MANGLAWATI SEWA SADAN THROUGH ITS VICE PRESIDENT GAJENDRA SINGH V. THE UNION OF INDIA THROUGH THE COMMISSIONER OF INCOME TAX

WPC/1270/2019

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The case involves Manglawati Sewa Sadan, a charitable trust, challenging the demand for a 20% pre-deposit as a condition for stay on tax demand for the Assessment Year 2016-17. The trust contested the orders from the Income Tax authorities, which mandated the pre-deposit based on an Office Memorandum from the Central Board of Direct Taxes. The trust argued that this condition was arbitrary and not in line with a Supreme Court ruling that allowed for discretion in such matters. Initially, the High Court granted an interim relief requiring a lesser deposit, which the trust complied with. However, following the partial allowance of their appeal by the CIT(Appeals), the High Court found the writ petition to be infructuous and directed the refund of the pre-deposit.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 748226 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 11-01-2023
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax 5 & Ors Vs. M/s. LG Electronics India Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961, India Registration Act, 1908
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: RATNESH SAHAY
• Assessee Lawyers: SUMEET GADODIA; AAKANSHA MITTAL
• Keywords: Assessment Year; Charitable Trust; Garnishee Order; Income Tax; Pre-deposit; Stay of demand
• Section: 143(3); 250; 12AA; 12A; 220

