SURAT URBAN DEVELOPMENT AUTHORITY V. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION)

SCA/11001/2015

AI Insights

The case involves the Surat Urban Development Authority challenging an assessment order by the Deputy Commissioner of Income Tax, which assessed the authority's income as Rs.48,22,54,670 for the year 2012-13, contrary to previous years where it was assessed as 'Nil'. The primary legal contention was whether the activities of the authority, which involved charging various fees for public services, constituted 'trade, commerce or business' under section 2(15) of the Income Tax Act, thereby disqualifying it from being considered a charitable entity. The court examined precedents and statutory provisions to determine the applicability of section 2(15) and the proper interpretation of 'charitable purpose'.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 753665 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 22-09-2015
• Assessment Year: misc
• Other Referred Cases: Director of Income Tax (Exemption) v. Sabarmati Ashram Gaushala Trust, Bureau of Indian Standards v. Director General of Income Tax (Exemptions), Commissioner of Income Tax v. M/s. Lucknow Development Authority, Gomti Nagar, Lucknow, Saurashtra Cement and Chemical Industries Ltd. v. Commissioner of Income Tax, Gujart, Wood Polymer Limited, In re v. Bengal Hotels Pvt. Ltd., In re, Gujarat State Fertilizers and Chemicals Ltd. v. Deputy Commissioner of Income Tax (Assessment), Hitech Outsourcing Services v. Income Tax Officer, Sakarpatal Vibhag Jangal Kamdar Sahakari Mandali Ltd. v. Income Tax Officer and others, Jammu Development Authority v. Union of India and another
• Laws Referred To: Income Tax Act, 1961, Gujarat Town Planning and Urban Development Act, 1976
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: MANISH BHATT; MAUNA BHATT
• Assessee Lawyers: MIHIR THAKORE; GURSHARANSINGH VIRK
• Keywords: Charitable purpose; Income tax assessment; Stay of demand; Urban Development Authority; Trade commerce business
• Section: 143(3); 12A; 246; 220(6)

Judgement Text

"C/SCA/11001/2015 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 11001 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.G.URAIZEE ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ========================================================== SURAT URBAN DEVELOPMENT AUTHORITY....Petitioner(s) Versus DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) & 2....Respondent(s) ========================================================== Appearance: MR MIHIR THAKORE, SENIOR ADVOCATE with MR GURSHARANSINGH H VIRK, ADVOCATE for the Petitioner(s) No. 1 MR MANISH R BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1 - 3 ========================================================== Page 1 of 23 C/SCA/11001/2015 JUDGMENT CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.G.URAIZEE Date : 22/09/2015 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. Rule. Mrs. Mauna Bhatt, learned senior standing counsel, waives service of notice of rule for the respondents. Having regard to the controversy involved in the present case and considering the view that the court is inclined to take in the matter, the matter was taken up for final hearing and is disposed of by this judgment. 2. The petitioner is an urban development authority performing functions under the provisions of the Gujarat Town Planning and Urban Development Act, 1976 and the rules framed thereunder. By an order dated 14.2.2007 passed by the Commissioner of Income Tax-II, Surat the petitioner was granted registration under section 12A of the Income Tax Act with effect from 1.4.2002. Subsequently, for assessment years 2009-10, 2010-11 and 2011-12, the matters were taken up for scrutiny and assessment orders came to be passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) computing the income of the petitioner as ‘Nil’. In respect of assessment year 2012-13, the petitioner filed return of income declaring its income as ‘Nil’ on 28.9.2012. The matter was taken up for scrutiny and by the impugned order dated 24.3.2015, the Assessing Officer assessed the total income of the petitioner as Page 2 of 23 C/SCA/11001/2015 JUDGMENT Rs.48,22,54,670/- and raised a demand of Rs.20,41,52,870/-. Against the impugned order, the petitioner preferred a statutory appeal under section 246 of the Act before the Commissioner of Income Tax (Appeals). Simultaneously, the petitioner also moved an application under section 220(6) of the Act before the first respondent Deputy Commissioner of Income Tax (Exemptions) praying that the demand raised pursuant to the assessment order be kept in abeyance till the final disposal of the appeal. By the impugned order dated 26.5.2015, the respondent No.1 directed the petitioner to pay the entire demand in six monthly installments of Rs.3,40,25,000/- each. The petitioner thereafter filed an application before the