “a) direct the respondents to stay the complete demand of Rs.7,47,30,070/- wrongly raised in the case of the Petitioner Company and also to rectify the mistakes in the intimation dated 13.11.2022 and / or to decide the appeal pending before Respondent No.3

b) issue Writ of prohibition or any other order or direction restraining Respondent No.2 to proceed further to recover / demand any amount from the Petitioner Company pursuant to order of This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/03/2024 at 11:36:36

Respondent No.1 Dated 15.01.2024 during pendency of this Writ Petition before this Hon’ble Court;

c) direct the Respondent No.2 to refund the amount of Rs.21,57,000/- unreasonably withdrawn from the bank account of Petitioner Company by way of bank attachment;

d) issue ex-parte ad-interim directions in terms of prayers (a) to (d) hereinabove; and

e) issue such further order or direction as may be deemed fit so as to afford complete relief to the Petitioner.”

2.

The petitioner is principally aggrieved by the disposal of its applications purporting to be under Section 220(6) of the Income Tax Act, 1961[“Act”]. 3. The record would reflect that by an order of 2 January 2024, the Assessing Officer [“AO”] had rejected the application for stay on recovery of demand and required the petitioner to deposit 20% of the outstanding demand in the following terms: - “Please refer to your petition for stay of demand dated 29.12.2023 on the above mentioned subject. Please refer to CBDT instruction through its office Memorandum F. No. 404/72/93-ITCC dated 29.02.2016 & 31.07.2017 also.

In this regard, it is informed that your petition of stay of demand is rejected due to non-fulfillment of conditions as mandated by above referred instructions issued by CBDT. Further, you are directed to immediately deposit 20% of the total demand. The evidence of payment may be furnished to the office of the undersigned within 10 days of issuance of this letter. The balance demand shall be stayed on production of challan payment of the 20% demand, failing which coercive action shall be taken for recovery of whole demand.”

4.

Dissatisfied by the order so made, the petitioner approached the Principal Commissioner of Income Tax [“PCIT”] who has proceeded to dispose of its prayer of the disputed demand being placed in abeyance in the following terms:- “2. The assessee filed an application dated 03.01.2024 for stay of demand before this office. In this regard, an opportunity of being This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/03/2024 at 11:36:36

heard was allowed to the assessee vide this office notice dated 08.01.2024 issued vide DIN & Letter No. ITBA/COM/F/17/2023- 24/1059488130(1). The case was fixed for 10.01.2024. In response thereto, Sh. Anunav Kumar, CA along with Sh. S.P. Singh, Director attended on 10.01.2024. A demand of Rs. 21,57,000/- is already collected through bank attachment. In this context, the assessee was directed to deposit 10 lacs in each quarter, beginning 1st April 2024 till disposal of first appeal or 30.09.2024 whichever is earlier.

3.

Accordingly, the assessee's petition is disposed off, once the assessee makes the payment of the above installments the demand will be stayed till disposal of the first appeal or 30.09.2024, whichever is earlier.

4.

However, if the above mentioned sum is not paid as per the schedule given above, the assessee company would be treated as an assessee deemed to be in default u/s 220(4) of the IT Act, 1961 and suitable action will be taken as per the provision of the IT Act and Rules in this regard. For removal of doubts, it is clarified that this order will not affect chargeability of interest u/s 220(2) of the Act.”

5.

As is ex facie evident, the PCIT as well as the AO have failed to record any cogent reasons while disposing of the application for stay of demand. 6. The aforesaid view will also not sustain in light of the judgment rendered by the Supreme Court in Commissioner of Income Tax vs. LG Electronics India (P) Ltd. [(2018) 18 SCC 447]. While dealing with the aforesaid issue the Supreme Court has held as under:- “2. Having heard Shri Vikramjit Banerjee, learned ASG appearing on behalf of the appellant, and giving credence to the fact that he has argued before us that the administrative circular will not operate as a fetter on the Commissioner since it is a quasi-judicial authority, we only need to clarify that in all cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal.”

Bearing in mind the aforesaid, we find ourselves unable to sustain the order impugned. 7. The writ petitions are accordingly allowed. The impugned order dated 15 January 2024 are hereby quashed. The matters shall stand This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/03/2024 at 11:36:36

remitted to the PCIT who shall consider the applications for stay afresh and in accordance with law. 8. Insofar as the pending applications under Section 154 of the Act are concerned, we render no observation and leave it open to the writ petitioner to pursue the same independently.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J.

MARCH 13, 2024 p’ma This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/03/2024 at 11:36:36

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