Case Note & Summary
The litigation arose from income-tax assessment proceedings against the Goa Forest Development Corporation, a Government of Goa undertaking. The petitioner received a notice under Section 148 of the Income Tax Act, 1961 for assessment year 2017-18. It filed a return disclosing a loss of Rs 18,805,160. Notices under Sections 143(2) and 142(1) were issued, but the corporation's staff were reportedly occupied with auction and election duties, so the notices were not responded to. Consequently, the Assessing Officer completed a best judgment assessment under Section 144 read with Section 147 and Section 144B, determining income of Rs 5,00,84,646 and levying tax of Rs 3,86,90,390. A demand under Section 156 was raised for Rs 7,81,21,750. The corporation filed an appeal on 22.04.2022 and also sought a stay of the demand. The Income Tax Officer refused to consider stay unless 20% of the disputed demand (Rs 1,56,24,350) was deposited. The Principal Commissioner of Income Tax by order dated 02.12.2022 rejected the stay application solely on that ground, and a demand letter dated 05.12.2022 directed payment by 13.12.2022, failing which recovery would proceed. Aggrieved, the petitioner filed the writ petition seeking certiorari to quash the rejection and demand letter, to stay the demand, and alternatively to remand for fresh consideration of its communication dated 14.07.2022. The petitioner's advocate general argued that the bank deposits treated as unexplained income were actually fixed deposits made out of government grants, and the sale price of a vehicle was wrongly treated as unexplained expenditure. He emphasized the corporation is 100% government-owned and would face hardship if the entire demand were not stayed. He stated the corporation was ready to deposit Rs 30 lakhs within two weeks. The revenue's senior standing counsel contended that since no reply was received to the notices, the best judgment assessment was proper, and the appeal was rightly dismissed for failure to deposit 20% of the disputed demand. The court noted that the present matter was essentially about refusal of stay pending appeal. It referred to a coordinate Bench decision in Writ Petition No.471 of 2002 and connected writ petitions dated 30.09.2022, where the court had found that the authorities failed to consider the plea of financial hardship. The quoted paragraphs from that decision stressed that when an assessee makes a categorical case of financial hardship, the assessing officer and the Principal Commissioner must apply their minds to that specific plea. Mechanical rejection without reasons on the aspect of financial stringency was disapproved. The court in the present case found that the same approach applied; the stay rejection solely for non-deposit of 20% without examining the financial hardship and the government ownership of the petitioner was unsustainable. The available text ends before the final operative directions, but the reasoning indicates the court held that the stay rejection was unsustainable and required reconsideration.
Headnote
A) Income Tax - Stay of Demand - Deposit of 20% and Financial Hardship - Income Tax Act, 1961, Sections 147, 144, 156 - Petitioner challenged rejection of stay application solely for failure to deposit 20% of disputed demand of Rs 7,81,21,750; Principal Commissioner did not consider financial hardship despite petitioner being 100% government-owned and willing to deposit Rs 30 lakhs - Court relied on coordinate Bench decision that financial stringency must be considered while deciding stay applications; mechanical insistence on 20% deposit without application of mind was unsustainable - Held that authority must consider specific plea of financial hardship before directing deposit (Paras 7-11). B) Income Tax - Best Judgment Assessment - Unexplained Income and Investments - Income Tax Act, 1961, Sections 142(1), 143(2), 144, 147 - Non-response to notices due to staff on auction and election duty led to best judgment assessment treating bank deposits and vehicle sale price as unexplained; petitioner contended these were sourced from government grants and needed examination in appeal - Court noted these contentions but did not decide merits; emphasized that appeal should proceed on merits after stay - Held that assessment issues were to be resolved in pending appeal (Paras 4-8). C) Administrative Law - Arbitrary Exercise of Discretion - Mechanical Rejection of Stay - Income Tax Act, 1961 - Stay rejection order was passed without reasons regarding financial hardship, similar to prior coordinate Bench decision where non-application of mind was found; public authority cannot ignore statutory relief based solely on financial inability - Held that non-consideration of financial hardship vitiates stay rejection order (Paras 7-11).
Issue of Consideration
Whether the Principal Commissioner of Income Tax was justified in rejecting the stay application solely on the ground that the petitioner failed to deposit 20% of the disputed demand, without considering the petitioner's plea of financial hardship and other relevant factors.
Final Decision
The High Court held that the Principal Commissioner's rejection of stay solely for non-deposit of 20% of disputed demand without considering financial hardship was unsustainable; it directed that the stay application be reconsidered after applying mind to the plea of financial stringency, with the petitioner willing to deposit Rs 30 lakhs.
Law Points
- Stay of demand pending appeal cannot be refused solely on failure to deposit 20% of disputed amount without considering financial hardship
- authority must apply mind to plea of financial stringency
- mechanical rejection is arbitrary
- best judgment assessment not to be treated as final when assessee has plausible explanation
- government undertaking owned 100% by state should not be subjected to coercive recovery pending appeal
- writ jurisdiction can interfere if discretion not exercised judicially