respondent No.2 for staying the demand under the assessment order. By an order dated 3.6.2015, the second respondent disposed of the stay petition by granting the petitioner quarterly installments of Rs.3.5 crore each. The petitioner then approached the third respondent, namely, the Principal Commissioner of Income Tax (OSD) (Exemptions) with a request to keep the demand in abeyance. By an order dated 4.6.2015, the Principal Commissioner of Income Tax observed that the authorised representative of the assessee had agreed to pay six monthly installments of Rs.50 lakh each till December, 2015 and thereafter monthly installment of Rs.1 crore for the next three months and Rs.1.83 crore in the next nine monthly installments covering the entire demand. Being aggrieved, the petitioner has presented the present petition challenging the assessment order dated 24.3.2015 and has prayed that the respondents be restrained from taking any coercive recovery measures pursuant to the assessment order dated 24.3.2015. Page 3 of 23 C/SCA/11001/2015 JUDGMENT 3. Mr. Mihir Thakore, Senior Advocate, learned counsel with Mr. G. H. Virk, learned advocate for the petitioner assailed the impugned order of assessment by inviting the attention of the court to the provisions of section 2(15) of the Act to submit that the proviso to sub-section (15) of section 2 came to be inserted with effect from 1.4.2009 whereby it was provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity rendering any service in relation to any trade, commerce or business or a cess or fee or any other consideration, irrespective of the nature of application, or retention, of the income from such activity. The attention of the court was invited to the scheme of the Gujarat Town Planning and Urban Development Act, 1976 with special reference to the provisions of sections 3, 12, 13, 22, 23, 25, 27, 35, 40(3)(jj), 44, 49 to 52, 65, 91, 91A, 99, 100, 101, 101(4a), 107 and 110 thereof to point out that the fees etc. recovered by the petitioner were in connection with its statutory duties and not in the course of any trade, business or commerce. It was submitted that for the purpose of examining whether the petitioner falls within the ambit of section 2(15) of the Act, one has to look to the statutory scheme of the Town Planning Act to find out whether the activities carried out by the petitioner amount to trade, commerce or business. According to the learned counsel, in the light of the statutory duties cast upon the petitioner, by no stretch of imagination can the same be considered to be trade, commerce or business. Referring to the impugned assessment order dated 24.3.2015, it was pointed out that the Assessing Officer has considered that the assessee being an urban development Page 4 of 23 C/SCA/11001/2015 JUDGMENT authority charges various types of fees from the public for providing certain amenities like roads, bridges, etc. which is recovered from the beneficiaries who get benefit out of development of such common infrastructure. Similarly, the assessee charges building height fee, charge of use fee, ground coverage fee, development charges, NOC processing fee, regulation fee, impact fee, sewage charge etc. These are receipts which are received by the assessee for the services rendered by the assessee to the general public/beneficiaries and, therefore, the same have to be considered as income of the assessee trust. It was pointed out that the Assessing Officer has held that the assessee is engaged in the activity of earning by charging various fees for rendering services to the general public and, therefore, is not carrying on any charitable activity and is squarely covered by the first and second provisos to section 2(15) of the Act. Thus, the Assessing Officer has held the activities of the assessee which are carried out within the statutory framework to be trade, commerce and business under the proviso to section 2(15) of the Act. It was further submitted that in the previous years, the income of the petitioner assessee was assessed as ‘Nil’. However, in the year under consideration, the income has been assessed at more than Rs.48 crore. It was submitted that the impugned order whereby the statutory activities carried out by the petitioner assessee have been considered as trade, commerce and business is, therefore, ex facie bad and contrary to the decision of this court in the case of Director of Income Tax (Exemption) v. Sabarmati Ashram Gaushala Trust, (2014) 362 ITR 539 (Gujarat), wherein the court has held that what emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that Page 5 of 23 C/SCA/11001/2015 JUDGMENT the activity of a trust would be excluded from the term ’charitable purpose’ if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose. The court further held that if there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business - particularly if generating surplus is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. The court after considering the object of the appellant therein noted that the objects were of general public utility and would squarely fall under section 2(15) of the Act. The court further noted that profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for the purpose of achieving the objects of the trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. It was submitted that the above decision would be squarely applicable to the facts of the present case and that the impugned order of assessment which is contrary to the law laid down in the above decision, therefore, cannot be sustained. 