DEEPENDRA SINGH KAVARETI,SEONI V. INCOME TAX OFFICER SEONI, SEONI

SA 1/JAB/2025

AI Insights

The case involves a stay application filed by Mr. Deependra Singh Kavreti against an outstanding tax demand for the Assessment Year 2017-18, which was significantly higher than the income reported in his tax return. The assessee argued that the demand was based on an erroneously high assessment and that the recovery of the disputed amount would cause undue hardship and render the right of appeal meaningless. The Tribunal considered various precedents and the principles of balance of convenience, irreparable loss, and public interest in deciding to grant the stay. The Tribunal also noted that the assessee had not been given adequate opportunity to present his case at earlier stages, which contributed to the decision to stay the demand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774272 (ITAT-JABALPUR)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Stay Application
• Pronouncement Date: 02-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 18-07-2025
• Other Referred Cases: JCT Ltd. vs Income tax Appellate Tribunal, Reuters India (P) Ltd vs DCIT, Soul vs. DCIT, Taneja Developers & Infrastructure Ltd. v ACIT, Valvoline Cummins Ltd vs. DCIT, Mrs. R Mani Goyal vs. CIT, Maruti Suzuki Ltd vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK BHURA
• Assessee Lawyers: PAVAN VED
• Keywords: Right to appeal; Recovery proceedings; Application of stay
• Section: 154

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH “DB”, JABALPUR BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI, NIKHIL CHOUDHARY, ACCOUNTANT MEMBER Stay Application No.1/JAB/2025 (Arising out of ITA No. 210/JAB/2025) Assessment Year: 2017-18 Mr Deependra Singh Kavreti C/o Prop of M/s. Sai Kripa Petrol Pump Ghansor, Dist- Seoni-480661. v. ITO, Seoni Office of the Income Tax Officer Wainganga Height, in front of Abhinandan Restaurant, Bahubali Chowk, Barapathar, Seoni- 480661. TAN/PAN:AQGPK5806L (Appellant) (Respondent) Appellant by: Shri Pavan Ved, Adv Respondent by: Shri Alok Bhura, Sr. DR Date of hearing: 20 08 2025 Date of pronouncement: 02 09 2025 O R D E R PER KUL BHARAT, VICE PRESIDENT.: The Stay Application in SA. No.01/JAB/2025 for Assessment Year 2017-18 filed by the assessee has arisen out of ITA No.210/JAB/2025. By way of this Stay Application, the assessee is seeking for stay of outstanding demand of tax aggregating to Rs1,59,08,925/-, after rectification u/s 154 of the Income Tax Act, 1961 (“Act”, for short). Ld. Counsel for the assessee reiterated the submissions as made in the written submissions, for the sake of clarity, submissions so made are reproduced hereinbelow: - “This is written submission for stay application. For deciding this issue, the principle to be followed is balance of convenience, this principle is FAVOUR OF THE APPLICANT. Printed from counselvise.com S.A No.1/JAB/2025 Page 2 of 9 As submitted above, the Applicant is sanguine that on conclusion of the appeal proceedings, the impugned demand raised by the AO would stand deleted and accordingly, the Applicant requests for a stay on recovery of disputed demand. In view of the above, it is submitted that the balance of convenience obviously lies in favour of the Applicant. In this respect, recovery of the disputed demand would render the valuable right of appeal totally nugatory and meaningless, resulting in undue and genuine hardship to the Applicant. The decision of Hon'ble Delhi High Court in the case of JCT Ltd. vs Income tax Appellate Tribunal [2002] 125 Taxman 855 (Del HC) wherein it has been held as under: - “The principles by which an application for waiver of condition of pre- deposit for entertainment of an appeal under the aforenoted statutes governed is well settled by a catena of decisions of the Supreme Court and High Courts, These are: (a) whether there is a prima facie case in favour of the applicant; (b) the balance of convenience qua deposit or otherwise; (c) irreparable loss, if any, to be caused in case stay is not granted, and (d) safeguarding of public interest. it is trite that while dealing with an application for stay, it is neither desirable nor proper for the Tribunal or any other authority to embark upon a detailed enquiry to find out whether the stand of the applicant is on terra firma, because expression of final opinion on merits at that juncture, without full-fledged hearing and consideration of entire material, fs