When assessment order is not final, assessee can file stay petition before Appellate Authority

To delve deeper, you can read the original judgement of the court order here.

Case Name:

Archit Khemka Vs Principal Commissioner of Income Tax And Ors.(High Court of Madras)

W.P.No.33800 of 2018

Key Takeaways:

1. When the assessment order has not reached finality, the assessee has the right to file a stay petition before the Appellate Authority (CIT(A)).

2. The Appellate Authority must consider the stay petition on its merits and in accordance with the law.

3. Until the Appellate Authority decides on the stay petition, no coercive action can be taken against the assessee.

Issue:

Whether the assessee is entitled to file a stay petition before the Appellate Authority when the assessment order has not reached its finality.

Facts:

- The Assessing Officer passed an assessment order under Section 143(3) (of Income Tax Act, 1961) for the assessment year 2012-13.

- The assessee filed an appeal against the assessment order before the CIT(A), which was pending.

- The assessee also filed a stay petition before the Assessing Officer, who directed the assessee to pay 15% of the tax demand.

- The assessee then filed a stay petition before the Principal Commissioner of Income Tax, who rejected it in a single-line order.

- The assessee filed a writ petition before the High Court challenging the order of the Principal Commissioner.

Arguments:

- The assessee argued that since the appeal against the assessment order was pending, the assessee was entitled to file a stay petition before the Appellate Authority (CIT(A)) and present all points in support of the stay

- The respondents argued that since the assessee did not file a stay petition before the Appellate Authority and failed to pay 15% of the tax demand, the order of the Principal Commissioner rejecting the stay petition could not be faulted.

Key Legal Precedents:

- The High Court relied on its previous judgment in W.P.No.5794 of 2018 dated 05.04.2018, where a similar view was expressed.

Judgement:

- The High Court held that since the assessment order had not reached its finality, the assessee was entitled to file a stay petition before the Appellate Authority (CIT(A)) and present all points in support of the stay.

- The High Court set aside the order of the Principal Commissioner and directed the assessee to file a stay petition before the CIT(A) within two weeks.

- The High Court further directed the CIT(A) to take up the stay petition and dispose of it on the merits and in accordance with the law within four weeks.

- Until the Appellate Authority decides on the stay petition, no coercive action shall be taken against the assessee.

FAQs:

Q1: What is the key legal principle established in this case?**

A1: The key legal principle established in this case is that when the assessment order has not reached its finality, the assessee is entitled to file a stay petition before the Appellate Authority (CIT(A)) and present all points in support of the stay.

Q2: Can the Assessing Officer take coercive action against the assessee while the stay petition is pending before the Appellate Authority?

A2: No, the High Court has directed that until the Appellate Authority decides on the stay petition, no coercive action shall be taken against the assessee

Q3: What is the timeline for the Appellate Authority to decide on the stay petition?

A3: The High Court has directed the CIT(A) to take up the stay petition and dispose of it on the merits and in accordance with the law within four weeks.

Q4: Can the assessee file the stay petition directly before the Appellate Authority (CIT(A))?

A4: Yes, the High Court has directed the assessee to file the stay petition directly before the CIT(A), where the appeal is pending, instead of approaching the Principal Commissioner.

1. Mr.Naveen Durai Babu, learned Standing Counsel takes notice for the respondents. By consent, this writ petition is taken up for final disposal at the stage of admission itself.

2. The petitioner is aggrieved against the order of the first respondent dated 05.12.2018, in rejecting the assessee's application dated 09.11.2018, seeking for stay of demand of disputed taxes till the disposal of the appeal by the CIT (A)-1.

3. Heard Mr.R.Sivaraman, learned counsel appearing for the petitioner and Mr.Naveen Durai Babu, learned Standing Counsel appearing for the respondents.

4.The second respondent/ Assessing Officer passed an order of assessment under Section 143(3) (of Income Tax Act, 1961), 1961 on 26.03.2015, in respect of the assessment year 2012-13. Aggrieved over the said order, the petitioner preferred an appeal before the 3rd respondent on 07.04.2015. The petitioner also filed the stay petition before the second respondent/Assessing Officer on 06.05.2015, seeking to stay the recovery of the disputed tax demand till the disposal of the appeal before the third respondent. The second respondent, however passed an order on 22.02.2017, calling upon the petitioner to pay 15% of the tax demand. Thus, the petitioner preferred an application before the first respondent seeking for stay of demand of entire disputed tax. The first respondent, however rejected the application by a single line order stating "Petition rejected. AO to collect eligible demand." Hence, the present writ petition is filed before this Court.

5.The learned counsel for the petitioner contended that when the appeal filed against the order of the assessment is still pending before the third respondent/Appellate Authority, the order of the first respondent in rejecting the stay petition, that too, with a further direction to the Assessing Officer to collect the demand, is totally unreasonable and unjustifiable. He further contended that under similar circumstances, in an order made in W.P.No.5794 of 2018 dated 05.04.2018, this Court set aside the order passed by the Principal Commissioner of Income Tax and permitting the assessee to file a stay petition before the Appellate Authority.

6.The learned Standing Counsel appearing for the respondents submitted that since the petitioner has not filed any stay petition before the Appellate Authority and failed to pay 15% of the tax liability as demanded by the Assessing Officer, the order of the Principal Commissioner cannot be found fault with.

7.It is seen that as against the order of assessment, the petitioner has filed an appeal before the CIT (A) and the same is pending. Therefore, it is evident that the order of assessment has not reached its finality. Needless to say that the petitioner is entitled to file stay petition before the Appellate Authority and canvas all the points in support of their stay petition. The similar view is expressed by the learned Judge of this Court in W.P.No.5794 of 2018 dated 05.04.2018. However, in this case, they have gone before the Principal Commissioner viz., the first respondent herein and sought for stay, who unfortunately rejected the petition by a single line order, without stating any reason or finding as to why the application is liable to be rejected. Therefore, I find that the said order of the first respondent cannot be sustained. However, this Court is not inclined to remit the matter back to the first respondent for considering the petition once again, since the petitioner is entitled to file such stay petition before the Commissioner of Income Tax (Appeal) himself, where the appeal is admittedly pending.

7.Accordingly, this writ petition is allowed and the impugned order is set aside. Consequently, the petitioner is directed to file a stay petition before the Commissioner of Income Tax (Appeals) in the pending appeal within a period of two weeks from the date of receipt of a copy of this order. If any such application is filed, the CIT (A) shall take up the same and dispose at first instance on merits and in accordance with law within a period of four weeks thereafter. Till such decision is taken by the Appellate Authority, no coercive action shall be taken against the petitioner. No costs. Consequently, the connected miscellaneous petitions are closed.

Sd/-

Assistant Registrar