MATHAMSETTI NAGA VEERA VENKATA SATYANARAYANA MURTHY V. THE Pr COMMISSIONER OF INCOME TAX

WP/5110/2025

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The case involves Mathamsetti Naga Veera Venkata Satyanarayana Murthy, the petitioner, challenging an order from the Principal Commissioner of Income Tax, Visakhapatnam-1, which required the petitioner to pay 10% of an outstanding tax demand in eight installments as a condition for stay. The petitioner argued that the reassessment order lacked jurisdiction and was contrary to CBDT guidelines. The Income Tax Department countered that the petitioner had made substantial cash deposits without adequate explanation, justifying the tax demand. The High Court of Andhra Pradesh at Amaravati, after considering the submissions and the conduct of the petitioner, decided to remand the matter for a detailed examination by the appellate authority, emphasizing the need for the petitioner to comply with procedural requirements and financial obligations under the tax laws.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 747266 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 08-04-2025
• Assessment Year: misc
• Other Referred Cases: Kankanala Ravindra Reddy Vs. Income Tax Officer, Ward No.1, Income Tax Office, Nalgonda District & batch, Principal Commissioner of Income Tax and others Vs. LG Electronics India Private Limited, M/s. Prestige Lights Ltd., Vs. State Bank of India, Ibiza Industries Ltd. and another vs. Union of India and others, Rex v. Kensington Income Tax Commissioners, Princess Edmond De Polignac, exparte
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: ANUP KARAVADI
• Assessee Lawyers: VENKATARAM MANTUR
• Keywords: Assessment; Faceless assessment; Income Tax; Stay order; Unexplained cash deposit; Writ petition
• Section: 147; 148; 142(1); 143(2); 133(6); 69A; 226(3)

Judgement Text

"APHC010098762025 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3526] TUESDAY, THE EIGHTH DAY OF APRIL TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE NINALA JAYASURYA AND THE HONOURABLE SRI JUSTICE TARLADA RAJASEKHAR RAO WRIT PETITION No: 5110 of 2025 Between: Mathamsetti Naga Veera Venkata Satyanarayana Murthy ...PETITIONER AND The Pr Commissioner Of Income Tax and Others ...RESPONDENT(S) Counsel for the Petitioner: 1. VENKATRAM REDDY MANTUR Counsel for the Respondent(S): 1. ANUP KOUSHIK KARAVADI The Court made the following: 2 ORDER: (Per Hon’ble Sri Justice Tarlada Rajasekhar Rao) The present Writ Petition is filed to declare the order passed by the 1st respondent, i.e., the Principal Commissioner of Income Tax, Visakhapatnam-1, vide Document Identification Number (DIN)- ITBA/COM/F/17/2024-25/1073125648(1), dated 11.02.2025, wherein the Principal Commissioner of Income Tax has granted stay on condition that the assessee shall pay 10% of the outstanding demand (Rs.1,51,79,752/-) in eight equal instalments, as it is bad in law, contrary to the provisions of the statute and, consequently, prayed to set aside the same, since the re-assessment order through which demand was raised itself lacks jurisdiction and the said order is against CBDT guidelines and instructions dated 22.03.2024 passed by the 3rd respondent, i.e., Assessment Unit, Income Tax Department, National Faceless Assessment Centre, Delhi-110003. 2. The case of the assessee was reopened under Section 147 of the Income Tax Act (for short, „the IT Act‟) and a notice under Section 148 of the IT Act was caused (issued) to the assessee on 07.04.2022. In response to the said notice, the assessee has filed the return of income on 07.05.2022 admitting total income of Rs.7,53,840/-. Subsequently, notices under Sections 143(2) and 142(1) of the IT Act were issued to the assessee. On receipt of the response to the notices issued under Section 133(6) of the IT Act, the Assessing Officer has ascertained the cash deposits of Rs.27,00,000/- and Rs.87,13,000/- in bank account maintained by the assessee in Bank of Baroda. After ascertaining the cash deposit, the Assessing Officer issued a show cause notice proposing addition of Rs.1,14,13,000/- as cash receipt of the business 3 of the petitioner during the Financial Year 2017-18 (F.Y. 2017-18). As no document was submitted by the assessee, the Assessing Officer added the entire amount of Rs.1,14,13,000/- as unexplained cash deposit under Section 69A of the IT Act and the same was added to the total income returned by the assessee. The total income was assessed at Rs.1,21,66,840/- and thereby raising demand of Rs.1,51,79,752/- (including interest). 