Delhi High Court Dismisses Newsclick's Plea Seeking Stay Of Demand During Pendency Of Appeal Before Commissioner Of Income Tax

The Delhi High Court has recently dismissed a plea moved by news portal Newsclick seeking stay of demand, as per the assessment order of income tax department passed last year, during the pendency of its appeal before the Commissioner of Income Tax (Appeals).

The division bench of Acting Chief Justice Manmohan and Justice Mini Pushkarna upheld two orders passed by the Principal Chief Commissioner of Income Tax which dismissed the news portal's application for stay of demand during the pendency of the appeal.

The court said that the Assessing Officer in the assessment order had given a “number of cogent findings” against Newsclick and had, after analyzing a number of relevant facts, virtually held that the transaction between the news portal and a foreign entity was based on 'reverse engineering'.

“Keeping in view the aforesaid findings, this Court is of the view that the petitioner has not been able to make out a prima facie case in its favour. To put it mildly, the petitioner has a 'lot to answer' in the appeal,” the court observed.

It added: “Undoubtedly, the power vested under Section 220(6) of the Act, 1961 is discretionary and it is not mandatory to pre-deposit 20% of the assessed amount to obtain stay of deposit at the stage of filing the appeal before the Commissioner of Income Tax (Appeals).”

As per Section 220 (6) of the Income Tax Act, an assessee can make an application for stay of his outstanding demand if he has filed an appeal before the Commissioner of Income Tax (Appeal) within 30 days of service of demand notice, requesting the assessing officer for not treating him as assessee in default.

The bench said that Newsclick's plea of financial stringency based on its balance-sheet inspired no confidence, as according to the Assessing Officer, its accounts were not properly maintained.

“Accordingly, the writ petition is dismissed. However, this Court clarifies that the findings given by this Court are only in the context of the present writ proceedings and shall not prejudice either of the parties at the stage of the appellate proceedings,” the court said.

The Assessing Officer had observed that the amount of funds to be received by Newsclick from M/s Justice and Education Fund were “predetermined without any specifications about the services.”

“No prudent businessmen will pay such a handsome amount for creation of content without having any exclusivity to the content for even a bare minimum time. This shows that the action of uploading content on People's Dispatch site is just an smoke-screen to justify the receipt of remittance to create the impression that the receipts are in lieu of services provided,” the Assessing Officer had said.

Newsclick's offices and residences of its officials have been raided by the Enforcement Directorate, the Economic Offences Wing of Delhi Police and the Income Tax Department in the past since 2021. Resultantly, cases have also been registered against the news portal under PMLA and other provisions.

Currently, Newsclick's founder Prabir Purkayastha and Human Resources head Amit Chakraborty are under judicial custody in a UAPA case registered following allegations of the portal receiving money for pro-China propaganda.

NewsClick and Purkayastha had earlier approached the Delhi High Court seeking a copy of the ECIR registered by ED in September 2020 in the money laundering case, which had passed interim orders on June 21, 2021 and July 20 directing the ED not to take any coercive action against the website and its editor in chief.

Subsequently, ED sought vacation of two orders passed by a co-ordinate bench on June 21, 2021 and July 20, 2021.

Counsel for Petitioner: Mr. Devadatt Kamat, Sr. Advocate with Mr. Rohit Sharma, Mr. Nikhil Purohit, Mr. Jatin Lalwani, Mr. Rajesh Inamdar and Mr. Anubhav Kumar, Advocates

Counsel for Respondents: Mr. Abhishek Maratha, Mr. Parth Senwal and Mr. Pratyush, Advocates

Title: PPK NEWSCLICK STUDIO PVT LTD v. PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX CENTRAL DELHI AND ANR.

Citation: 2023 LiveLaw (Del) 1272

Click Here To Read Order