Court Orders Reassessment of Stay Petition for 2012-2013 Tax Year

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Case Name:

Rakesh P Sheth vs. Income Tax Commissioner & Anr. (High Court of Madras)

W.P.No.13984 of 2019 and WMP.Nos.14025 & 14027 of 2019

Key Takeaways

- The High Court found the initial order rejecting the stay petition to be cryptic and lacking adherence to established guidelines.

- The case was remanded to the Principal Commissioner of Income Tax for reassessment.

- The court emphasized the need to follow specific parameters and determinants in disposing of stay petitions.

- The reassessment must be completed within four weeks, providing the petitioner an opportunity to present their case.

Issue

Did the Principal Commissioner of Income Tax err in rejecting the stay petition for the 2012-2013 tax year without adhering to established guidelines?

Facts

- The petitioner, Rakesh P Sheth, is an income tax assessee for the 2012-2013 tax year.

- The petitioner filed a stay petition, which was rejected by an order dated 22.09.2017.

- The petitioner argued that the order was cryptic and did not follow the necessary parameters for disposing of such petitions.

- The court referred to a previous order dated 13.02.2019, which laid down specific guidelines for handling stay petitions.

Arguments

- Petitioner:

The impugned order was cryptic and did not adhere to the guidelines established in the court's previous order dated 13.02.2019.

- Respondent:

The respondent acknowledged that the previous order had legal quietus and agreed that the guidelines should be followed.

Key Legal Precedents

- W.P.No.3849 of 2019:

This order laid down the parameters and determinants for disposing of stay petitions, emphasizing the need for a prima facie case, financial stringency, and balance of convenience.

- Commissioner of Income Tax vs. Mahindra Mills (2008) 296 ITR 85 (Mad):

This case highlighted the responsibility of tax officers to assist taxpayers in claiming refunds and reliefs.

Judgement

The High Court set aside the impugned order and remanded the case to the Principal Commissioner of Income Tax for reassessment. The court directed that the reassessment should adhere to the guidelines established in the order dated 13.02.2019 and be completed within four weeks, providing the petitioner an opportunity to be heard.

FAQs

Q1. What was the main issue in this case?

A1. The main issue was whether the Principal Commissioner of Income Tax erred in rejecting the stay petition without following established guidelines.

Q2. What did the court decide?

A2. The court set aside the impugned order and remanded the case for reassessment, emphasizing adherence to specific guidelines.

Q3. What guidelines must be followed in reassessing the stay petition?

A3. The guidelines include considering a prima facie case, financial stringency, and balance of convenience.

Q4. What is the significance of this case?

A4. The case underscores the importance of following established guidelines in disposing of stay petitions and ensuring that taxpayers are given a fair opportunity to present their case.

Q5. What is the timeline for the reassessment?

A5. The reassessment must be completed within four weeks from the date of the court's order.

1. Mr.Nithyaesh Natraj, learned counsel of M/s.Nithiyaesh & Vaibhav [Law Firm] is before this Court on behalf of the sole writ petitioner.

2. Mr.A.N.R.Jayaprathap, learned Junior Standing Counsel for Income Tax accepts notice on behalf of both the respondents.

3. By consent of both the learned counsel, the main writ petition itself is taken up for disposal.

4. The main writ petition itself was heard out, though the matter is listed under the caption 'FOR ADMISSION'. As mentioned supra, this is by consent of both the counsel considering the narrow scope of which the entire writ petition turns.

5. This petitioner is an income tax assessee and the entire writ petition pertains to assessment year 2012-2013.

6. Considering the narrow scope of the writ petition and the stated position of the learned Standing counsel for respondents, it may not be necessary to advert to the facts in great detail.

7. Suffice to say that the petitioner has preferred an appeal before the first respondent and has also taken out a stay petition therein.

8. Stay petition came to be rejected by an order dated 22.09.2017 bearing reference No.6102/PCIT-6/2015-16, which is called in question in the instant writ petition and the same shall therefore be referred to as 'impugned order' for the sake of convenience and clarity.

