High Court of Delhi

Tata Teleservices Limited Vs. Commissioner of Income Tax, International Taxation-3 and Ors.

MANU/DE/0928/2022

23.03.2022

Direct Taxation

Pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases

Present writ petition has been filed challenging the orders passed by the Respondents whereby the stay application filed by the Petitioner had been disposed of. The disputed demand of Rs. 42,40,72,259 has arisen from an order passed under section 201(1)/201(1A) of the Income Tax Act, 1961 wherein the Petitioner was held to be an assessee in default for failure to deduct tax at source while making interest payments to China Development Bank ("CDB").

Learned Counsel for the Petitioner submits that, the order passed under Section 201(1)/201(1A) of the Act in itself is manifestly against the plain language of law and was passed without following the principles of natural justice. He further states that, the impugned orders do not deal with the facets of prima facie case, balance of convenience and irreparable harm or injury.

The requirement of payment of twenty percent 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 twenty percent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th February, 2016 gives instances like where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee.

In fact the Supreme Court in the case of PCIT vs. M/s. LG Electronics India Pvt. Ltd. has held that tax authorities are eligible to grant stay on deposit of amounts lesser than twenty percent of the disputed demand in the facts and circumstances of a case.

In the present case, the impugned orders are non-reasoned orders. Neither the Assessing Officer nor the CIT have considered three basic principles i.e. the prima facie case, balance of convenience and irreparable injury while deciding the stay applications.

Consequently, the impugned orders and notices are set aside and the matter is remanded back to the Commissioner of Income Tax for fresh adjudication in the application for stay. Till the stay application filed by the Petitioner is not decided, no coercive action shall be taken by the respondents against the Petitioner in pursuance to the demand arising out of the order dated 08th December, 2021. Petition disposed off.

Tags : Demand Pre-condition Deposit

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