3.1 Reliance was also placed upon the decision of the Delhi High Court in the case of Bureau of Indian Standards v. Director General of Income Tax (Exemptions), (2013) 358 Page 6 of 23 C/SCA/11001/2015 JUDGMENT ITR 78 (Delhi), wherein the court was called upon to decide as to whether the Bureau of Indian Standards is involved in carrying on trade, commerce or business. The court observed that BIS is a statutory body established under the BIS Act and was brought into existence “for the harmonious development of the activities of standardization, marking and quality certification of goods”. This was, and has been, its primary and pre-dominant object. Even though it does take license fee for granting marks/certification, the same cannot be said to be done for the purpose of profit. If any profit/revenue is earned, it is purely incidental. The BIS performs sovereign and regulatory function, in its capacity of an instrumentality of the State. The court, therefore, had no doubt in holding that it was not involved in carrying any activity in the nature of trade, commerce or business. It was submitted that the above decision would also apply on all fours to the facts of the present case where the petitioner performs sovereign and regulatory function in its capacity as an instrumentality of the State. 3.2 Reliance was also placed upon an unreported decision of the Allahabad High Court in the case of Commissioner of Income Tax v. M/s. Lucknow Development Authority, Gomti Nagar, Lucknow rendered on 16.9.2013 in Income Tax Appeal No.149 of 2009 and other cognate matters for a similar proposition of law. 3.3 On the question of bypassing the statutory remedy of appeal and approaching this court directly against the assessment order made by the Assessing Officer, it was submitted that in an exceptional case, it is always permissible Page 7 of 23 C/SCA/11001/2015 JUDGMENT for the party to approach the High Court directly. It was contended that the issue of alternative remedy does not arise when the jurisdictional High Court’s judgment is ignored by the authority. It was urged that the Assessing Officer cannot ignore the decision of the jurisdictional High Court and decide the matter on the basis of the decisions of the Tribunals or other High Courts. It was submitted that the impugned order is an ex facie bad order whereby statutory activities are sought to be considered as trade, commerce or business. Therefore, having regard to the facts of the case, it is expedient that this court exercises powers under Article 226 of the Constitution to quash the impugned order of assessment. 3.4 It was further submitted that the conduct of the authority is also required to be taken into consideration, inasmuch as, the order dated 24.3.2015 was served upon the petitioner on 8.4.2015 and demand notice was served on 23.4.2015. It was submitted that pursuant to the application made by the petitioner under section 220(6) of the Act, the first respondent without duly considering the relevant factors had directed the petitioner to pay the entire demand in six monthly installments. Referring to the order dated 26.5.2015, it was submitted that the same is a totally non-reasoned order which does not take into consideration any factor relevant for the purpose of deciding the stay application. Reliance was placed upon the decision of this court in the case of Hitech Outsourcing Services v. Income Tax Officer, 2015 LawSuit (Guj) 88, wherein the court noted that in the order under section 220 (6) impugned therein, reasons were not mentioned for prima facie consideration of the merit or even on the aspect of balance of convenience. Nothing was recorded in the order Page 8 of 23 C/SCA/11001/2015 JUDGMENT as to why the ground of bank guarantee for grant of stay was taken into consideration. The court was of the considered view that the order can be said to be non-speaking order since no reasons are mentioned. The court was of the view that when the application is to be considered and decided, it is required of the concerned authority to record the reasons and then to reach to the ultimate conclusion as to whether the stay should be granted or not and if yes on what condition. In absence of any reasons, the order cannot be sustained. It was submitted that both, prima facie consideration and balance of convenience have not been looked into by the authorities below while directing the petitioner to pay the entire amount in installments. 