The Delhi High Court bench of Justice Manmohan and Justice Dinesh Kumar Sharma has held that neither the Assessing Officer nor the Principal Commissioners of Income Tax (PCIT) have considered the three basic principles, i.e., the prima facie case, balance of convenience, and irreparable injury, while deciding the stay application.
The petitioner company/assessee filed an application for a stay of demand under Section 220(6) of the Income Tax Act for the assessment years 2013-14 to 2019-20 on the ground that the appeal filed by the petitioner before the CIT (A) against the additions made by the department was pending adjudication. The assessee was under financial stress on account of the COVID-19 pandemic. The accounts of the assessee have been declared as NPA by all the banks due to non-payment of principal instalment and interest to the banks.
The petitioner stated that the department had passed the orders rejecting the plea of the petitioner to stay the demand and directed the petitioner to pay 20% of the total outstanding demand of Rs.37,52,08,576/-. The department has also rejected the stay application filed by the petitioner in a cryptic manner.
The court held that the requirement of payment of 20% of disputed tax demand was not a prerequisite for putting in abeyance recovery of demand pending first appeal in all cases. In appropriate cases, the deposit requirement of 20% of the demand can be waived.
The court set aside the orders and notices and the matter was remanded back to the PCIT for fresh adjudication on the applications for stay. However, before deciding on the stay applications, the PCIT must hold a personal hearing with the petitioner's authorised representative.
The court listed the matter before the PCIT on May 23rd, 2022.
The court has directed the PCIT to pass a reasoned order in accordance with the law.
"It is clarified that till the stay applications filed by the Petitioner are not decided, no coercive action shall be taken by the Respondents against the Petitioner in pursuance to the demands arising out of the orders dated 31st March, 2022 and 13th December, 2021," the court said.
Case Title: Seven Seas Hospitality Private Limited Versus PCIT
Citation: 2022 LiveLaw (Del) 467
Counsel For Petitioner: Advocate Salil Kapoor with Advocate Tarun Chanana
Counsel For Respondent: Senior Standing Counsel Vibhooti Malhotra