BAREGUNDI JAGADHISHA YEDIYALA vs. THE INCOME TAX OFFICER

WP/12903/2024HC KarnatakaKAHC01027135202423 July 2024Bench: S SUNIL DUTT YADAV6 pages

AI SummaryRemanded

What did the High Court hold?

The High Court held that the order at Annexure-'R' was flawed as it did not properly consider the requirements of an 'unreasonably high pitched demand' and 'genuine hardship' of the assessee. The Court found that merely observing the absence of financial difficulties did not constitute consideration of the ground of genuine hardship. Furthermore, no finding was recorded regarding the 'unreasonably high pitched demand'. Consequently, the order at Annexure-'R' was set aside and the matter was remanded to the Principal Commissioner of Income Tax (Respondent No. 2) for fresh consideration. The petitioner was granted liberty to produce further documents. The Court also directed the Appellate authority to expedite the appeal hearing and lifted the attachment orders (Annexures-'J' to 'M'), while restraining further coercive action until the stay application was reconsidered. All contentions were kept open.

What were the facts?

The petitioner, Baregundi Jagadisha Yediyala, filed a writ petition challenging an order dated 18/09/2023 passed by the Principal Commissioner of Income Tax (Respondent No. 2). This order disposed of the petitioner's stay petition concerning a demand raised by the Income Tax Officer (Respondent No. 1), directing the assessee to pay 20% of the demand while noting an appeal was pending before the Commissioner of Income Tax (Appeals). The petitioner contended that the order was non-speaking and failed to consider whether the demand was 'unreasonably high pitched' or would cause 'genuine hardship', despite the Principal Commissioner noting no financial difficulties. The revenue argued that the petitioner failed to provide necessary documents to demonstrate these grounds.

What were the issues?

1. Whether the order passed by the Principal Commissioner of Income Tax, directing the deposit of 20% of the demand while disposing of a stay petition, adequately considered the grounds of 'unreasonably high pitched demand' and 'genuine hardship' as per applicable circulars and judicial precedents, particularly in light of Section 245D(6A) of the Income Tax Act, 1961 (implied context of stay applications)? Assessee's Contentions: - The order at Annexure-'R' is non-speaking as it failed to consider the grounds of 'unreasonably high pitched demand' and 'genuine hardship'. - The Principal Commissioner noted no financial difficulties but did not address the 'unreasonably high pitched demand' aspect. - Relied on circulars regarding deposit conditions and the High Court's decision in Flipkart India Private Limited v. Assistant Commissioner of Income Tax (W.P.Nos.1339-1342/2017). Revenue's Contentions: - The petitioner failed to furnish necessary documents to demonstrate 'unreasonable high pitched demand' or 'genuine hardship'. - In the absence of such documents, the petitioner cannot assail the order.

Which sections of the Income-tax Act were involved?

245D(6A)

AI-generated summary — verify with the full judgment below

Before: SMT. POORNIMA H.S., ADVOCATE)

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NC: 2024:KHC:28984 WP No. 12903 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF JULY, 2024 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 12903 OF 2024 (T-IT) BETWEEN: BAREGUNDI JAGADHISHA YEDIYALA, S/O DEVRAO PATEL SANYASIGUDDE, ULLOORU ROAD, MOODLKATTE POST, KUNDAPURA TALUK, UDUPI DISTRICT - 576 217. …PETITIONER (BY SRI. VIKRAM HUILGOL, SENIOR ADVOCATE FOR SMT. POORNIMA H.S., ADVOCATE) AND: 1. THE INCOME TAX OFFICER, WARD 1, AAYAKAR BHAVAN, MALPE ROAD, AADIUDUPI, AMBALPADI P.O., UDUPI, KARNATAKA - 576 103. 2. THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, EDC COMPLEX, PATTO-PLAZA, PANAJI, GOA - 403 001. 3. THE COMMISSIONER OF INCOME TAX (APPEALS), ROOM NO. 245-A, NORTH BLOCK, NEW DELHI - 110 001. …RESPONDENTS (BY SRI. THIRUMALESH M., ADVOCATE) Digitally signed by YAMUNA K L Location: High Court of Karnataka