3. Aggrieved by the said assessment order, the writ petitioner, doing business in the name and style of “Sri Ayyappa Traders”, has filed an appeal before the CIT(A) on 18.04.2024 along with stay petition. The Principal Commissioner of Income Tax (PCIT), Visakhapatnam, after considering the stay petition and submissions made by the assessee, has disposed of the stay petition, directing the assessee to pay 10% of the outstanding demand (Rs.1,51,79,752/-) i.e., pay Rs.15,18,000/- in eight (8) equal instalments. While granting stay, vide order dated 11.02.2025, the Assessing Officer was directed to release attachments made, if any, subject to payment of the first instalment. Subject to the above conditions, the Assessing Officer was directed to stay the collection of remaining demand and penalty demand and not to treat the assessee in default till the disposal of first appeal and if any of the above conditions were not met by the assessee, the Assessing Officer is free to initiate recovery action as per the Act. 4. Assailing the order dated 11.02.2025 in directing the assessee to pay 10% of the outstanding amount, the present Writ Petition is filed, inter alia, on the ground that the 3rd respondent/Faceless Assessment Officer did not issue fresh notice under Section 148 of the IT Act and 4 an identical issue was considered by the High Court of Telangana in the case of Kankanala Ravindra Reddy Vs. Income Tax Officer, Ward No.1, Income Tax Office, Nalgonda District & batch, vide W.P.Nos.25903 of 2022 and batch. In addition to the aforesaid, the said order was assailed on the other ground that the Department has reopened the case based on the wrong facts and assumptions and that under CBDT instruction No.1914 dated 21.03.1996, revenue should not insist upon payment of 20% of the demand whenever it is shown that tax demand is arising out of high pitch, in other words, payment of 20%of the demand is not mandatory and complete stay ought have granted and that the said order is contrary to the judgment of the Hon‟ble Apex Court in Principal Commissioner of Income Tax and others Vs. LG Electronics India Private Limited, wherein it is held that when the authorities have been vested with judicial discretion ought to analyse the facts of the case in a judicious perspective in the light of the exceptions provided in CBDT Instruction No.95 and there is no bar to grant a blanket stay. Hence, prayed to set aside the impugned order dated 11.02.2025 of the 1st respondent. 5. The 2nd respondent, i.e., Income Tax Officer, Ward-1, Rajamahendravaram, has filed its counter and stated that the assessee made a cash deposit of Rs.80,34,000/- in cash into the account held with M/s. Bank of Baroda during the relevant financial year under consideration. In spite of huge deposits, the assessee did not file the return of income for A.Y.2018-19 and during the course of assessment proceedings, the JAO called for copy of the bank account statement held in the name of the assessee from M/s. Bank of Baroda. 5 On verification of the bank account statement, it is noticed that the assessee deposited cash of Rs.27,00,000/- into the current account and also Rs.87,13,000/- into the SB account, cumulative total of Rs.1,14,13,000/- held with the Bank of Baroda during the F.Y.2018-19. During the course of re-assessment proceedings under Section 147 read with Section 144B of the IT Act, 1961, the assessee has not furnished the information pertaining to the source of the cash deposit in the bank account sought for in the notices issued under Section 142(1) of the IT Act/show cause notice of the IT Act, 1961. The second respondent, in its counter, further asserted that the judgment in Kankanala Ravindra Reddy Vs. Income Tax Officer is not relevant to the current case, as it does not involve a faceless assessment and the said case arose in a different context. 6. It is further asserted that the assessee has filed an appeal before the CIT(A) at NFAC, Delhi and requested to grant stay of collection of outstanding demand till disposal of the appeal and the JAO disposed of the stay petition for non-payment of 20% of the disputed demand and other reasons on 20.12.2024. Subsequently, the bank accounts of the assessee were attached under Section 226(3) of the IT Act, 1961, with prior approval of the Hon‟ble Pr. CIT-1, Visakhapatnam on 20.12.2024 held with various banks. Subsequently, the assessee again filed stay application before the Pr.CIT on 25.12.2024 and the said application was disposed of directing the assessee to pay 10% of the disputed demand with condition to pay the same in eight (8) equal instalments. Accordingly, the assessee paid the first instalment of Rs.1,89,750/- on 12.02.2025 and on such deposit, the attachment was 6 lifted and the assessee has also paid the second instalment of Rs.1,89,750/- on 13.03.2025 and produced the counterfoil to the AO through the mail and the writ petitioner/assessee has failed to disclose these crucial facts in the Writ Petition and thereby approached this Court with unclean hands suppressing the material facts, as such, the petitioner is disentitled for seeking equitable relief under Article 226 of the Constitution of India. 7. The respondent also relied on the judgment of the Hon‟ble Apex Court for the aforesaid contention in the case of M/s. Prestige Lights Ltd., Vs. State Bank of India, wherein the Hon'ble Apex Court has ruled that if a party suppresses material facts or presents distorted information to the Court, that individual is barred from seeking equitable relief under Article 226 of the Constitution of India. Consequently, it is justified to deny relief under Article 226 in such cases. 