New Rupayan Jewellers vs Union of India (UOI) and Others

Soumitra Pal, J.—This writ petition has been filed by M/s. New Rupayan Jewellers challenging the order dated November 10, 2008, passed by the Income Tax Officer, Ward-28(3), Kolkata, respondent No. 3 rejecting the application for stay of realisation of the sum assessed as tax due.

The facts in brief are that being aggrieved with the assessment order for the assessment year 2006-07 passed on September 18, 2008, the petitioner had filed an appeal before the Commissioner of Income Tax (Appeals), West Bengal, respondent No. 2. It appears that on the day on which assessment order was passed, respondent No. 3 had issued notice of demand requesting the petitioner to pay a sum of Rs. 10,27,028. After receiving such notice of demand the petitioner had filed an application for stay which, as already noted, was rejected by an order dated November 10, 2008. The relevant portion of the order impugned is as under:

Your petition for granting stay in the realisation of demand for the assessment year 2006-07 is not acceptable merely on the ground that you have filed an appeal against the said assessment order. Moreover, the perusal of the assessment order suggests that the respective additions were made with perfect marshalling of facts and with due importance to the principles of natural justice. I, therefore, do not find it a fit case to grant your petition to stay the recovery proceedings of the said demand. Hence, your above referred petition is rejected.

This is for your information with a further request to liquidate the said demand within 7 (seven) days of the receipt of this communication.

In order to decide the issue it is necessary to refer to the relevant provision in Section 220(6) of the Income Tax Act, 1961, which is as under:

220.(6) Where an assessee has presented an appeal u/s 246 or Section 246A 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.

Therefore, Section 220(6) of the Act, postulates that where an appeal u/s 246 or u/s 246A is pending, the Assessing Officer has the discretion, subject to such conditions as he may think fit to impose, to treat the assessee as not being in default in respect of the amount in dispute in the appeal, as long as such appeal remains pending though the time for payment might have expired. Consequently, a circular dated March 6, 1989, has been issued by the Revenue. Therefore, the Act confers discretion on the Assessing Officer to grant stay of realisation of taxes after protecting the interest of the Revenue. Thus, once the Assessing Officer chooses to exercise his discretion, in my view, it is to be done judiciously. From a perusal of the order impugned I find that discretion has been exercised mechanically and without the application of mind. Since an assessee has a statutory right to prefer appeal against an order of assessment, the observation of the Assessing Officer in the order impugned that "your petition for granting stay in the realisation of demand for the assessment year 2006-07 is not acceptable merely on the ground that you have filed an appeal against the said assessment order" is against the spirit of the statute. That apart the observation "the respective additions were made with perfect marshalling of facts" is uncalled for as it is the subject-matter of the appeal preferred against the order of assessment. Since discretion has to be exercised in a sound and judicious manner, which in the instant case was not done, the order dated November 10, 2008, under challenge cannot be sustained and is, thus, set aside and quashed. Since appeal has been preferred and is pending, respondent No. 2 is directed to dispose of the appeal preferably within a period of eight weeks from the date of communication of this order.

Since the writ petition is disposed of at the stage of admission without calling for affidavits, the allegations made in the writ petition are deemed not to have been admitted by the respondents.

The writ petition is, thus, allowed.

There will be no order as to costs.

Urgent xerox certified copy of this order, if applied for, be given to the appearing parties on priority basis.