3.5 Referring to the order dated 3.6.2015 of the Additional Commissioner of Income Tax, it was submitted that while considering the stay application he had not considered that there is a clear decision of the Delhi High Court on this issue nor has he considered the question of balance of convenience. As regards the order dated 4.6.2015 passed by the third respondent, reference was made to the affidavit in rejoinder filed on behalf of the petitioner and more particularly, paragraph 3.3 thereof to point out that more often than not, it is customary and a matter of procedure for departmental officers to record concurrence of the authorised representatives even though there may not have been such concurrence. Though, on the record, the said concurrence may be depicted as being voluntary, it is an open secret that the said concurrence is nothing but a tool of coerced convenience in furtherance of general practice and procedure followed by departmental officers. It was submitted that assuming for the Page 9 of 23 C/SCA/11001/2015 JUDGMENT sake of argument (without admitting) that there was such consent from the authorised representative of the petitioner, the question of directing payment by installments does not arise in view of the fact that the statutory provision does not contemplate installments within the scope of stay. It was pointed out that in the affidavit in rejoinder it has been expressly denied that any concurrence was obtained by the third respondent from the authorised representative of the petitioner. It was, accordingly, urged that if at all the court is not inclined to interfere with the impugned order of assessment on the ground of there being an alternate remedy, having regard to the facts of the case and more particularly considering the fact that the petitioner is a statutory authority, the entire demand against the petitioner be stayed. 4. Vehemently opposing the petition, Mr. M. R. Bhatt, Senior Advocate, learned counsel for the respondents raised a preliminary objection to the very maintainability of the petition by submitting that the assessee has already availed of the statutory remedy of appeal before the Commissioner (Appeals) and hence, this petition under Article 226 challenging the order of assessment is not maintainable. It was argued that merely because the assessee is a statutory authority, is no reason to jettison the alternative remedy. Referring to the relief prayed for vide paragraph 9 (a) of quashing the assessment order, it was submitted that such relief is not warranted in the facts and circumstances of the case and that the perception of the Assessing Officer in the facts and circumstances of the case would not justify jettisoning the appellate remedy. In support of his submission, the learned counsel placed reliance upon the decision of the Supreme Court in the case of Page 10 of 23 C/SCA/11001/2015 JUDGMENT Commissioner of Income Tax v. Chhabil Dass Agarwal, (2013) 357 ITR 357, wherein the assessee instead of exhausting the statutory remedy available under the Act, that is, the statutory appeal before the statutory appellate authority had approached the High Court under Article 226 of the Constitution of India. The court noticed that the writ court had delved into the merits of the case and thought it fit to quash the order of the Assessing Officer. The only question before the Supreme Court was as to whether the High Court was justified in interfering with the order passed by the Assessing Officer under section 148 of the Act in exercise of its jurisdiction under Article 226 of the Constitution when an equally efficacious alternative remedy was available to the assessee under the Act. The court, after referring to the various decisions on the question including its earlier decision in the case of Union of India v. Guwahati Carbon Ltd., (2012) 11 SCC 651, wherein the court had reminded itself of the observations made by it in Munshi Ram v. Municipal Committee, Chheharta, (1979) 3 SCC 83, wherein it was observed that when a revenue statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be sought in that forum and in that manner, and all the other forums and modes of seeking remedy are excluded. The court observed that while it can be said that it has recognized some exceptions to the rule of alternative remedy, that is, where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the court may Page 11 of 23 C/SCA/11001/2015 JUDGMENT entertain a writ petition. However, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. The court in the facts of the said case observed that the Act provides complete machinery for the assessment/re- assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the revenue authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). Mr. Bhatt submitted that the present case does not fall within any of the exceptions carved out by the Supreme Court and that there being an efficacious remedy available to the petitioner, which, in any case has already been invoked, there is no warrant for entertaining the present petition against the impugned order of assessment. 