January 2023
Stay of demand - open to the tax authorities to grant stay against recovery of demand on deposit of a lesser amount than 20 per cent of the disputed demand, pending disposal of appeal
Ajay R. Singh, Advocate
19. Dr. B L Kapur Memorial Hospital vs. CIT (TDS)
W.P.(C) 16287 & 16288 of 2022 (Del)(HC)
Date of order: 25th November, 2022
A.Ys.: 2013-14 and 2014-15
Stay of demand - open to the tax authorities to grant stay against recovery of demand on deposit of a lesser amount than 20 per cent of the disputed demand, pending disposal of appeal
The petitioner/assessee challenged the orders dated 6th September, 2022 and 7th November, 2022, rejecting the applications filed by the petitioner and directing the petitioner to make payment to the extent of 20 per cent of the total tax demand arising u/s 201(1) of the Income Tax Act, 1961, for A.Ys. 2013-14 and 2014-15.
The petitioner states that respondent No. 2 (AO) passed orders dated 30th March, 2021 u/s 201(1)/201(1A) of the Act holding the petitioner to be an ‘assessee-in-default’ for short deduction of tax at source and total tax liability was computed at Rs. 16,47,35,035 and Rs. 20,09,39,099 for A.Ys. 2013-14 and 2014-15, respectively. Aggrieved by the orders, the petitioner filed appeals before CIT(A) along with an application seeking stay on the recovery of demand.
The petitioner states that the respondent No. 2 (AO) passed the orders dated 6th September, 2022, whereby the stay applications filed by the petitioner were dismissed in a non-speaking manner and the petitioner was directed to pay 20 per cent of the disputed demand. The petitioner filed applications dated 20th September, 2022, before respondent No.3 for review of the stay orders dated 6th September, 2022. He, however, states that the impugned orders dated 7th November, 2022 were passed rejecting the stay applications of the petitioner without dealing with the contentions raised by the petitioner.
The petitioner further states that respondents while disposing of the petitioner’s applications have failed to appreciate that the condition under the impugned Office Memorandum dated 31st July, 2017, read with the Office Memorandum dated 29th February, 2016, stating that, “the assessing officer shall grant stay of demand till disposal of the first appeal on payment of twenty per cent of the disputed demand”, is merely directory in nature and not mandatory. In support, it relied on the decision of the Supreme Court in Pr. CIT vs. LG Electronics India (P) Ltd., 303 CTR 649 (SC), wherein it has been held that it is open to the tax authorities, on the facts of individual cases, to grant a stay against the recovery of demand on a deposit of a lesser amount than 20 per cent of the disputed demand, pending disposal of the appeal.
The Hon. Court observed that the requirement of payment of 20 per cent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases. The said pre-condition of deposit of 20 per cent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th Februa
W.P.(C) 16287 & 16288 of 2022 (Del)(HC)
Date of order: 25th November, 2022
A.Ys.: 2013-14 and 2014-15
Stay of demand - open to the tax authorities to grant stay against recovery of demand on deposit of a lesser amount than 20 per cent of the disputed demand, pending disposal of appeal
The petitioner/assessee challenged the orders dated 6th September, 2022 and 7th November, 2022, rejecting the applications filed by the petitioner and directing the petitioner to make payment to the extent of 20 per cent of the total tax demand arising u/s 201(1) of the Income Tax Act, 1961, for A.Ys. 2013-14 and 2014-15.
The petitioner states that respondent No. 2 (AO) passed orders dated 30th March, 2021 u/s 201(1)/201(1A) of the Act holding the petitioner to be an ‘assessee-in-default’ for short deduction of tax at source and total tax liability was computed at Rs. 16,47,35,035 and Rs. 20,09,39,099 for A.Ys. 2013-14 and 2014-15, respectively. Aggrieved by the orders, the petitioner filed appeals before CIT(A) along with an application seeking stay on the recovery of demand.
The petitioner states that the respondent No. 2 (AO) passed the orders dated 6th September, 2022, whereby the stay applications filed by the petitioner were dismissed in a non-speaking manner and the petitioner was directed to pay 20 per cent of the disputed demand. The petitioner filed applications dated 20th September, 2022, before respondent No.3 for review of the stay orders dated 6th September, 2022. He, however, states that the impugned orders dated 7th November, 2022 were passed rejecting the stay applications of the petitioner without dealing with the contentions raised by the petitioner.
The petitioner further states that respondents while disposing of the petitioner’s applications have failed to appreciate that the condition under the impugned Office Memorandum dated 31st July, 2017, read with the Office Memorandum dated 29th February, 2016, stating that, “the assessing officer shall grant stay of demand till disposal of the first appeal on payment of twenty per cent of the disputed demand”, is merely directory in nature and not mandatory. In support, it relied on the decision of the Supreme Court in Pr. CIT vs. LG Electronics India (P) Ltd., 303 CTR 649 (SC), wherein it has been held that it is open to the tax authorities, on the facts of individual cases, to grant a stay against the recovery of demand on a deposit of a lesser amount than 20 per cent of the disputed demand, pending disposal of the appeal.
The Hon. Court observed that the requirement of payment of 20 per cent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases. The said pre-condition of deposit of 20 per cent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th Februa
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