Delhi High Court: The petition was filed challenging the orders dated 03-11-2023 and 20-02-2023, passed by respondents whereby petitioner’s application for stay of demand during the pendency of the appeal before the Commissioner of Income Tax (Appeals) against the assessment order dated 30-12-2022 had been dismissed. Petitioner further prayed for stay of demand during the pendency of petitioner’s appeal before the Commissioner of Income Tax (Appeals). The Division Bench of Manmohan, ACJ and Mini Pushkarna, J., opined that petitioner was unable to make out a prima facie case in its favour and petitioner had a ‘lot to answer’ in the appeal. The Court thus dismissed the writ petition.
Petitioner submitted that the discretion to stay the demand during the pendency of an appeal must be exercised judiciously and should be based on relevant grounds, with due application of mind, and must not be exercised arbitrarily or capriciously or based on irrelevant considerations. Petitioner further submitted that the impugned orders were arbitrary in nature, were passed mechanically, and suffered from complete non-application of mind. Petitioner also submitted that the impugned order failed to consider that petitioner had a strong prima facie case on merits as petitioner’s Service Agreement with Justice and Education Fund Inc. (‘JEF’), contents supplied, receipts through proper banking channels were all duly disclosed in the ITR and legitimacy of business activity, or expenditure of petitioner were undisputed.
Petitioner submitted that there was no requirement for a pre-deposit for the purposes of granting stay of deposit under Section 220(6) of the Income Tax Act, 1961 (‘the Act’) and relied on CIT v. LG Electronics India (P) Ltd., (2018) 18 SCC 447, wherein the Supreme Court was held that the Office Orders of the CBDT regarding the same were not binding and did not act as a fetter on the discretionary powers vested under Section 220(6) of the Act.
The Court opined that the power vested under Section 220(6) of the Act was discretionary and it was not mandatory to pre-deposit 20% of the assessed amount to obtain stay of deposit at the stage of filing the appeal before the Commissioner of Income Tax (Appeals). The Court noted that the Assessing Officer, after analyzing several facts held, that the transaction between petitioner and the foreign entity was based on ‘reverse engineering’.
The Court opined that petitioner was unable to make out a prima facie case in its favour and petitioner had a ‘lot to answer’ in the appeal. Petitioner’s plea of financial stringency based on its balance sheet inspired no confidence as according to the Assessing Officer the accounts had not been properly maintained. The Court thus dismissed the writ petition and clarified that the findings given by this Court were only in the context of the present writ proceedings and would not prejudice either of the parties at the stage of the appellate proceedings.
[PPK NewsClick Studio Pvt. Ltd. v. CIT, W.P.(C) 15337 of 2023, Order dated 29-11-2023]
Advocates who appeared in this case :
For the Petitioner: Devadatt Kamat, Senior Advocate; Rohit Sharma, Nikhil Purohit, Jatin Lalwani, Rajesh Inamdar, Anubhav Kumar, Advocates
For the Respondent: Abhishek Maratha, Parth Senwal, Pratyush, Advocates
