UDAY SHANKAR PRASAD CHAURASIA V. UNION OF INDIA AND 4 ORS.

WP(C)/2072/2019

AI Insights

The case involves Uday Shankar Prasad Chaurasia, an assessee under the Income Tax Act, 1961, who is the proprietor of M/S Shree Baijnath Agencies and M/S Shree Baijnathjee and Sons. The petitioner challenged the orders rejecting his request for a stay on the disputed tax demand until the disposal of his appeals pending before the Commissioner of Income Tax (Appeals). The High Court found contradictions in the orders regarding the payment requirements and emphasized the need for the assessing authority to exercise discretion independently under Section 220(6) of the Income Tax Act, 1961.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 722922 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 29-03-2019
• Assessment Year: misc
• Other Referred Cases: UCO Bank, Calcutta Vs. Commissioner of India Tax, W.B., Orient Paper Mills Ltd. Vs. Union of India, Shri Altafur Rahman Vs. Union of India and Others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S G I
• Assessee Lawyers: A SARAF
• Keywords: Assessment years; CBDT Circular; Income Tax; Quasi-judicial power; Stay of demand
• Section: 220(6); 220(3)

Judgement Text

"Page No.# 1/6 GAHC010066182019 THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : WP(C) 2072/2019 1:UDAY SHANKAR PRASAD CHAURASIA AN ASSESSEE UNDER THE INCOME TAX ACT, 1961 CARRYING OUT THE BUSINESS OF CARRYING AND FORWARDING AND TRADING AND PROPRIETOR OF M/S SHREE BAIJNATH AGENCIES AND M/S SHREE BAIJNATHJEE AND SONS VERSUS 1:UNION OF INDIA AND 4 ORS. REP. BY THE SECY. TO THE GOVT. OF INDIA, MINISTRY OF FINANCE, DEPTT. OF REVENUE, NEW DELHI 2:PRINCIPAL COMMISSIONER OF INCOME TAX GHY-2 AAYAKAR BHAWAN G.S.ROAD CHRISTIAN BASTI GHY-5 3:COMM. OF INCOME TAX (APPELS)-2 GHY AAYAKAR BHAWAN G.S.ROAD CHRISTIAN BASTI GHY-5 4:DY. COMMISSIONER OF INCOME TAX CIRCLE-4 GHY AAYAKAR BHAWAN G.S.ROAD CHRISTIAN BASTI Page No.# 2/6 GHY-5 5:INCOME TAX OFFICER (TECH.) OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX AAYAKAR BHAWAN G.S.ROAD CHRISTIAN BASTI GHY- Advocate for the Petitioner : DR. A SARAF Advocate for the Respondent : ASSTT.S.G.I. BEFORE HONOURABLE MR. JUSTICE MICHAEL ZOTHANKHUMA ORDER Date : 29-03-2019 Heard Dr. A Saraf, learned senior counsel assisted by Mr. N N Dutta, learned counsel appearing for the petitioner in all the writ petitions. Also heard Mr. S Saikia, learned standing counsel for the Income Tax Department as well as Ms. J Sarma, Mr. K Gogoi, and Mr. AM Dutta, learned CGC appearing for the Union of India. 2. The subject matter in issue being the same in all the cases, a common order is being passed. The above writ petitions have been filed challenging the orders dated 01.02.2019 and 06.03.2019 passed by the Deputy Commissioner of Income Tax (for short, DCIT), Circle-4, Guwahati and the Principal Commissioner of Income Tax, Guwahati-2, rejecting the prayer of the petitioner, for stay of the disputed demand of tax till disposal of the appeals, which are pending before the Commissioner of Income Tax (for short, CIT) (Appeals). 3. Being aggrieved by the orders of assessment dated 30.12.2018 for the assessment years 2011- 2012 to 2017-2018, the petitioner has filed appeals before the CIT(Appeals), which is still pending. The petitioner has also filed an application before the DCIT requesting for stay of the demand amount till disposal of the appeals pending before the CIT(Appeals). The DCIT rejected the petitioner’s prayer for stay of the demand amount vide order dated 01.02.2019. The petitioner, thereafter, filed a petition Page No.# 3/6 before the Principal Commissioner of Income Tax praying for stay of the impugned demand till disposal of the appeals. The same was, however, rejected. 4. The petitioner’s counsel submits that subsequent to the rejection of the petitioner’s application for stay of the demanded amount by the Principal CIT, the bank account of the petitioner has been frozen for recovery of the assessed amount. He submits that the appeals filed by the petitioner have been heard by the CIT(Appeals) on 14.02.2019. However, no final decision has been taken on those appeals till date. In the meantime, the authorities have started proceedings to recover the assessed amount and they have even taken away the personal computers of the petitioner. 