M/S KHODAY ESHWARSA AND SONS vs. DEPUTY COMMISSIONER OF INCOME TAX

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WP/10443/2019HC KarnatakaKAHC01006626201914 March 2019Bench: S.SUJATHA6 pages
AI SummaryRemanded

What did the High Court hold?

The High Court directed respondent No.3 to consider the stay application filed by the petitioner on 15/16.5.2018 and take a decision expeditiously. The Court noted that it was necessary to consider the genuine hardship to the petitioner if directed to pay 20% of the disputed demand, relying on Instruction No.4(B)(b) of the Circular dated 29.2.2016. Given the assessment order was "unreasonably high-pitched" and the appeal was being heard, the assessee needed protection from coercive action until the appellate authority decided the matter. Consequently, respondent No.3 was directed to decide the stay application promptly, and no coercive recovery action was to be initiated by the authorities until such decision was taken. The petitioner was directed to appear before respondent No.3 on 18.3.2019. The issue of the validity of the 20% demand was implicitly addressed by directing consideration of hardship and protection from coercive action.

What were the facts?

The petitioner, M/s Khoday Eshwarsa and Sons, a partnership firm, is challenging an order dated 03.04.2018 passed by the Deputy Commissioner of Income Tax (R-1) for the assessment year 2015-16. The assessment was concluded under Section 143(3) of the Income-Tax Act, 1961, resulting in a demand of Rs. 6,54,00,840/-. The petitioner had filed an appeal before the Commissioner of Income Tax (Appeals)-5 (R-4), which was pending. The petitioner's grievance is that R-1 insisted on payment of 20% of the outstanding demand despite a stay application. This demand was reiterated by R-1 on 03.04.2018 after dismissing the petitioner's stay application. The petitioner's subsequent attempts to obtain a stay from the Additional Commissioner (R-2) and the Principal Commissioner (R-3) were unsuccessful, with R-3 not passing any orders. The writ petition was filed seeking a direction to R-3 to dispose of the stay application expeditiously.

What were the issues?

1. Whether the respondent No.3 is obligated to pass an order on the stay application filed by the petitioner? 2. Whether the demand of 20% of the outstanding demand by the revenue authorities is contrary to the judgment in Flipkart India Private Limited vs. The Assistant Commissioner of Income Tax? Assessee's Contentions: - It was obligatory for respondent No.3 to pass orders on the stay application. - The demand of 20% of the outstanding demand is contrary to the judgment of this court in Flipkart India Private Limited vs. The Assistant Commissioner of Income Tax. - Given the high-pitched assessment, no 20% demand should be made pending the stay application. Revenue's Contentions: - The respondent No.3 may be directed to consider the stay application filed by the petitioner in accordance with law and pass appropriate orders.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF MARCH, 2019 BEFORE: THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No. 10443 OF 2019 (T-IT) BETWEEN:

M/S KHODAY ESHWARSA AND SONS NO.9, KHODAY HOUSE, SESHADRI ROAD GANDHI NAGAR, BENGALURU – 560 009 REPRESENTED BY ITS PARTNER SRI. K. L SWAMY SON OF LATE SRI. K. LAKSHMANSA

... PETITIONER

[BY SRI. A. SHANKAR, SENIOR ADVOCATE SRI. SUKUMAR. S, ADVOCATE]

AND:

1.

DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -5(2)(1),. ROOM NO.316, 3RD FLOOR, BMTC BUILDING 80 FEET ROAD, 6TH BLOCK KORAMANGALA, BENGALURU – 560 095.

2.

THE ADDITIONAL COMMISSIONER OF INCOME TAX, BENGALURU -5(2) 3RD FLOOR, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU – 560 095.

3.

THE PRINCIPAL COMMISSIONER OF INCOME TAX, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU - 560 095.

4.

THE COMMISSIONER OF INCOME TAX (APPEALS)-5, 7TH FLOOR BMTC BUILDING, 80 FEET ROAD,

- 2 - 6TH BLOCK,KORAMANGALA, BENGALURU – 560 095.

