Case Note & Summary
The petitioner, Flipkart India Private Limited, challenged three orders: two dated 23.11.2016 passed by the Assistant Commissioner of Income Tax refusing to stay the collection of demand for Assessment Years 2014-15 and 2015-16, directing deposit of 15% of the disputed demand (Rs.3,37,11,514 and Rs.22,92,02,561 respectively), and an order dated 25.1.2016 by the Principal Commissioner of Income Tax confirming the same. The petitioner argued that the orders were arbitrary, passed without considering financial hardship or prima facie case, and contrary to CBDT Instruction No. 96/2016. The respondents contended that the orders were in accordance with the Instruction. The High Court observed that the impugned orders did not consider the petitioner's financial hardship or prima facie case, and were not reasoned orders. The court held that CBDT Instruction No. 96/2016 does not mandate a pre-deposit of 15% as a condition for stay; it requires the Assessing Officer to consider the assessee's financial hardship and prima facie case. The court set aside the impugned orders and directed the respondents to consider the petitioner's application for stay afresh, after hearing the petitioner, and to pass a reasoned order in accordance with law, keeping in view the CBDT Instruction No. 96/2016.
Headnote
A) Income Tax - Stay of Demand - CBDT Instruction No. 96/2016 - Pre-deposit Condition - The Assessing Officer directed the petitioner to deposit 15% of the disputed demand as a condition for stay of recovery. The High Court held that the Instruction does not mandate a pre-deposit of 15% as a condition for stay; rather, it requires the Assessing Officer to consider the assessee's financial hardship and prima facie case. The orders were set aside as they failed to consider these factors and were not reasoned orders. (Paras 1-10)
B) Income Tax - Natural Justice - Reasoned Order - The impugned orders were passed without giving the petitioner an opportunity of being heard and without recording reasons for rejecting the petitioner's contentions. The High Court held that such orders violate principles of natural justice and are liable to be quashed. (Paras 5-10)
C) Income Tax - Section 220(6) - Stay of Recovery - The court directed the respondents to consider the petitioner's application for stay afresh, after hearing the petitioner, and to pass a reasoned order in accordance with law, keeping in view the CBDT Instruction No. 96/2016. (Para 10)
Issue of Consideration
Whether the Assessing Officer and the Principal Commissioner of Income Tax were justified in directing the petitioner to deposit 15% of the disputed demand as a condition for stay of recovery, without considering the petitioner's financial hardship and prima facie case, and whether such orders are in conformity with CBDT Instruction No. 96/2016.
Final Decision
The High Court allowed the writ petitions, set aside the impugned orders dated 23.11.2016 and 25.1.2016, and directed the respondents to consider the petitioner's application for stay afresh, after hearing the petitioner, and to pass a reasoned order in accordance with law, keeping in view the CBDT Instruction No. 96/2016.
Law Points
- CBDT Instruction No. 96/2016
- stay of demand pending appeal
- pre-deposit condition
- prima facie case
- financial hardship
- Section 220(6) of Income Tax Act
- 1961
- natural justice
- reasoned order
Case Details
2017 LawText (KAR) (02) 15
Writ Petition Nos.1339-1342/2017 (T-IT)
Sri K. G. Raghavan, Senior Counsel for Sri Arun Sri Kumar, Advocate (for petitioner); Sri K. V. Aravind, Advocate (for respondents)
Flipkart India Private Limited
The Assistant Commissioner of Income Tax, The Principal Commissioner of Income Tax-3, The Commissioner of Income Tax (Appeals)-3
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Nature of Litigation
Writ petitions under Articles 226 and 227 of the Constitution of India challenging orders refusing stay of collection of income tax demand and directing pre-deposit of 15% of disputed demand.
Remedy Sought
The petitioner sought a writ of certiorari to declare the impugned orders as null and void and to quash them.
Filing Reason
The petitioner challenged the orders dated 23.11.2016 and 25.1.2016 passed by the income tax authorities refusing to stay the collection of demand for Assessment Years 2014-15 and 2015-16 and directing deposit of 15% of the disputed demand.
Previous Decisions
The Assistant Commissioner of Income Tax passed orders dated 23.11.2016 refusing stay and directing deposit of 15% of disputed demand. The Principal Commissioner of Income Tax confirmed the same by order dated 25.1.2016.
Issues
Whether the impugned orders directing pre-deposit of 15% of disputed demand as a condition for stay are in conformity with CBDT Instruction No. 96/2016?
Whether the impugned orders are reasoned orders and consider the petitioner's financial hardship and prima facie case?
Whether the impugned orders violate principles of natural justice?
Submissions/Arguments
The petitioner argued that the impugned orders are arbitrary, passed without considering financial hardship or prima facie case, and contrary to CBDT Instruction No. 96/2016.
The respondents contended that the orders are in accordance with the CBDT Instruction and the petitioner was required to deposit 15% of the disputed demand.
Ratio Decidendi
CBDT Instruction No. 96/2016 does not mandate a pre-deposit of 15% as a condition for stay; it requires the Assessing Officer to consider the assessee's financial hardship and prima facie case. The impugned orders were not reasoned orders and failed to consider these factors, hence they are liable to be set aside.
Judgment Excerpts
The petitioner has challenged the order dated 23.11.2016 (Annexure-A), passed by the Assistant Commissioner of Income Tax, whereby the learned Assistant Commissioner has refused to stay the collection of demand for the Assessment Year 2014-15, and has directed the petitioner to deposit 15% of the disputed demand, amounting to Rs.3,37,11,514/- by 5.12.2016.
The impugned orders do not consider the financial hardship of the petitioner nor do they consider the prima facie case of the petitioner. The orders are not reasoned orders.
The CBDT Instruction No. 96/2016 does not mandate a pre-deposit of 15% as a condition for stay; it requires the Assessing Officer to consider the assessee's financial hardship and prima facie case.
Procedural History
The petitioner filed writ petitions under Articles 226 and 227 of the Constitution of India challenging the orders dated 23.11.2016 passed by the Assistant Commissioner of Income Tax and the order dated 25.1.2016 passed by the Principal Commissioner of Income Tax. The High Court heard the matter and delivered judgment on 23.02.2017.
Acts & Sections
- Income Tax Act, 1961: Section 220(6)
- Constitution of India: Articles 226, 227