4.1 On the merits of the case, it was submitted that there is no general exemption merely because an authority is carrying out statutory functions. It was submitted that the activities carried out by the statutory authority has to fall within the exemption provisions and merely because the authority is carrying out various statutory functions does not mean that it falls within the ambit of section 2(15) of the Act. It was submitted that whether the petitioner carries on trade, commerce or business is primarily a question of ascertaining facts and that even a solitary transaction can be in the nature of trade, commerce or business. Referring to the impugned order of assessment and more particularly paragraph 5.3 Page 12 of 23 C/SCA/11001/2015 JUDGMENT thereof, it was pointed out that the assessee is carrying on various activities in respect of which it charges fees from the beneficiaries, to submit that having regard to the activities carried on by the petitioner, it cannot be said that the proviso to section 2(15) of the Act would not be attracted. The attention of the court was invited to the decision of the Jammu and Kashmir High Court in the case of Jammu Development Authority v. Union of India and another rendered on 7.11.2013 in ITA No.164 of 2012. It was submitted that the said decision supports the stand of the Assessing Officer. It was further pointed out that the said decision came to be challenged by the assessee before the Supreme Court and the special leave petition came to be dismissed by an order dated 21.7.2014. It was submitted that, therefore, the decision of the Jammu and Kashmir High Court taking a contrary view, stands confirmed by the Supreme Court, under the circumstances, it cannot be said that the view adopted by the Assessing Officer is not a plausible view. 4.2 On the submissions advanced by the learned counsel for the petitioner with regard to the conduct of the respondents, it was submitted that till date no coercive action has been taken against the petitioner and, therefore, there is nothing wrong with the conduct of the respondents. The attention of the court was invited to the CBDT Circular No.1914 dated 2.12.1993 Annexure-R1 to the petition to point out that the CBDT has prescribed certain guidelines for staying demand and that the orders passed by the respondents No.1 to 3 under section 220(6) of the Act being in consonance with such guidelines, there is no warrant for interference by this court. It was pointed out that the guidelines permit the respondents to Page 13 of 23 C/SCA/11001/2015 JUDGMENT grant installments to the assessee on an application under section 220(6) of the Act and that the authorities having considered the stay petition and having granted installments to the petitioner and not having taken any coercive step for recovery thereof, it cannot be said that the approach adopted by the respondents is in any manner unreasonable, as alleged by the petitioner. 4.3 Lastly it was submitted that if the court is inclined to interfere with the orders passed by the authorities under section 220(6) of the Act, the court may direct the petitioner to deposit some reasonable amount with a direction to the Commissioner (Appeals) to decide the appeal within stipulated time frame. 5. In rejoinder, Mr. M. J. Thakore, learned counsel for the petitioner submitted that the Assessing Officer has not considered the ratio of the decision of the Division Bench of this High Court in Director of Income Tax (Exemption) v. Sabarmati Gaushala Trust (supra) while passing the impugned assessment order which is, therefore required to be struck down as being contrary to the decision of the High Court and the petitioner should not be relegated to avail of the alternative remedy of appeal before the Commissioner (Appeals). 6. In the backdrop of the rival contentions advanced by the learned counsel for the respective parties, the first question that arises for consideration is as to whether on the facts and in the circumstances of this case, this court would entertain a writ petition challenging the assessment order framed by the Page 14 of 23 C/SCA/11001/2015 JUDGMENT Assessing Officer under section 143(3) of the Income Tax Act, 1961. From the facts and contentions noted hereinabove, it is apparent that none of the exceptions laid down by the Supreme Court warranting interference by the High Court in exercise of powers under Article 226 of the Constitution have been made out in the facts of the present case. It is not the case of the petitioner that the