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NC: 2024:KHC:28984 WP No. 12903 of 2024

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER BEARING NO. ITBA/COM/F/17/2023- 24/1056302904(1) DATED 18/09/2023 PASSED BY THE R2 AT ANNEXURE-R DECLARING IT AS NULL AND VOID AND ETC.,

THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S SUNIL DUTT YADAV ORAL ORDER (PER: HON'BLE MR JUSTICE S SUNIL DUTT YADAV)

The petitioner has challenged the order at Annexure-'R', whereby the Principal Commissioner of Income Tax has disposed off the stay petition directing the assessee to pay 20% of the demand raised while taking note that it was a case of appeal pending before the Commissioner of Income Tax (appeals).

Learned Senior Counsel Sri. Vikram Huilgol appearing for the petitioner submits that when the stay application is put up before the Principal Commissioner of Income Tax, is required to dispose off the same insofar as the condition of deposit is concerned by taking note of the circulars and also the law laid down by this Court in the

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NC: 2024:KHC:28984 WP No. 12903 of 2024 case of Flipkart India Private Limited v. Assistant Commissioner of Income Tax in W.P.Nos.1339- 1342/2017. 3. It is submitted that in terms of the applicable circulars regarding condition of deposit, the Principal Commissioner of Income Tax is to examine as to whether the assessment is 'unreasonably high pitched' or where 'genuine hardship is likely to be caused to the assessee'. It is submitted that in terms of the order at Annexure-'R' while Principal Commissioner of Income Tax has clearly stated that there are no financial difficulties in payment of tax, the question of unreasonably high pitched demand was not considered. It is submitted that the order is a non speaking order. 4. Learned counsel appearing for the revenue would submit that the petitioner is required to furnish necessary documents to demonstrate the case of 'unreasonable high pitched demand' or 'genuine hardship' and in the absence of relevant documents placed before

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NC: 2024:KHC:28984 WP No. 12903 of 2024 the Principal Commissioner of Income Tax, petitioner cannot assail such order. 5. After hearing both sides, a perusal of the order at Annexure-'R' would indicate that the finding as regards requirements of unreasonably high pitched demand and genuine hardship of the assessee have not been considered in proper prospective. Mere absence of financial difficulties as observed by the Principal Commissioner of Income Tax by itself does not amount to consideration of the ground of genuine hardship of the assessee, even otherwise we find that there is no finding recorded as regards unreasonably high pitched demand. 6. Accordingly, the order at Annexure-'R' is set aside. Matter is remanded to respondent No.2 for fresh consideration taking note of the applicable circulars including the direction of this Court in the case of Flipkart India Private Limited v. Assistant Commissioner of Income Tax in W.P.No.1339-1342/2017. During such

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NC: 2024:KHC:28984 WP No. 12903 of 2024 consideration, petitioner is at liberty to produce such other documents to make out his case. 7. While noticing that the appeal is still pending consideration, the Appellate authority is permitted to expedite hearing of the appeal. Taking note of the submission made on behalf of the revenue that the attachment has not yielded any funds towards appropriation of funds towards demand, in the peculiar facts of the case, order of attachment would stand lifted and Annexures-'J' to 'M' are set aside while reserving liberty to the Principal Commissioner of Income Tax to pass appropriate orders after reconsidering the contentions in light of setting aside of the order at Annexure-'R'. 8. All contentions are kept open. Needless to state, there would be a direction for not to take further coercive action till the application of stay is reconsidered in light of the observations made above.

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NC: 2024:KHC:28984 WP No. 12903 of 2024 9. I.A.No.3/2024 is allowed. Petitioner is dispensed with production of certified copy of Annexure-R. 10. Accordingly, petition is disposed off. Sd/- (S SUNIL DUTT YADAV) JUDGE MCR

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