5. The petitioner’s counsel submits that Section 220(3) and (6) Of the Income Tax Act confers a discretion upon the Assessing Authority to consider the application for stay of the demand without being influenced from any quarter. However, in view of the circular issued by the Central Board of Direct Taxes (for short, CBDT), wherein stay of the demand amount is permitted, after deposit of 20% of the assessed amount, the Assessing Authority has simply parroted the CBDT circular and not applied his mind independently with regard to whether there should be a stay of the demand amount. 6. The petitioner’s counsel thus prays that till a decision is taken by the CIT(Appeals), there should be a stay of the demand amount. 7. Mr. S Saikia, learned counsel appearing for the Income Tax Department submits that the CBDT circular is binding upon the Income Tax Officers and they have to abide by the said circular. He also submits that as per the Judgment of the Apex Court in UCO Bank, Calcutta Vs. Commissioner of India Tax, W.B., reported in (1999) 4 SCC 599, the Apex Court, while considering Section 119(1) of the Income Tax Act has held that the Board has power to turn down the rigour of law and ensure a fair enforcement of its provisions, by issuing circulars under Section 119 of the Income Tax Act, which are binding on the authorities in the administration of the Act, though the circulars cannot be adverse to the assessee. He, accordingly, submits that if the petitioner submits 20% of the demanded amount, there will be automatic stay of the demand amount. 8. I have heard the counsels for the parties. Page No.# 4/6 9. Section 220(6) of the Income Tax Act, 1961 states as follows: “Where an assessee has presented an appeal under section 246, the 2 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.” 10. In the case of Orient Paper Mills Ltd. Vs. Union of India reported in AIR 1969 SC 48, the Apex Court has held at paragraphs 8 and 10 as follows: “8. If the power exercised by the Collector was a quasi judicial power-as we hold it to be - that power cannot be controlled by the directions issued by the Board. No authority however high placed can control the decision of a judicial or a quasi judicial authority. That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are judges in their own cause; yet when they are called upon to decide disputes arising under the Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their orders as their judgments; they would essentially be the judgments of the authority that gave the directions and which authority had given those judgments without hearing the aggrieved party. The only provision under which the Board can issue directions is Rule 233 of the Rules framed under the Act. That rule says that the Board and the Collectors may issue written instructions providing for any supplemental matters arising out of these Rules. Under this rule the only instruction that the Board can issue is that relating to administrative matters; otherwise that rule will have to be considered as ultra vires Section 35 of the Act. “ “10. The rule laid down in the above decisions is fully applicable to the facts of this case. It is obvious as well as admitted that both the Collector and the Central Government proceded on the basis that the direction given by the Board was decisive of the matter. The revision applications filed before the Government were heard and decided by one of the members of the Board. He appears to have proceeded on the basis that in view of the directions given by the Board nothing more need be said as to the point in dispute. It is regrettable that when administrative officers are entrusted with quasi judicial functions, often times they are unable to keep aside administrative considerations while discharging quasi-judicial functions.- This Court as well as the High Courts have repeatedly tried to impress upon them that their two functions are separate; while functioning as quasi judicial officers they should not allow their judgment to be influenced by administrative considerations or by the instructions or directions given by their superiors. -In this case both the Collector as well as the Central Government have ignored the line that demarcates their administrative duties and their judicial functions.” 11. In UCO Bank, Calcutta Vs. Commissioner of India Tax (supra), the Apex Court has held that the Central Board of Direct Taxes has the power to turn down the rigours of law and ensure a fair enforcement of its provisions by issuing circulars in exercise of its statutory power under Section 119 Page No.