likely to cause prejudice to either side. But at the same time, the authority concerned is required to consider whether, with reference to the material placed before it a prima facie case for grant of stay is made out or not. Similarly, the Tribunal has to consider whether with reference to the pleadings and the material placed before it to substantiate it undue hardship is likely to be caused to the applicant in case the stay is not granted or when a conditional stay is granted, the conditions imposed are so onerous that the applicant is incapable of complying with the same and, thus, rendering the right of appeal illusory...” We may also here refer to the decision of the Hon'ble Delhi ITAT in the case of Reuters India (P) Ltd vs DCIT (2004) 84 TT] 95 (Delhi), wherein it was held that it would be an undue hardship on the applicant if despite the satisfaction of other parameters like balance of convenience, existence of a prima facie case on merits, it is still required to pay the outstanding tax demand only because it could afford to pay the taxes. The relevant text of the decision from Para 11 is reproduced below: “The judgment of the Madras High Court cited supra supports this plea. The judgment of the Hon’ble Delhi High Court cited supra cannot assist the Revenue since it was not held in that case that no stay shall be granted by the Tribunal merely because the Applicant’s financial position was strong and he could afford to pay the taxes………. In our view there will be undue hardship to the applicant (as against financial hardship) in the sense that if it is directed to pay the entire demand outstanding, despite the satisfaction of the other parameters such as balance of convenience, Printed from counselvise.com S.A No.1/JAB/2025 Page 3 of 9 existence of a prima facie case on merits etc, merely because it can afford to pay the taxes.” A. Recovery of Demand to be kept in abeyance since assessed income is substantially higher than returned income Furthermore, it is worthwhile to draw your kind attention towards the Instruction no. 96 [F no. 1-6-96 (ITCC)] of the Board which states that where the income determined on assessment was substantially higher than the returned income, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision of the appeals. For the year under consideration, the Company has filed its return of income declaring returned loss of Rs. 98,71,60,760/- whereas the assessment was framed at income of 3,53,43,56,141/-. Thus, the total income as per the order framed by the Ld. AO is substantially higher (approximately 5 times). Hence, the case of the Applicant is squarely covered by the said Instruction which has been affirmed by the Hon'ble High Court in the cases of Soul vs. DCIT (220 CTR 210), Taneja Developers & Infrastructure Ltd. v ACIT (222 CTR 521} and Valvaline Cummins Ltd vs. DCIT and others (217 CTR 292). The relevant extracts from the judgment of Saul vs, DCIT is reproduced as under: “Although instruction No. 1914 of 1993 specifically states that it is in supersession of all earlier instructions, the Position after obtaining the decision of this court in the case of Valvoline Cummins Ltd. (supra) is not altered at all. This is so because para No. 2(A) which speaks of responsibility specifically indicates that it shall be the responsibility of the AO and the TRO to collect every demand that has been raised “except the following’, which includes “(d) demand stayed in accordance with the paras B and C below. Para B relates to stay petitions. As extracted above, sub-cl. (iii) of para B clearly indicates that a higher / superior authority could interfere with the decision of the AO /TRO only in exceptional circumstances. The exceptional circumstances have been indicated as where the assessment order appears to be unreasonably high pitched or where genuine hardship Is likely to be caused to the Applicant’. The very question as to what would constitute the assessment order as being reasonably high pitched in consideration under the said Instruction No.96 and, there, it has been noted by way of illustration that assessment at twice the amount of the returned income would amount to being substantially higher or high pitched. In the case before this Court in Valvoline Cummins Ltd.