…RESPONDENTS

[BY SRI.K.V. ARAVIND, ADVOCATE]

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER PASSED BY THE R-1 VIDE COMMUNICATION DATED 03.04.2018 (ANNEXURE-A) FOR THE ASSESSMENT YEAR 2015-16, PENDING DISPOSAL OF THE APPEAL BY R-4.

THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:-

O R D E R

Learned Counsel Sri K.V.Aravind accepts notice for the respondents.

2.

Though the petitioner has sought for several reliefs in the prayer column of the writ petition, at the time of arguments, the relief is restricted only to prayer-

(f) which reads as follows:

“f) Issue a writ or order in the nature of mandamus or any other writ or order to direct the respondent No.3 to dispose of the stay application filed by the petitioner on 16.5.2018 (Annexure-L) and expeditiously.”

- 3 -

3.

The petitioner is a partnership firm. The assessments were concluded for the assessment year 2015-16 under Section 143(3) of the Income-Tax Act, 1961 (for short, the ‘Act’), against which, an appeal has been preferred before the respondent No.4. It appears, the respondent No.4 has heard the assessee-petitioner on 13.3.2019 and reserved for orders.

4.

It is the grievance of the petitioner that the petitioner had filed an application before the respondent No.1 for stay of collection of demand

of Rs.6,54,00,840/- as per the order under Section 143(3) till the disposal of the appeal. The respondent No.1 insisted the petitioner to pay 20% of the outstanding demand without considering the stay application filed by the petitioner vide communication dated 26.2.2018. It transpires that the petitioner wrote a letter dated 5.3.2018 in response to the said communication by the respondent No.1 and requested to consider the stay

- 4 - application. Respondent No.1 dismissed the application on 3.4.2018 directing the petitioner to pay 20% of the outstanding demand. Aggrieved by the order of the respondent No.1, the petitioner approached the respondent No.2 seeking absolute stay of demand unsuccessfully. Aggrieved by the order of the respondent No.2, the petitioner approached the respondent No.3. However, no orders are passed by the respondent No.3 so far. Hence this writ petition.

5.

The learned counsel for the petitioner would submit that it was obligatory on the part of the respondent No.3 to pass orders on the stay application filed by the petitioner. The demand of 20% of the outstanding demand by the authorities is contrary to the judgment of this court in the case of Flipkart India Private Limited vs. The Assistant Commissioner of Income Tax in Writ Petition Nos.1339-1342/2017. On the highpitched assessment determined by the authorities,

- 5 - no 20% demand could be made pursuant to the stay application filed.

6.

The learned counsel for the Revenue fairly and rightly submits that the respondent No.3 may be directed to consider the stay application filed by the petitioner in accordance with law and pass appropriate orders.

7.

In view of the aforesaid submissions made by the learned counsel for the parties, it is necessary to direct the respondent No.3 to consider the stay application filed by the petitioner on 15/16.5.2018 and take a decision in the matter considering the genuine hardship that would be caused to the petitioner in case the petitioner is directed to pay 20% of the disputed demand placing reliance on Instruction No.4(B)(b) of the Circular dated 29.2.2016. In view of the assessment order being unreasonably highpitched and the matter is

- 6 - heard by the appellate authority, the assessee is required to be protected from coercive action, if any, to be initiated by the Department until a decision is taken by the appellate authority.

8.

Under these circumstances the respondent No.3 is directed to consider the stay application filed by the petitioner on 15/16.5.2018 and take a decision in the matter in an expedite manner keeping in mind the observations made hereinabove. The petitioner shall appear before the respondent No.3 on 18.3.2019 without expecting any notice. No coercive recovery action shall be initiated by the authorities till the decision is taken by the respondent No.3. With the aforesaid observations and directions, the writ petition stands disposed of.

Sd/- JUDGE nv

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