THOMAS DANIEL V. THE INCOME TAX OFFICER

WP(C)/19971/2017

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The case involves Thomas Daniel, the petitioner, who challenged a conditional stay order related to an income tax assessment for the year 2014-15. The assessment disallowed deductions claimed on interest payments amounting to Rs.67,30,90,917 due to non-compliance with tax deduction at source requirements under Section 40 and Section 201 of the Income Tax Act. The appellate authority granted a conditional stay, requiring the payment of 75% of the assessed amount for a stay on recovery of the remaining 25%. The petitioner contested this condition in the High Court, arguing misinterpretation of the law. The court, considering the financial hardship claimed by the petitioner, reduced the deposit requirement to 50% but upheld the conditional stay pending the appeal's decision.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 761289 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 16-06-2017
• Assessment Year: misc
• Other Referred Cases: I.T.A 278/2014
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: HARISANKAR MENON; MEERA MENON
• Keywords: Assessment Order; Deduction Disallowance; Income Tax; Stay Petition; Tax deducted at source
• Section: 201; 40

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 16TH DAY OF JUNE 2017/26TH JYAISHTA, 1939 WP(C).No. 19971 of 2017 (V) ---------------------------- PETITIONER(S): ------------- THOMAS DANIEL, INDIKATTIL HOUSE, VAKAYAR, KONNI, PATHANAMTHITTA-689698. BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON RESPONDENT(S): -------------- 1.THE INCOME TAX OFFICER, WARD 4, THIRUVALLA-689101. 2.THE COMMISSIONER OF INCOME TAX (APPEALS), KOTTAYAM-686001. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 16-06-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: EL WP(C).No. 19971 of 2017 (V) ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS ----------------------- EXHIBIT-P1 TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE IST RESPONDENT FOR THE YEAR 2014-15 DTD 30.12.2016 EXHIBIT-P2 TRUE COPY OF THE APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DTD 31.1.2017 EXHIBIT-P3 TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT DTD 06.06.2017 EXHIBIT-P4 TRUE COPY OF THE JUDGMENT IN I.T.A 278/2014 OF THIS HONOURABLE COURT DTD 30.7.2015 EXHIBIT-P5 TRUE COPY OF THE OFFICE MEMORANDUM ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES DTD 29.2.2016 RESPONDENT(S)' EXHIBITS ----------------------- NIL TRUE COPY P.S. TO JUDGE EL A.K.JAYASANKARAN NAMBIAR, J. - - - - - - - - - - - - - - - - - - - - - - - - - - W.P.(C) No.19971 of 2017 - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 16th day of June, 2017 JUDGMENT The petitioner has approached this Court aggrieved by Ext.P3 order, passed by the 2nd respondent appellate authority, in a stay petition filed along with an appeal against an order of assessment, for the assessment year 2014-15, under the Income Tax Act. The facts in the writ petition would indicate that the assessment for the year in question was completed against the petitioner by disallowing amounts that had been paid by the petitioner assessee towards interest on borrowed funds, to an extent of Rs.67,30,90,917/-. The dis-allowance of the deduction claimed was for the reason that, the provisions of Section 40 of the Income Tax Act contemplated a dis-allowance of any amount claimed by way inter alia of the interest, commission, brokerage etc., that was paid to a resident, and on which tax was deductible at source, without deducting the tax as contemplated under Section 201 of the Income Tax Act. In the case of the petitioner, it was found by the assessing authorities that the petitioner, who was required to deduct tax at source on the amounts claimed towards deduction, had not actually deducted tax at source, and therefore, the deduction claim had to be disallowed. Against the order of assessment, the petitioner preferred an appeal along with a stay petition before the first W.P.(c).No.19971 of 2017 : 2 : appellate authority, the 2nd respondent herein. In the said stay petition, that was filed along with the appeal, the petitioner sought for a stay of the demand confirmed against him by the assessment order, pending disposal of the appeal by the 2nd respondent. The 2nd respondent considered the stay petition, and after finding that the petitioner had defaulted on the requirement of deducting tax at source, and was therefore an assessee in default within the meaning of the term under the said Section, granted a conditional order of stay of recovery, of the amounts confirmed against the petitioner by the assessment order, by directing the petitioner to pay 75% of the amounts confirmed against him, as a condition for stay of recovery of the balance 25%. It is this conditional order, that the petitioner has impugned in the writ petition, inter alia on the ground that the 2nd respondent did not consider the true purport and ambit of the 2nd proviso to section 201 of the Income Tax Act, while considering the stay petition preferred by the petitioner. 2. I have heard the learned counsel for the petitioner and the learned Standing counsel for the respondents. 3. On a consideration of the facts and circumstances of the case and the submissions made across the bar, I find from Ext.P3 order of W.P.(c).No.19971 of 2017 : 3 : the 2nd respondent, that is impugned in this writ petition, that the 2nd respondent relies solely on the statutory provisions to hold that the petitioner has to be treated as an assessee in default. Although the petitioner states that the 2nd proviso to the said Section will come to his aid in contending that he cannot be treated as an assessee in default, I am of the view that this is a matter that would have to be examined by the 2nd respondent at the time of adjudication of the appeal. While the petitioner has not made out a case warranting an interference with Ext.P3 order in these proceedings under Article 226 of the Constitution of India, taking note of the plea of financial hardship, urged by the petitioner, which is one of the factors that ought to be considered by an appellate authority at the time of considering stay petitions against orders of assessment, I deem it fit to reduce the amount directed to be deposited, pending disposal of the appeal to 50% of the demand outstanding against the petitioner pursuant to the assessment order. Save for this limited modification to Ext.P3 order, the writ petition in its challenge against Ext.P3 order is otherwise dismissed. The petitioner shall pay 50% of the amount confirmed against him by the assessment order, in three equal and successive monthly installments, commencing from 15.07.2017. If the petitioner pays the said amount as directed, the 2nd respondent shall consider the appeal preferred by the petitioner on merits, and pass W.P.(c).No.19971 of 2017 : 4 : orders thereon, and recovery proceedings for recovery of the balance amount confirmed against the petitioner in the assessment order, shall be kept in abeyance till such time as orders are so passed by the 2nd respondent in the appeal. Sd/- A.K.JAYASANKARAN NAMBIAR JUDGE sm/ "