(supra) the Applicant’s income was about eight (8) times the returned income. This Court was of the view that was high pitched. In the present case, the assessed income is approximately 74 times the returned income and obviously, this would fall within the expression “unreasonably high pitched”.” Accordingly, in view of the above judgements of the Hon’ble High Court, the high-pitched demand in the applicant’s case should be automatically stayed keeping in view the judicial discipline and the settled law. The CBDT instruction No. 96 [F. No. 21-8-69 (ITCC)] was taken into cognizance by the Hon'ble Allahabad High Court in the case of Mrs. R Mani Goyal vs. CIT (217 ITR 641) wherein it was observed as follows: Printed from counselvise.com S.A No.1/JAB/2025 Page 4 of 9 “During the pendency of the appeal, it is really a case of great hardship to the Applicant, if the assessed liability of income-tax of Rs. 33,04,450 is sought to be recovered. Learned counsel for the Applicant has invited attention to the circular of the Central Board of Direct Taxes bearing No. 334 (F. No. 400/3/81ITCO) (sic) dated 3-4-1982, which reads as follows: “1. One of the points that came up for consideration in the ®h meeting of the informal Consultative Committee was that income-tax assessments were arbitrarily pitched at high figures and that the collection of disputed demands as a result thereof was also not stayed in spite of the specific provision in the matter in section 220(6). 2. The then Deputy Prime Minister had observed as under:….. where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapse on the part of the Applicant. The Board desires that the above observations may be brought to the notice of all the income-tax Officers working under you and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/Commissioner of income-tax. This circular Is also in consonance with the spirit of the provisions contained in sub-section (6) of section 220 of the Income-tax Act. According to learned counsel for the Applicant, this circular of the Central Board of Direct Taxes becomes applicable to the facts of the present case, as mentioned in paragraph 2 of the writ petition. The Applicant had submitted a return of income declaring total income of Rs. 11,710. The Deputy Commissioner of Income-tax, Special Range, Ghaziabad, did not accept the return and enhanced the income by making several additions and determined the tax at Rs.33,04,450 i.e. more than several times of the return. In such a situation, the applicant cannot be treated to be in default and recovery proceedings before the disposal of the appeal will have to be kept in abeyance. The circular of the Board has desired the Recovery Officers to keep such recoveries in abeyance until disposal of the appeal by the appellate authority. This circular of the Central Board of Direct Taxes was also brought to the notice through an affidavit, the Applicant before the Commissioner (Appeals) at Muzaffarnagar, but no reference in the impugned order of rejection of the stay has been made. Moreover, it is opposed to the principles of good conscience and fair play that the disputed amount of tax is sought to be recovered even though the appeal is pending. It adds to the hardship of the Applicant in such circumstances, in which he is unable to deposit the amount during recovery proceedings. Therefore, it is highly desirable in the interest of justice that if the assessing authority or the appellate authority are not in mood to stay recovery proceedings, even contrary to the circular of the Central Board of Direct Taxes, then they must dispose of the appeal without further delay and without taking any coercive action against the Applicant. For the purposes of disposal of this writ petition, it would be sufficient to say that in case the appeal is expeditiously disposed of, the recovery proceedings should not be pursued till disposal of the appeal’. In light of the above stated legal position, the stay of demand may kindly be granted undoubtedly as in the present case of the applicant, the Ld. AO Printed from counselvise.com S.A No.1/JAB/2025 Page 5 of 9 has assessed the income of the applicant approximately five times than the returned income (loss) which is an undisputed fact as well as the case of the applicant is also strong on prima facie merits of the case as discussed in detail in the preceding paras above. In view of the above legal position regarding granting of stay and principle of balance of convenience, the assessee humbly submits as under: B. Wrong Computation of tax keeping in view the merits of the case. As discussed above, the Ld. AO has wrongly invoked provisions of Sec. 115BBE of the Act (by way of order u/s 154) in case of the applicant and therefore, the correct computation of tax (though not admitted) is as under:- Table-A Particulars Denotes Amount (In Rs.) Tax as per Original Assessed Income A 73,13,119/- as per original assessment order Total demand under sec 115BBE as per 154 order B 1,59,08,925/- Excess Demand erroneously created against binding decision of jurisdictional HC D (B-A) 85,95,806/- This increase is as per 154 order Since sec 115BE is not applicable as per Hon’ble MP HC order, the tax payable remains at Rs.73,13,119/- including interest u/s 234A, B and C Possible reduction in Demand due to mistake in taking bank account deposit figure by LAO in assessment order: - The LAO has made addition on the basis of deposits made in Syndicate bank: Amount of cash deposit taken by LAO in the assessment order Rs.1,48,41,500/- Amount of cash deposit as per bank account copy attached Rs.22,69,600/- Excess amount of Cash deposit taken by LAO in the assessment order Rs.1,25,71,900/- Additional Tax charged (liable to be rectified u/s 154 for apparent mistake) Rs.65,27,399/- Tax as per original assessment order without invoking sec. 115BBE Rs.73,13,119/- Balance tax payable Rs.7,85,720/- Tax already paid as advance tax SA Tax and regular tax Rs.8,16,220/- Thus if apparent mistakes are rectified, the assessment should result in refund. Hence there is prima facie, there is no tax liability but it is a case of strong possibility of refund. Thus prima facie, the assessment is to result in refund if entire deposit in syndicate bank is treated as unexplained. But the deposit is explained from audited books. Hence the refund would be much more. In view of the aforesaid computation, the Ld. AO has erroneously computed excess demand of Rs. 65,27,399/- (As per Table-B) and also excess demand u/s 115BBE of Rs. 85,95,806/- (As per Table-A); which needs to be corrected and should be considered by your honors in deciding the present stay application filed by the applicant. The AO should be Printed from counselvise.com S.A No.1/JAB/2025 Page 6 of 9 directed to recover just demand after correcting apparent mistakes till erroneous demand issue is not settled. The assessee relies on the decision of Hon'ble Delhi HC in the case of Maruzi Suzuki Itd. It was observed in this case as under: “Additions/Amount covered by earlier orders 26. The petitioner has filed calculations and has drawn our attention to a chart summarizing the issues on which additions/ disallowances have been made by the Assessing Officer and has high-lighted that several additions or disallowances have already been decided or adjudicated in favour of the petitioner by the CIT (Appeals) or by the ITAT, as noticed above, this is a relevant factor, while deciding the stay application. We do not agree with the stand of the Revenue that in the present year, assessment order has been passed under Section 144C after reference to the Dispute Resolution Panel, therefore the orders passed by the CIT(Appeals) and ITAT in favour of the petitioner have lost significance and do not justify stay of demand in matters covered in favour of the assessee. Decisions of the CIT (Appeals) or the ITAT in favour of the assessee should not be ignored and have not become inconsequential. This is not a valid or good ground to ignore the decisions of the appellate authorities and is also not a good ground to not to stay demand or to allow adjustment under Section 245 of the Act. Revenue has not made out a good cause or reason why adjustment should allowed to recover demand on issues that have been decided in favour of the petitioner in other years.” In view of the above, demand on the basis of invoking provisions of sec. 15BBE should be totally stayed without stipulation of 20% as the issue is covered in favour of assessee by jurisdictional HC decision in case of Krishna Kumar Verma. Copy in PB. Further demand should not be enforced in respect of additions for which there is apparent mistake from record. The mistake is that deposit by the assessee in the syndicate bank account as per assessment order was Rs. 1,48,41,500/- while in fact as per bank statement filed by the assessee and is part of PB, the deposit is only Rs. 22,69,600/- hence demand attributable to mistake by LAO should not be allowed to be enforced. PRAYER 1. That the stay of demand be granted in respect of the entire demand of Rs. 1,59,08,925/- raised by the Ld. AO till the disposal of the appeal before