DUMKA CATHOLOIC DIOCESE THROUGH ITS SECRETARY IGNATIUS SOREN V. THE PRINCIPAL COMMISSIONER OF INCOME TAX

WPC/5774/2023

AI Insights

The case involves the Dumka Catholic Diocese, a charitable society, which challenged the recovery proceedings initiated by the Income Tax Department for the Assessment Year 2015-2016. The society contested the assessment order and the subsequent penalty notice issued on 3rd March 2023, arguing that these were unjust and not in accordance with the law. The society had filed a statutory appeal against the assessment order, which was pending. The main legal contention revolved around the stay of recovery proceedings pending the appeal and the jurisdictional validity of the assessment under the amended provisions of the Income Tax Act, 1961. The court's decision focused on balancing the statutory requirements with the principles of justice and reasonableness, particularly in light of the potential serious prejudice to the petitioner.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 747623 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 02-04-2024
• Assessment Year: misc
• Other Referred Cases: Sant Raj & Anr vs O.P. Singla & Anr.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: ANURAG VIJAY; OM PRAKASH; SHIVAM SINGH
• Assessee Lawyers: NITIN PASARI; SHUBHAM CHOUDHARY
• Keywords: Assessment Order; Charitable society; Faceless assessment; Income Tax; Penalty notice; Stay of recovery
• Section: 147; 148; 143(3); 271F; 148A; 139(4C)(e)