9. Adverting to the impugned order, learned counsel for petitioner submitted that it is not only cryptic, but it has given a complete go by to the parameters and determinants which have to be taken into account while disposal of stay petition of this nature.

10. Learned counsel for the writ petitioner drew the attention of this Court to an order dated 13.02.2019 of this Court in W.P.No.3849 of 2019 and submitted that in the said order, this Court has laid down the parameters and determinants which have to be taken into account in disposal of such a stay petition. In other words, according to learned counsel for writ petitioner,there is an adumbration of the mode and the manner in which the stay petitions of this nature have to be disposed of. Most relevant paragraphs are paragraphs 12 and 14, which read as follows:

'12. The Circulars and Instruction as extracted above are in the nature of guidelines issued to assist the assessing authorities in the matter of grant of stay and cannot substitute or override the basic tenets to be followed in the consideration and disposal of stay petitions. The existence of a prima facie case for which some illustrations have been provided in the Circulars themselves, the financial stringency faced by an assessee and the balance of convenience in the matter constitute the 'trinity', so to say, and are indispensable in consideration of a stay petition by the authority. The Board has, while stating generally that the assessee shall be called upon to remit 20% of the disputed demand, granted ample discretion to the authority to either increase or decrease the quantum demanded based on the three vital factors to be taken into consideration.

14. The disposal of the request for stay by the petitioner leaves much to be desired. I am of the categoric view that the Assessing Officer ought to have taken note of the conditions precedent for the grant of stay as well as the seeking stay filed by the petitioner is itself cryptic. However, as noted by the Supreme Court in the case of Commissioner of Income Tax vs Mahindra Mills, ((2008) 296 ITR 85 (Mad)) in the context of grant of depreciation, the Circular of the Central Board of Revenue (No.14 (SL-35) of 1995 dated April 11, 1955) requires the officers of the department 'to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs... Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other.....'. Thus, notwithstanding that the assessee may not have specifically invoked the three parameters for the grant of stay, it is incumbent upon the assessing officer to examine the existence of a prima facie case as well as call upon the assessee to demonstrate financial stringency, if any and arrive at the balance of convenience in the matter.'

11. Mr.A.N.R.Jaya Prathap, learned Standing Counsel for Revenue very fairly submitted that the aforesaid order dated 13.02.2019 made in W.P.No.3849 of 2019 has been given legal quietus and there is no appeal against the same. As the Revenue has given legal quietus and finality to the aforesaid order, it follows as a indisputable sequitur that the Revenue has to necessarily follow the parameters laid down in the said order for disposal of stay petition.

12. Before this Court proceeds further, to be fair to the first respondent,it is to be recorded that this Court has noticed that the impugned order was passed on 22.09.2017, whereas the aforesaid order came to be passed by this Court only on 13.02.2019.

13. Be that as it may, as there is no dispute or disagreement that the aforesaid order is operating and the obtaining position with regard to disposal of stay petitions, it follows as a natural sequitur that the impugned order which is cryptic and which does not make any reference to the parameters and determinants adumbrated in the aforesaid order deserves to be set aside.

14. However, the matter is sent back to the Principal Commissioner of Income Tax, Chennai – 600 006 for disposal of the stay petition with regard to assessment year 2012-2013 afresh after affording an opportunity to the writ petitioner and by adhering to the aforesaid order of this Court dated 13.02.2019 made in W.P.No.3849 of 2019.

15. Learned counsel for writ petitioner submits that the main appeal is still pending and this statement is taken on record.

16. To be noted, the first respondent as arrayed in the writ petition reads as follows:

but, the learned counsel for Revenue points out that the appellate authority, who passed the impugned order is the Principal Commissioner of Income Tax, Chennai – 600 006 and the learned counsel for Revenue undertakes to inform the appellate authority concerned about this order under cover of a suitable letter.

17. The appellate authority shall dispose of the aforesaid stay petition within four weeks from today.

18. This writ petition is disposed of with the above observations. Consequently, connected miscellaneous petitions are closed. No costs.

03.06.2019