this Hon’ble ITAT and for a period of 60 days thereafter; 2. That the Ld. AO be directed not to adjust demand of the instant year against the refund due to the Applicant in any of the previous and subsequent assessment years; 3. That the Ld. AO be directed not to initiate any recovery proceedings pending disposal of this application. Reliance is placed on the Bombay High Court decision in the case of Mahindra and Mahindra Ltd (59 ELT 505) in which it is held that no recovery proceedings should be initiated pending disposal of the stay petition; 4. That the Ld. AO or their subordinates or their successors be restrained from taking any action as regards recovery of tax, interest and penalty levied or leviable for the relevant assessment year. Printed from counselvise.com S.A No.1/JAB/2025 Page 7 of 9 5. That the attachment of bank accounts of the appellant be ordered to be vacated with immediate effect. 6. That the appellant be given option to give suitable security to LAO to his satisfaction to the extent of 20% of remaining demand; instead of payment of 20% of demand; as held by Hon'ble cochin bench in the case of KK Builders. Copy enclosed. 7. That any other relief which the Honorable members may deem fit and proper in the nature and circumstances of the case.” 2. The contention of the Ld. Counsel for the assessee is that the assessee has strong prima facie case and is sanguine of success. It is further stated that the bank accounts of the assessee have been attached, thus, the action of Revenue is patently illegal and excessive. It is stated that the assessee is running a Petrol-Pump, hence, during the period of demonetization, the sale of the petroleum products increased since the Government allowed such transaction in demonetized currency. The Assessing Officer has not pointed out any discrepancy in the books of accounts. Further, he contended that the Assessing Officer passed ex parte order without giving adequate opportunity to the assesee to explain his bank accounts and before the Ld. CIT(A) also there was no effective representation on behalf of the assessee. Thus, he prayed that the impugned tax demand may be stayed and hearing of appeal be fixed out of turn basis. 3. The Ld. Departmental Representative for the Revenue opposed the submissions and contended that the assessee may be directed to deposit the outstanding demand of Rs1,59,08,925/-. He contended that there is no prima facie case, hence, the stay application deserves to be dismissed. 4. Heard the Ld. Representatives of the parties. Having considered the material available on records, the assessee had no occasion to explain his case before the lower authorities. It is the Printed from counselvise.com S.A No.1/JAB/2025 Page 8 of 9 case of the assessee that the amount deposited in the bank accounts is related to the sales of the assessee who is running a Petrol Pump and the purchases and sales are verifiable from the accounts of the assessee. Moreover, the stocks are controlled by the Government Company. Therefore, the assessee cannot inflate for any sales or purchases since everything remains recorded and well documented. Further, it is stated that due to inadequacy of opportunity, the correct facts could not be placed before the lower authorities and the same were not appreciated. Consequently, there is miscarriage of justice. Looking to these facts, we are of the view that the assessee has prima facie strong case. Therefore, in the interest of justice, we hereby stay the outstanding tax demand subject to the condition that the assessee would furnish the suitable security to the satisfaction of the Assessing Authority equivalent to the 20% of remaining outstanding demand. The application of the assessee is disposed of in the terms indicated hereinbefore. Further, registry is directed to fix the appeal as requested by the assessee on out-of- turn basis on 17th Sep, 2025 for physical hearing before the Bench. 5. In the result, the Stay Application No. 1/JAB/2025 in ITA. No.210/JAB/2025 of the assessee is allowed Order pronounced in the open Court on 02/09/2025. Sd/- Sd/- [NIKHIL CHOUDHARY] [KUL BHARAT] ACCOUNTANT MEMBER VICE PRESIDENT DATED: 02/09/2025 Vijay Pal Singh, (Sr. PS) Printed from counselvise.com S.A No.1/JAB/2025 Page 9 of 9 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT (Judicial) 4. The PCIT 5. DR, ITAT, Jabalpur 6. Guard File By order // True Copy// Assistant Registrar ITAT, Jabalpur Printed from counselvise.com "