By K. B. Bhujle, Advocate
New Page 2
I. Not reported :
46 Recovery : Stay during pendency of appeal
before CIT(A) : S. 220(6) of Income-tax Act, 1961 : Order on stay application
should be passed by the Assessing Officer and not by a subordinate authority :
In view of CBDT Instruction No. 96, dated 21-8-1969, in case of high pitched
assessment, i.e., where the assessed income is twice or more than
the returned income, assessee would be entitled to an absolute stay of the
demand in the normal course.
[Valvoline Cummins Ltd. v. DCIT and ors. (Del.), WP(C)
2511/2008 dated 20-5-2008]
For the A.Y. 2005-06, the petitioner-company had filed the
return of income computing the income of Rs.7.5 crores. The Additional
Commissioner having jurisdiction to assess the assessee-company assessed the
income at Rs.58.68 crores and raised a demand of Rs.25.01 crores. The assessee-company
preferred an appeal before the CIT(A) and made an application to the Assessing
Officer (the Additional Commissioner) for stay of the demand u/s.220(6) of the
Income-tax Act, 1961 during the pendency of the appeal before the CIT(A). The
Additional Commissioner advised the assessee to approach the Dy. Commissioner
who had concurrent jurisdiction in the matter. Accordingly, the assessee moved
an application on 8-2-2008, requesting the Dy. Commissioner to stay the demand.
When these applications for stay were pending, the assessee was served with a
notice u/s.221 of the Act, dated 14-2-2008 requiring it to show why penalty
should not be levied since the demand of tax has not been deposited by the
assessee. Therefore, the assessee moved another application to the Dy.
Commissioner on 22-2-2008, requesting to stay the demand. On 27-2-2008, the Dy.
Commissioner passed an order directing the assessee to pay 15% of the net
demand; i.e., Rs.3.75 crores on or before 3-3-2008. The assessee pointed
out that Rs.1 crore had already been paid and requested for instalment for the
balance Rs.2.75 crores. Since there was no response, apprehending coercive
action by the Department, the assessee filed a writ petition before the Delhi
High Court.
The Delhi High Court allowed the petition and held :
“(i) Pursuant to the order dated 16-5-2007 read with a few
subsequent letters in this connection, the Commissioner of Income-tax passed a
jurisdiction order dated 1-8-2007, whereby the Additional Commissioner was
entitled to exercise the powers and perform the function of an AO in respect
of some cases (including that of assessee). It is pursuant to these orders
that the Additional Commissioner passed an assessment order on 30-12-2007 in
the case of the assessee. The Additional Commissioner/AO does not become
functus officio immediately on passing an assessment order, he continues
to be the AO in respect of the assessee and therefore he must deal with the
application filed by the assessee u/s.220(6) of the Act.
(ii) The contention of the Revenue is that the Dy.
Commissioner has concurrent jurisdiction over the matter along with the
Additional Commissioner and, therefore, he was fully competent to dispose of
the stay petition filed by the assessee. On the issue of concurrent
jurisdiction, in the case of Berger Paints India Ltd. v. ACIT, 246 ITR
133 (Cal.) the Calcutta High Court had explained the meaning of the expression
concurrent to mean two authorities having equal powers to deal with a
situation, but the same work cannot be divided between them. It appears to us
quite clearly that there is a distinction between concurrent exercise of power
and joint exercise of power; when power has been conferred upon two
authorities concurrently, either one of them can exercise that power and once
a decision is taken to exercise the power by any one of those two authorities,
that exercise must be terminated by that authority only. It is not that one
authority can start exercising a power and the other authority having
concurrent jurisdiction can conclude the exercise of that power. This perhaps
may be permissible in a situation where both the authorities jointly exercise
power, but it certainly is not permissible where both the authorities
concurrently exercise power.
(iii) In the facts of the present case, since the
Additional Commissioner had exercised the power of an AO, he was required to
continue to exercise that power till his jurisdiction in the matter was over.
His jurisdiction in the matter was not over merely on the passing of the
assessment order, but it continued in terms of S. 220(6) of the Act in dealing
with the petition for stay. What has happened in the present case is that
after having passed the assessment order, the Additional Commissioner seems to
have washed his hands off the matter and left it to the Dy. Commissioner to
decide the stay application filed u/s.220(6) of the Act. We are of
the opinion that this was not permissible in law.
(iv) Learned counsel for the Revenue, however, sought to
justify this by referring to an order dated 21-8-2007 passed by the Additional
Commissioner, in which it is stated as follows : For the removal of doubts it
is further clarified that after completion of assessment, the remaining
functions in the cases specified in the Schedule, appended hereto, whether
legal or administrative, shall be discharged by the DCIT, Circle-17(1), New
Delhi in accordance with law. In our opinion, the above paragraph relied upon
by the counsel for the Revenue goes well beyond the power conferred upon the
Additional Commissioner, in the sense that he has virtually abdicated the
power conferred upon him by S. 220(6) of the Act. The power u/s.220(6) of the
Act being a statutory power, the Additional Commissioner could not abdicate or
relinquish it. That apart, we find that the Additional Commissioner had no
authority in law to delegate his power to the Dy. Commissioner when he was
conferred a statutory power by the CBDT. The Principle of delegates non
potest delegare would clearly apply.
(v) Under the circumstances, we are of the opinion that
learned counsel for the assessee is right in his contention that the
application filed by the assessee on 1-2-2008 was required to be dealt with
only by the Assessing Officer, which in this case was the Additional
Commissioner.
vi) Learned counsel for the Revenue submitted that by addressing further letters to the Dy. Commissioner on 8-2-2008 and 22-2-2008, the assessee had acquiesced in the jurisdiction or power of the Dy. Commissioner to deal with the application for stay filed by the assessee. We are of the opinion, and this is well settled, that mere acquiescence in the exercise of power by a person who does not have jurisdiction to exercise that power, cannot work as an estoppel against him. Consequently, the mere fact that the assessee addressed letters dated 8-2-2008 and 22-2-2008 to the Dy. Commissioner does not mean that the Dy, Commissioner had jurisdiction over the matter. The assessee could not confer jurisdiction on the Dy. Commissioner to deal with the application filed u/ s. 220(6) of the Act. Moreover, we also find that the assessee had approached the Dy. Commissioner (apparently) only on the asking of the Additional Commissioner, otherwise the fact still remains that the assessee had made its first request to the Additional Commissioner on 1-2-2008. It was only at the instance of the Ad-ditional Commissioner that the assessee had approached the Dy. Commissioner with the letters dated 8-2-2008 and 22-2-2008. Surely, this cannot be used to the disadvantage of the assessee.
vii) It may be recalled that the returned income of the assessee was Rs.7.2S crores, but the assessed income is Rs.58.68 crores, which is almost 8 times the returned income. CBDT Instruction No. 96, dated 21-8-1969 provides that where the income determined is substantially higher than the returned income, that is, twice the latter amount or more, then the collection of tax in dispute should be held in abeyance till the decision on the appeal is taken. In this case, the assessment is almost 8 times the returned income. Under the circumstances, we are of the view that the assessee would, in normal course, be entitled to an absolute stay of the demand on the basis of the above Instruction.”