Judgement Text

" IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No.5774 of 2023 DUMKA CATHOLOIC DIOCESE, A Charitable Society, registered under the Socities Act, situated at Bishop House, Dudhani, Dumka, through its Secretary, Ignatius Soren, son of Sri Lourence Soren, aged about 32 years, resident of 08, Kharhara, Dumka, P.O. & P.S.- Kharahara, District-Dumka, Jharkhand …….... Petitioner -VERSUS- 1. The Principal Commissioner of Income Tax, Patna having its office at 2nd Floor Birchand Patel Path, Patna, P.O. G.P.O., P.S. Kotwali, District Patna, PIN-800001. 2.The National Faceless Assessment Center represented through Principal Chief Commissioner of Income Tax (NaFAC), having its office at 4th Floor, Mayur Bhawan, Connaught Lane, P.O. & P.S. Connaught Place, New Delhi- 110001. 3. Income Tax Officer, (Exemption), Dhanbad, having his Office at Aayakar Bhawan, Luby Circular Rd, Dhanbad, P.O. & P.S. Circular Road, District- Dhanbad, Jharkhand 826001 …………… Respondents ….... CORAM: HON’BLE THE ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE NAVNEET KUMAR For the Petitioner : Mr. Nitin Kumar Pasari, Advocate Mr. Shubham Choudhary, Advocate For the Respondents : Mr. Anurag Vijay, S.C. (Income Tax) Mr. Om Prakash, Advocate Mr. Shivam Singh, Advocate 2nd April 2024 Per Shree Chandrashekhar, A.C.J. The petitioner-society has made the following prayers: A. “For issuance of an appropriate writ, order or direction, directing upon the Respondents to show cause as to how and under what circumstances, the petitioner is being threatened of recovery proceedings, when admittedly, the stay petition preferred by the petitioner, has been kept pending and is not being decided by the Respondents. B. For issuance of an appropriate writ, order or direction, including Writ of Certiorari, directing the Respondents to take active steps for expeditious disposal of the application for stay of recovery proceedings as also, the appeal preferred by the petitioner, pertaining to Assessment Year 2015- 2016. C. For issuance of an appropriate writ/order/direction, including Writ of Mandamus, directing the Respondents not to enforce and realize the outstanding demand pursuant to assessment order dated 03.03.2023 2 W.P.(T) No. 5774 of 2023 [Annexure-7] and the Notice for Penalty dated 03.03.2023 [Annexure-9], issued under Section 274 read with Section 271F of the Income Tax Act, 1961, in respect of Assessment Year 2015-2016, during the pendency and adjudication of the Appeal filed by Petitioner before the Respondent. IN THE ALTERNATIVE D. For issuance of an appropriate writ/order/direction declaring that any proceedings carried out by the Jurisdictional Assessing Officer purportedly in exercise of powers under the amended provisions of Income Tax Act, 1961, viz. 147, 148, 148A, and orders, if any, is directly in conflict with Notification bearing No. 18/2022 dated 29.03.2022 issued by Central Board of Direct Taxes and as such is beyond jurisdiction; E. Consequently, the Order and Notice dated 03.03.2023 (Annexure-7 & 9) passed by the Jurisdictional Assessing Officer be quashed and set aside and be declared ab-initio-void; F. For issuance of any other appropriate writ(s)/ order(s)/ direction(s) as Your Lordships may deem fit and proper in the facts and circumstances of the case for doing justice to the Petitioners.” 2. The petitioner-society raised a grievance against the assessment order dated 3rd March 2023 which followed the Notice for Penalty on the same day. 3. Aggrieved thereby, the petitioner-society has preferred a statutory appeal filed under section 246A of the Income Tax Act, 1961. 4. By filing a counter affidavit, the Revenue has suggested that the appeal preferred by the petitioner-society shall be disposed of by 30th September 2024. 5. For this statement made by the Revenue, the prayer at clause (B) has been rendered infructuous. Mr. Nitin Kumar Pasari, the learned counsel for the petitioner- society submits that in addition to prayer at clause (B) the declaration sought by the petitioner-society under clause (D) no longer requires to be adjudicated. 6. As this Court gathers from the pleadings of the parties, the declaration that the notice dated 3rd March 2023 was void ab initio can also not be adjudicated; the statutory appeal is pending final adjudication. 7. Therefore, what remains to be adjudicated is the challenge laid to the order dated 11th December 2023 by which the application seeking stay of operation of the Notice for Penalty dated 3rd March 2023 has been declined. 8. In the order dated 11th December 2023, the Income Tax Officer has stated as under: “Disposal of stay petition(s) for recovery proceedings-reg. Kindly refer to the above. With reference to above subject, it is to communicate that your petition for 3 W.P.(T) No. 5774 of 2023 stay of recovery proceeding were perused minutely and it is observed that: 1. Your case for the A.Y-2015-16 has been initiated u/s 147 of the Act after prior approval of the competent authority by the then A.O. on 31.03.2023 on the ground that despite being substantial financial transactions, return of income has not been filed for the impugned year whereas: \"As per the provision of section 10(23C)(v) of the I.T. Act if any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes. [which may be approved by the prescribed authority] having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof, the assessee was liable to file Retum of income for the A.Y- 2015-16 as per section 139(4C) (e) of the I.T.Act, 1961\". 2. Later on, the case was migrated to the National faceless assessment Centre where assessment order was passed with addition of Rs. 23,02,13,864/-based on all compliances made from your side. 3. Aggrieved upon the same you preferred an appeal before the Ld. CIT(A) of National Faceless Appeal Centre. 