Recovery of tax – Stay of demand when assessee in appeal before Commissioner (Appeals) – Discretion of AO to grant stay – CBDT Office Memorandum cannot oust jurisdiction of AO to grant stay – Prima facie case showing high pitched assessment and financial burden on assesse – Stay on condition of deposit of 20% of amount demanded – Not justified

47.  SAMMS Juke Box
vs. ACIT; 409 ITR 33 (Mad); Date of order: 28^th June, 2018 A. Y. 2015-16

Recovery of tax – Stay of demand when assessee in appeal
before Commissioner (Appeals) – Discretion of AO to grant stay – CBDT Office
Memorandum cannot oust jurisdiction of AO to grant stay – Prima facie
case showing high pitched assessment and financial burden on assesse – Stay on
condition of deposit of 20% of amount demanded – Not justified

For the A. Y. 2015-16, the assessee’s assessment was completed u/s.
143(3) of the Act. The assessee had receipts of Rs. 28,05,852/- from Conde Nast
(India) Limited for the year. However, by mistake, M/s. Conde Nast (India)
Limited had deducted excessive TDS and accordingly in Form 26AS the receipts
were shown to be Rs. 6,62,03,927/. The assessee did not claim the excessive
credit of TDS. The assessee also took steps to make the necessary corrections.
However, in the meanwhile, the Assessing Officer completed the assessment on
the basis of the receipts as shown in Form 26AS resulting in high pitched
assessment. The assesse preferred appeal before the Commissioner (Appeals) and
made an application to the Assessing Officer for stay of the demand u/s. 220(6)
during the pendency of the appeal before the Commissioner (Appeals). The
Assessing Officer passed order and directed the assesse to deposit 20 % of the
demand for grant of the stay as per the CBDT Office Memorandum dated
31/07/2017. The assesse filed writ petition and challenged the said order.

The Madras High Court allowed the writ petition, set aside the said
order and held as under:

“i)   Before whatever forum when an
application for interim relief is sought, the authority has to be necessarily
guided by the principles governing the exercise of jurisdiction under Order
XXXIX, rule 1 of the Civil Procedure Code 1908. Thus, the authority while
examining an application for grant of stay should consider whether the
applicant has made out a prima facie case, whether the balance of convenience
is in his favour, and if stay is not granted whether the applicant would be put
to irrepairable hardship.

ii)   Thus, when a statutory
authority exercises power to grant interim relief, he cannot be weighed down by
directives, which leave no room for discretion of the authority. Though the
CBDT’ Office Memorandum dated 31/07/2017 appears to fix a percentage of tax to
be paid for being entitled to an order of stay, it carves an exception in the
very same instruction and this is clear from the Office Memorandum dated
29/02/2016, in paragraph 4(B(b)). Thus, CBDT did not completely oust the
jurisdiction of the Officer, while examining a prayer for stay of the demand of
tax pending appeal.

iii)  The respondent could not have
passed the order without taking note of the assessee’s case and without
considering whether the assesse had made out a prima facie case for grant of
interim relief. The assesse had specifically pointed out its financial position
and the prejudice that was being caused to it on account of the high pitched
assessment. It had specifically pleaded that its income of the year was one
fourth of the tax assessed. This aspect was not dealt with by the respondent,
while passing the order. The order was not valid.

iv)  I find that the information
furnished by the Assessing Officer in the para-wise comments are not contained
in the impugned order. The respondent cannot improve upon the impugned order by
substituting fresh reasons in the form of a counter-affidavit. Thus, the
information furnished to the learned standing counsel for the Revenue would
clearly demonstrate that at the time of passing the impugned order, no such
reasons weighed in the minds of the respondent and therefore, the respondent
cannot justify his order by substituting fresh reasons, after the order is put
to challenge.

v)   In the result, the writ
petition is allowed, the impugned order is set aside and the matter is remanded
to the respondent for fresh consideration and to pass an order on merits and in
accordance with law after affording an opportunity of hearing to the assessee.”