8. Uberrima Fidei is a Latin phrase that translates to \"utmost good faith\" and is a fundamental principle in insurance contracts. It requires all parties involved to act with the highest degree of honesty and transparency, fully disclosing all material facts The Doctrine of Uberrima Fides has its fullest application in a petition under Article 226. The Court is not to use a discretion in the event of there being any attempt on the part of the petitioner to mislead the Court. 9. In the case of Ibiza Industries Ltd. and another vs. Union of India and others, reported in 1998 (5) ALD 565, it was held as under: \"Be it noted that a Prerogative Writ is not to be issued as a matter of course. The applicant must come in the 7 manner prescribed and adopt a method which is otherwise in accordance with law and must be perfectly frank and open with the Court. There is an obligation on the part of applicant in an application under Article 226 to be candid and be otherwise fair to Court so as not to mislead the Court. The Doctrine of Uberrima Fides has its fullest application in a petition under Article 226. The Court is not to use a discretion in the event of there being any attempt on the part of the petitioner to mislead the Court. The Writ Petition was dismissed on the grounds that the Doctrine of Uberrima Fides has been acknowledged in cases involving writ petitions that request, among other things, the issuance of a high prerogative writ. This was established in the Court of Appeal's decision in the King's Bench Division (KBD) in the case of Rex v. Kensington Income Tax Commissioners, Princess Edmond De Polignac, exparte 1917 (1) King's Bench 486. 10. Considered the submissions made and perused the material on record. 11. Though several grounds have been presented by the petitioner, the primary contention is that a blanket stay ought to have been granted by the appellate authority. The failure to grant such a stay is contrary to the judgment in the LG Electronics case (referred to above). Additionally, a second, equally important legal issue raised is that the notice issued under Section 148A(d) contradicts the judgment of the Telangana High Court in Kanakanala Ravindra Reddy‟s case. 8 12. The Hon‟ble Supreme Court, in the LG Electronics case, has clarified that while exercising quasi-judicial powers, it is permissible for the authorities to require a deposit of less than 20% pending appeal. In the present case, the first respondent has only directed a deposit of 10% in eight installments and has raised the attachment. Therefore, the argument presented by the learned counsel for the petitioner, relying on the judgment of the Supreme Court in the LG Electronics case, lacks substantial force. That apart, the writ petitioner is guilty of suppression of material facts and the Writ Petition is liable to be dismissed on that ground. 13. According to the respondents, the decision of the Telangana High Court does not apply to the current facts of the case because it is not a faceless assessment. After obtaining information from Baroda Bank, the writ petitioner assessee was given notice to provide documentary evidence pertaining to the deposit made by the petitioner. Since the petitioner failed to do so, the AO issued an order compelling the assessee to pay the assessed amount. 14. Learned Senior Counsel Sri K.Raji Reddy, appeared through online and made his submissions and has not refuted the counter averments nor filed any reply to the counter affidavit and submitted that assessee has deposited two instalments and the account of the assessee (writ petitioner) was lifted by the authorities. 15. The writ petitioner concealed the fact of having made the installment payment as directed by the appellate authority and also 9 omitted to disclose that they had lifted attachment/de-frozen the account. The suppression of key information, and in light of the doctrine of Uberrima Fides which requires full disclosure of material facts, the petitioner is not entitled to relief under Article 226 of the Constitution of India. 16. However, this Court feels it appropriate to dispose of the Writ Petition and to remand the matter to the 1st respondent in order to resolve the appeal filed by the petitioner herein, since the petitioner complied with the first respondent‟s order and on deposit of the two instalments, attachment was lifted. And this Court grants liberty to the petitioner to raise all the contentious grounds raised in the Writ Petition before the appellate authority, and the same shall be addressed and may be resolved as earliest as possible, in accordance with the law. Nevertheless, the petitioner must comply with the order dated 11.02.2025 and deposit the instalments as directed by the 1st respondent. 17. Accordingly, the Writ Petition is disposed of. There shall be no order as to costs. As a sequel, interlocutory applications pending, if any, in this case shall stand closed. __________________________ JUSTICE NINALA JAYASURYA __________________________________ JUSTICE TARLADA RAJASEKHAR RAO Date: 08.04.2025 siva 10 THE HON’BLE SRI JUSTICE NINALA JAYASURYA AND THE HON’BLE SRI JUSTICE TARLADA RAJASEKHAR RAO WRIT PETITION No.5110 OF 2025 Date: 08.04.2025 siva "