4. Now, the undersigned would like to draw your kind attention towards the CBDT Office memorandum (OM) dated 31-07-2017, in partial modification of the Instruction No. 1914 dated 21-03-1996, providing guidelines for stay of demand at the first appeal stage. Instruction No. 1914 dated 21.03.1996 contains guidelines issued by the Board regarding the procedure to be followed for recovery of outstanding demand. Thereafter, vide OM No. 404/72/93-ITCC dated 29-02-2016, revised guidelines were issued in partial modification of Instruction No. 1914, wherein interalia, vide para (4A) it had been laid down that in a case where the outstanding demand is disputed before CIT(A), the Assessing Officer shall grant the stay of demand till the disposal of first appeal on payment of 15% of the disputed demand. But the matter has been reviewed by the Board in the light of the feedback received from field authorities. In view of the Board's efforts to contain over pitched assessments through several measures resulting in fairer and more reasonable assessment orders, the standard rate of 15% of the disputed demand was found to be on the lower side. Accordingly, it was decided that the standard rate prescribed in OM dated 29-02-2016 be revised to 20% of the disputed demand, where the demand is contested before the Ld. CIT(A). 5. Thus, as per CBDT's OM dated 31.07.2017 the assessee can be granted the stay of the outstanding demand subject to the payment of 20% of the demand raised for the AY 2015-16 of Rs 14,01,27,406/-. The stay of the remaining demand, after the payment of 20% of the demand, may be granted for a period of 6 months or till the disposal of first appeal by the Ld. CIT(A), whichever is earlier. Also, the remaining demand may be stayed after the payment of 20% of the demand only if there are valid reasons for doing so. Mere filing of an appeal before the CIT(A) against the assessment order will not be sufficient ground and a valid reason for the stay of the recovery of demand. 6. Assessee's kind attention is also drawn towards the Circular issued by the CBDT in File No. 404/10/2009-ITCC dated 01.12.2009 affirming Instruction No. 1914 dated 02-12-1993, which clearly enlightens the duty, responsibility and the guidelines cast on the assessing authority for staying the demand. In this context, it is appropriate to extract the relevant portions of the Instruction No. 1914 dated 02-12-1993 as follows; - \"A. Responsibility: (i) It shall be the responsibility of the AO and the TRO to collect every demand that has been raised, except the following:-  Demand which has not fallen due. 4 W.P.(T) No. 5774 of 2023  Demand which has been stayed by a Court or ITAT or Settlement Commission.  Demand for which a proper proposal for write off has been submitted.  Demand stayed in accordance with the Paras (B) and (C) below B. Stay petitions: (1) Stay petitions filed by the taxpayers with the AOs must be disposed of expeditiously. The assessee must be intimated of the decision without delay. C. Guidelines for staying demand: (i) A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. 7. Further, In the above petition neither any sort of \"undue hardship\" nor insufficient fund has been resorted to for stay of demand. Furthermore, there is sufficient liquidity with the assessee to pay 20% of the outstanding demand raised in assessment year 2015-16 and would not cause a genuine hardship to the assessee. In view of the discussion in the forgoing paragraph, none of the guidelines are applicable in your case for the year under consideration. Thus, the stay petition is being disposed off, with request to make payment of 20% of the demand outstanding in the A.Y. 2015-16 as per CBDT OM dated 31.07.2017. The stay of the demand outstanding, after the payment of 20% of the above demand may be considered depending upon the merit of the case and the extant position of the law, and the other legal and statutory framework. 8. Thus, the stay petition dated 20th April 2023 received through speed post and again the same stay petition received through designation-based E-mail Id ie. [e-mail]. from the Mail Id: [e-mail] dated-24.06.2023 from your end may kindly be treated as disposed off.” 9. In “Sant Raj & Anr vs O.P. Singla & Anr.” (1985)2 SCC 349, the Hon’ble Supreme Court indicated that discretion has to be exercised according to the rules of reason and justice and not according to private opinion. This is an admitted position that under the Income Tax Act, 1961 there is no statutory requirement of pre-deposit but by virtue of Office Memorandum dated 29th February 2016 issued by Central Board of Direct Taxes such a requirement has been made mandatory. A writ Court shall not generally entertain a writ petition intended to avoid the rigors of statutory pre-deposit such as section 19 of the Micro, Small and Medium Enterprises Development (MSMED) Act. This is also quite a well settled proposition in law that by Executive Instruction(s) a statutory provision can be supplemented or the gap can be filled in but no requirement contrary to the statutory law can be made. The petitioner-society has laid specific challenge to the assessment order dated 3rd March 2023 on the ground that the cash deposits in different bank accounts have been duly explained by it. This we 5 W.P.(T) No. 5774 of 2023 have in our mind that the writ Court should not pass such interim orders which may amount to passing of the final order but in a situation like this where serious prejudice may be caused to the petitioner-society exemption from pre-deposit should have been granted by the Income Tax Officer. This is also bearing in our mind that the Income Tax department itself has treated this case as non-priority case and fixed a date for a final decision, which is about 6 months away. 10. Therefore, the order dated 11th December 2023 is set aside and the operation of the Notice for Penalty dated 3rd March 2023 is stayed. 11. The writ petition is allowed, to the aforesaid extent. (Shree Chandrashekhar, A.C.J.) (Navneet Kumar, J.) A.Mohanty "