# 5/6 of the Income Tax Act, which are binding on the authorities in the administration of the Income Tax Act. A reading of the above two cases shows that though the CBDT has the power to issue circulars under Section 119 of the Income Tax Act, which are to be followed by the Officers in the administration of the Income Tax Act, 1961, the CBDT cannot take away the discretionary power of the Income Tax Officers in dealing with cases of a quasi-judicial nature. 12. In the case of Shri Altafur Rahman Vs. Union of India and Others reported in (1986) 1 GLR 14, the Division Bench of this Court in paragraphs 12 and 13 has held that the power of an Assessment Authority not to treat an assessee as a defaulter is a power conferred by the Income Tax Act and the duty is cast upon the Income Tax Officer to consider a case on its own merit and to exercise his discretion judiciously. 13. In the present case, the impugned order dated 01.02.2019 states as follows: “Sub: Your request for Stay of Demand raised for the AY 2011-12, AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16, AY 2016-17, & AY 2017-18 vide your letter dt. 25-01-2019- matter reg. Sir, Please refer to the above. 2. Your prayer U/s.220(3) of the Act of 1961 received at his Office on 28.01.2019, is perused, and this Office finds no valid ground, neither any mitigating circumstance to extend the time for payment of the due taxes for the applied years, i.e., the AY 2011-12, AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16, AY 2016-17, & AY 2017-18. You are directed forthwith to make payment of the taxes for all these years within 3(three) days of receipt of this letter. 3. Reference is also directed to the CBDT O.M. No.404/72/93-ITCC dated 31st July 2017 (Partial modification of Instruction No.1914) in the matter. You are kindly requested to strictly adhere to the stipulated directions as contained in the said Instruction. 4. Any failure or shortfall in payment on your part will compel this Office to resort to coercive means, within the provisions of the Act of 1961, for collection of due tax without any further reference to you.” 14. Paragraph 2 of the impugned order dated 01.02.2019 states that the petitioner is to make payment of all taxes for all the above years within three days of the receipt of the letter. On the other hand, in paragraph 3, the petitioner has been requested to strictly adhere to the directions contained in the CBDT instruction. There is a contradiction in paragraphs 2 and 3 of the said letter dated 01.02.2019, inasmuch as, Page No.# 6/6 while paragraph 2 requires the petitioner to make payment of the entire demand, paragraph 3 requires the petitioner to pay 20% of the demand amount, as the CBDT circular dated 31.07.2017 is to the effect that the Assessing Officer shall grant stay of the demand till disposal of the appeal, on payment of 20% of the disputed amount, in which case, the petitioner’s request for stay of demand would automatically take place. 15. The above contradiction made by the DCIT clearly shows that the said Officer has not applied his mind independently as required under Section 220(6) of the Income Tax Act. In the view of this Court, the discretionary power given to the Assessing Authority under Section 220(3) has to be applied independently by the Officer concerned, and take a decision strictly as per the mandate of Section 220(3) of the Income Tax Act. 16. In view of the fact that there is a contradictory stand taken by the DCIT in the impugned letter dated 01.02.2019, the same being arbitrary, is set aside. However, liberty is given to the DCIT to decide the request of the petitioner’s stay of demand afresh and take a decision solely on his discretion as per the mandate of Section 220(6) within a period of 2(two) weeks from today. 17. The DCIT shall take a decision on the matter after giving an opportunity of hearing to the petitioner. Till a decision is taken by the DCIT, no coercive measure shall be taken for recovery of the demanded amount. 18. The Commissioner of Income Tax (Appeals) Guwahati-2 shall also make an endeavour to dispose of the petitioner’s appeals as expeditiously as possible. 19. Consequently, the order dated 06.03.2019 passed by the Principal Commissioner of Income Tax, Guwahati-2 is also set aside. 20. Writ petitions, accordingly, stand disposed of. JUDGE Comparing Assistant "