impugned order has been passed in breach of the principles of natural justice or that the statutory authority has not acted in accordance with the provisions of the Act or has acted in defiance of the fundamental principles of judicial procedure. Under the circumstances, when there is an efficacious alternative statutory remedy available to the petitioner and the petitioner has already availed of the same, in the opinion of this court, no case has been made out for entertaining a writ petition against the assessment order framed under section 143(3) of the Act. Besides, the question as to whether the activities carried out by the petitioner fall within the ambit of the proviso to section 2(15) of the Act, is a mixed question of fact and law and, hence, when there is a statutory remedy available and which has been resorted to by the petitioner under the provisions of the Act, this court would be loathe to interfere in exercise of its extraordinary powers under Article 226 of the Constitution. In the opinion of this court, the decision of the Supreme Court in the case of Commissioner of Income Tax v. Chhabil Dass Agarwal, (supra) referred to hereinabove would be squarely applicable to the facts of the present case and hence, this court is not inclined to entertain the petition qua the relief challenging the impugned assessment order. 7. The next question that arises for consideration is as to Page 15 of 23 C/SCA/11001/2015 JUDGMENT whether the petitioner is entitled to any relief under section 220(6) of the Act. Before adverting to the merits of the rival contentions, reference may be made to the orders passed by the respondents No.1 to 3 under section 220(6) of the Act. The first order which has been made by the first respondent Deputy Commissioner of Income Tax (Exemptions) on 26.5.2015, merely says that looking to the facts and circumstances of the case, issues involved and reasons given for stay of demand, the petitioner is requested to pay the entire demand of Rs.20,41,52,870/- in six monthly installments of Rs.3,40,25,000/- each. The second respondent Additional Commissioner of Income-tax (Exemptions) in the order dated 3.6.2015 has observed that the DCIT (Exemptions) had disposed of the stay petition granting the assessee installment facility to pay the entire outstanding demand of Rs.20,41,52,870/- in six equated monthly installments. The assessee has not availed the installment facility granted by DCIT (Exemptions) and filed a fresh petition before him and the authorised representative appeared before him and discussed the case. He has further observed that after discussion with the assessee’s authorised representative and considering the issues involved, merits of the cases, financial condition of the assessee and extant instructions with regard to grant of stay of demand, the assessee is requested to pay the demand in equal quarterly installments of Rs.3.5 crore each. The third respondent in the order dated 4.6.2015 has, as recorded in detail hereinabove, recorded that the authorised representative of the assessee agreed to pay installments. As noted earlier, the petitioner-assessee in the affidavit in rejoinder has taken a plea that no such consent had been given by the authorised representative and that is the normal Page 16 of 23 C/SCA/11001/2015 JUDGMENT practice of the officers to make such observations. These, in sum and substance are the contents of the orders passed by the respondents No.1 to 3 on the petitioner’s applications under section 220(6) of the Act. 8. Section 220(6) of the Act provides that where an assessee has presented an appeal under section 246, the Assessing Officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. Thus, section 220(6) enacts that where an assessee has preferred an appeal to the first appellate authority disputing any part or the whole of the demanded amount, the assessee may make an application to the Assessing Officer that the latter may not treat the former as in default in respect of such disputed amount even though the time for its payment has expired. The Assessing Officer may, in his discretion, with or without any condition, make an order not treating the assessee as in default in respect of such disputed amount till the time the appeal may remain pending before the first appellate authority. 