Judgement Text

" IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 1270 of 2019 Manglawati Sewa Sadan, A Trust registered under the India Registration Act, 1908 ....Petitioner Versus 1. The Union of India, through the Commissioner of Income Tax, (Exemption), Patna 2. The Deputy Commissioner of Income Tax, Exemption Circle, Ranchi 3. The Assistant Commissioner of Income Tax, Exemption Circle, Ranchi 4. The Commissioner of Income Tax (Appeal), Jamshedpur ....Respondents --- CORAM: Hon’ble The Acting Chief Justice Hon’ble Mr. Justice Deepak Roshan ---- For the Petitioner : M/s. Sumeet Gadodia, Aakansha Mittal, Advocates For the Respondents: Mr. Ratnesh Nandan Sahay, Sr. S.C ---- 10/11.01.2023 Heard learned counsel for the parties. 2. Writ petition was preferred with the following prayers: (i) For issuance of an appropriate writ/order/direction for quashing/setting aside the order dated 8.02.2019 passed by Respondent no. 2, (Annexure-9) which was received by the petitioner on 20.02.2019, wherein an order has been passed directing the petitioner to make payment of 20% of the disputed demand pertaining to Assessment Year 2016-17 dated 24.12.2018, in terms of Office Memorandum dated 31.7.2017 issued by the Central Board of Direct Taxes (CBDT) and further, it has been stated that after payment of 20% of the demand raised pertaining to Assessment Year, stay of the further demand outstanding against the petitioner would be considered upon merits of the case and extant position of law; (ii) For issuance of further appropriate writ/order/direction including Writ of declaration, declaring that the action of Respondent no. 2 in not adjudicating the application for stay filed by the petitioner under Section 220 of the Income Tax Act, 1961 on its own merit and instead directing the petitioner to make payment of 20% of the disputed demand in terms of Office Memorandum dated 31.7.2017 issued by the Central Board of Direct Taxes as condition precedent for considering the application for stay, is wholly arbitrary and illegal and is contrary to the order dated 20.07.2018 passed by the Hon’ble Supreme Court of India in Civil Appeal No. 6850 of 2018; (iii) For issuance of further appropriate writ/order/direction, including Writ of Mandamus, directing the Respondent no. 2 not to enforce and realize the outstanding demand pursuant to assessment order dated 24.12.2018 passed in respect of Assessment Year 2016-17 during the pendency and adjudication of the appeal filed by the petitioner before the Commissioner of Income Tax (Appeal), Jamshedpur. (iv) For issuance of further appropriate writ/order/direction, including Writ of Mandamus, directing the Respondent no. 4, the Commissioner of Income Tax (Appeal), Jamshedpur to hear and expeditiously dispose 2. off the appeal filed by the petitioner pertaining to Assessment Year 2016-17; (v) For issuance of an appropriate writ/order/direction for quashing/setting aside the order dated 15.03.2019 passed by Respondent No.1, wherein the application filed by the petitioner against the order dated 08.02.2019 passed by the assessing officer has been upheld in most mechanical manner without due application of mind and without giving due opportunity to petitioner. 3. Interim order was passed in the matter on 14th March, 2019 by the Coordinate Bench presided over by the then Hon’ble the Chief Justice, which reads as under: “The writ petitioner is a charitable trust enjoying the benefits under Section 12A and 12AA of the Income-Tax Act, 1961 (in short '1961 Act'). For the assessment year 2016-17 there was scrutiny assessment of the petitioner under Section 143(3) of the 1961 Act and the Assessing Officer found that a sum of Rs. 10,72,68,696/- was income assessable for tax purpose as being not exempted under the aforesaid provision of the 1961 Act. The writ petitioner has already appealed against the assessment order before the Commissioner (Appeals). Pending appeal the writ petitioner had applied for stay of the tax demand under Section 220(6) of the 1961 Act before the Assessing Officer himself. The Assessing Officer however rejected the prayer for stay for non-payment of pre-deposit as stipulated in Office Memorandum bearing No. F.No.404/72/93- ITCC dated 31st July, 2017 read with an earlier Office Memorandum dated 29th February, 2016 on the same subject. 2. Mr. Gadodia, learned counsel for the writ petitioner submits that it was within the jurisdiction of the Assessing Officer to stay the demand on payment of pre-deposit of sum of 20 % of the tax assessed or for a lesser sum upon applying his mind on the merit of the demand but in this case the Assessing Officer has treated the 20 % pre-deposit to be the fixed amount to be deposited. Mr. Gadodia has relied on the order of the Hon'ble Supreme Court passed in Civil Appeal No. 6850 of 2018 (Principal Commissioner of Income Tax 5 & Ors Vs. M/s. LG Electronics India Pvt. Ltd.) dated 20th July, 2018. In this order it has been observed and held:- “Having heard Shri Vikramjit Banerjee, learned ASG appearing on behalf of the appellant, and giving credence to the fact that he has argued before us that the administrative Circular will not operate as a fetter on the Commissioner since it is a quasi judicial authority, we only need to clarify that in all the cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20 %, pending appeal. The appeal is disposed of accordingly.” 3. The immediate grievance of the writ petitioner is a notice in the form of garnishee order served upon the bankers of the petitioner. That notice dated 11th March, 2019 has been issued under Section 226(3) of the Income-Tax Act, 1961 demanding a sum of Rs. 97,70,243/-. On behalf of Tax Authorities it has been submitted that the said sum reflects 20 % of the total tax demand. 4. The petitioner has already applied for review of this order in terms of Office Memorandum dated 29th February, 2016 before the Commissioner (Exemptions). That review petition was sent on 21st February, 2019. Reviewing Authority is in seisin over the issue. So far as the present writ petition is concerned, in our opinion the petitioner should deposit Rs. 20 lakhs without prejudice to the rights and contentions of the parties and on payment of said sum, the garnishee notice shall stand suspended. As the Assessing Officer himself has noted that the writ petitioner has substantial surplus amounting to Rs. 30 crores, we are not separately directing maintaining any security. Let the 3. Reviewing Authority, being the Commissioner (Exemptions), take a decision on the petitioner's application by 5th April, 2019. 5. This matter shall be listed before us on 10th April, 2019. We make it clear that what we have directed is only an interim arrangement and we shall hear out the main matter on the next date of hearing. We also make it clear that the Reviewing Officer shall take his decision on its own merit independent of any observation made in this order. The bank accounts shall be unfrozen upon remitting therefrom the sum of Rs. 20 lakhs to the Income Tax Authorities. 6. I.A. No. 2584 of 2019 stands disposed of in the above terms.” 4. Petitioner deposited Rs. 20 Lakhs in compliance thereof, but the matter did not end there as the Reviewing Authority rejected the review petition of the petitioner vide order dated 15th March, 2019, which was also sought to be challenged through I.A. No. 3189 of 2019. The said amendment was allowed vide order dated 25th November, 2019. Since the Appellate Authority i.e., Commissioner of Income Tax (Appeal) was in seisin of the pending appeal preferred by the petitioner against the order of the Assessing Authority, this Court vide order dated 25th November, 2020, made it clear that it would be open for the appellate authority to proceed and decide the pending appeal, in accordance with law. Thereafter, the matter has been adjourned on a number of dates. 5. Learned counsel for the Respondent-Department was asked to seek specific instruction as to the exact status of the pending appeal before C.I.T(Appeals) vide order dated 7th December, 2022 since sufficient adjournments have already been granted for that purpose. 6. Today, learned counsel for the petitioner has placed the order passed in appeal under Section 250 of Income tax Act, 1961 dated 9th January, 2023 in connection with the instant subject matter, whereby the appeal of the appellant has been partly allowed. 7. Learned counsel for the petitioner, Mr. Sumeet Gadodia submits that in view of the fact that the appeal has been partly allowed, the writ petition has become infructuous. Any pre-deposit made by the petitioner, would be subject to refund, in accordance with the provisions of Section 244A of the Income Tax Act, 1961. Therefore, the writ petition may be disposed of with an observation. 8. Learned counsel for the Respondent-Department also has got some instruction. However, since the appeal has been disposed of on 9th January, 2023, two days back he is also of the opinion that the writ petition has become infructuous and any pre-deposit made by the petitioner could be treated, in 4. accordance with law, in terms of the provisions of Section 244A of the Income Tax Act, 1961. 9. Having regard to the aforesaid development nothing survives to be decided in the writ petition. The writ petition is accordingly disposed of. Petitioner may seek refund of the pre-deposit made, which may be considered in accordance with law. Pending I.As stand disposed of. (Aparesh Kumar Singh, A.C.J) (Deepak Roshan, J) jk/ "