9. Thus, the Assessing Officer is vested with discretionary powers while considering an application under section 220(6) of the Act. However, the discretionary power conferred by section 220(6) upon the Assessing Officer is coupled with a duty, and if he does not exercise it when the occasion calls for it or if he exercises it in such a manner that it is no discretion at all, he can be compelled to discharge his duties [see Page 17 of 23 C/SCA/11001/2015 JUDGMENT Saurashtra Cement and Chemical Industries Ltd. v. Commissioner of Income Tax, Gujart, (1978) 115 ITR 27]. This court in Wood Polymer Limited, In re v. Bengal Hotels Pvt. Ltd., In re., (1977) 109 ITR 177, has held that it is well established and calls for no discussion that the discretionary power has to be exercised in a reasonable manner. Whenever a statute confers power, it is indisputable that such power is conferred to achieve some object and the power has to be exercised towards achieving the object. While exercising power, the authority on whom the power is conferred must be guided by the consideration whether by exercise of the power, the object sought to be achieved while conferring power would be achieved or not. Exercise of discretionary power stands on the same footing. Whenever a court or authority is invested with discretionary power, it is implicit therein that the power must be exercised reasonably, meaning thereby in a reasonable manner, and it must be exercised for the purpose for which it is conferred. 10. In Gujarat State Fertilizers and Chemicals Ltd. v. Deputy Commissioner of Income Tax (Assessment), (1997) 226 ITR 270, the petitioner had challenged the order made under section 220(6) of the Act by which it was held that the assessee may not be treated as in default within the meaning of section 220(6) in case the condition imposed under the order was fulfilled and no coercive measures as provided will be taken to recover the balance demand until the disposal of the appeal. The court after considering the facts of the case, found that there was absolutely no justification for imposing the condition to pay 20% of the outstanding demand under the order made by the Deputy Commissioner of Income Tax under Page 18 of 23 C/SCA/11001/2015 JUDGMENT section 220 (6) of the Act. 11. This court in the case of Hitech Outsourcing Services v. Income Tax Officer, (supra), has held that the authority is required to prima facie consider the merits and balance of convenience as also irreparable injury. Therefore, in order to decide whether the assessee has made out a prima facie case or not for grant of stay, the authority considering the application for grant of stay is required prima facie to look into the questions involved in the appeal and to consider the plea raised by the assessee and to exercise discretion vested in it judicially and assign the reasons for the rejection of the stay application. 12. In Sakarpatal Vibhag Jangal Kamdar Sahakari Mandali Ltd. v. Income Tax Officer and others, (1992) 198 ITR 685, this court held that where an assessee makes an application under section 220(6) to the Assessing Officer, the Assessing Officer has to consider all the relevant aspects before rejecting such an application, or imposing conditions, while treating the assessee as not being in default. If all the relevant aspects are taken into consideration, then it can be said that he has properly exercised his discretion. In the facts of the said case, the court did not find any material on the basis of which it could be said that he did consider all relevant aspects before imposing the condition of making 50% payment of the tax dues for the assessment year in question. 13. It may be noticed that the order dated 26.5.2015 passed by the Deputy Commissioner of Income Tax clearly shows that no reason whatsoever has been assigned for not staying the Page 19 of 23 C/SCA/11001/2015 JUDGMENT demand and the entire demand is directed to be paid in six monthly installments. In the order dated 3.6.2015, all that the Additional Commissioner of Income Tax has recorded is that after discussion with the assessee’s authorised representative and considering the issues involved, merits of the cases, financial condition of the assessee and extant instructions with regard to grant of stay of demand, the assessee is requested to pay the demand in equal quarterly installments of Rs.3.5 crore each. There is no discussion whatsoever as regards prima facie case, balance of convenience or regarding conflicting decisions of different High Courts on the issue in controversy. The third respondent once again has disposed of the application by recording consent of the authorised representative without considering any of the factors relevant for considering the application for stay. 14. On behalf of the respondent, reliance was placed upon the CBDT Circular No.1914 dated 2.12.1993. A perusal of the guidelines issued in the said circular clearly shows that it is laid down therein that the demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be sufficient to stay recovery of demand. A few illustrative situations where stay can be granted are narrated therein. One of which is if the demand in dispute has arisen because the Assessing Officer has adopted an interpretation of law in respect of which there exist conflicting decisions of one or more High Courts but not of the High Court under whose jurisdiction the Assessing Officer is working, or if the High Court having jurisdiction has adopted a contrary interpretation but the department has not accepted that judgment. Thus, while considering the application under Page 20 of 23 C/SCA/11001/2015 JUDGMENT section 220(6) the respondents were required to keep in mind the guidelines laid down by the CBDT and consider the question as to whether the assessee should be treated as an assessee not in default accordingly. However, all the three orders/communications under section 220(6) are bereft of any reasoning or any material to show application of mind to the aspects enumerated in the CBDT circular. True it is, that the circular also provides for grant of installments, however, that does not absolve the authorities from not examining the case in the light of the guidelines to examine as to whether blanket stay should be granted or whether the stay could be granted on condition of suitable security to safeguard the interest of the revenue or on payment towards the taxes a reasonable amount in lump sum or in installments, etc. 15. In the facts of the present case, as is evident from the submissions advanced by the learned counsel for the respective parties, there exist conflicting decisions of different High Courts including the jurisdictional High Court. Under the circumstances, having regard to the guidelines laid down in the circular, it was incumbent upon the respondents to apply their minds to the facts of the case while considering the question of grant of stay. However, no such application of mind to the relevant factors is reflected in the orders passed under section 220(6) of the Act. It may be noted that under clause (v) of the guidelines for staying the demand, it has been categorically stated that while considering an application under section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. While the respondents place reliance on the CBDT circular in Page 21 of 23 C/SCA/11001/2015 JUDGMENT support of the request for payment of the entire demand in installments, they seem to have ignored the other part of such circular which imposes a duty upon them to consider all relevant factors having a bearing on the demand raised and to pass a speaking order. Another notable aspect of the matter is that the petitioner is a statutory authority and hence, there would hardly be any reason to believe that the interest of the revenue is in jeopardy if the demand is stayed till the final disposal of the appeal. 16. Thus, on a plain reading of the orders passed by the respondents No.1 to 3 under section 220(6) of the Act, it is manifest that such orders have been passed in a mechanical and perfunctory manner without application of mind to the relevant factors for considering the question of grant of stay and as such cannot be sustained. Ordinarily, this court while setting aside the order passed under section 220(6) of the Act, would remand the matter to the concerned authority for the purpose of re-deciding the application under section 220(6) taking into consideration the relevant factors. However, having heard the learned counsel for the respective parties on the merits of the case as well as on the question of grant of stay, the court is of the view that the petitioner has made out a prima facie case for grant of stay of the demand, subject to reasonable conditions. Under the circumstances, instead of remanding the matter to the respondent authorities, the court is of the view that the ends of justice would be met if the petitioner is directed to pay an amount equal to ten per cent of the demand raised by the respondents. Having regard to the facts and circumstances of the case and the quantum of the demand raised against the petitioner, the court is of the view Page 22 of 23 C/SCA/11001/2015 JUDGMENT that the Commissioner (Appeals) should be asked to dispose of the appeal within a stipulated time frame. 17. In the light of the above discussion, the petition partly succeeds and is, accordingly allowed to the following extent. It is ordered that the petitioner shall not be treated as an assessee in default as contemplated under section 220(6) of the Act, subject to the petitioner depositing ten per cent of the amount stated in the demand notice within a period of four weeks from today. The Commissioner (Appeals) shall dispose of the appeal preferred by the petitioner under section 246 of the Act within a period of four months from the date of receipt of a copy of this judgment. The petitioner shall duly cooperate in the proceedings before the appellate authority. In case the Commissioner (Appeals) is not in a position to dispose of the appeal on account of default on the part of the petitioner, it would be open for the respondents to approach this court for modification of this order. The petitioner shall serve a copy of this order upon the Commissioner (Appeals). Rule is made absolute accordingly to the aforesaid extent with no order as to costs. (HARSHA DEVANI, J.) (A.G.URAIZEE, J.) zgs Page 23 of 23 "