By TIOL News Service

CHENNAI, APRIL 13, 2018: THE ISSUE IS - Whether though the AO is not empowered to grant stay for recovery of tax, but has the power to postpone such payments. YES IS THE VERDICT.

Facts of the case:

The Assessee-company, has preferred the Writ petition challenging a communication sent by the Asst. CIT. The said communication was in reponse to the Assessee's request made for grant of stay of collection of the demand of tax in respect of the AY 2011-12. The Assessee in their letter, had pointed out that, as against the assessment order dated 30.11.2017, the Assessee had preferred appeal before the CIT(A), and the prospects of winning the appeal was very high and there were no lapses on the Assessee's part to disclose all the material facts truly and fully. The Assessee was undergoing financial constraints and if the demand was enforced, they will be put to undue hardship and the assessment was a high pitched assessment. However, the Asst. CIT by its disputed communication had informed the Assessee that there could not be any stay of the entire demand, but directed the Assessee to pay 20% of the disputed demand.

the High Court held that,

++ the provisions of the Act does not specifically provided for a power with the AO to grant stay of his own assessment order on the ground that an appeal has been preferred against the assessment order. However, the AO is empowered to pass appropriate orders, not to treat the Assessee as a defaulter by considering the facts and circumstances placed before it. This distinction was succinctly brought out in the decision in the case of Paulsons Litho Works. It was pointed out that the Act confers power on the ITO u/s 220(6) to treat the Assessee concerned is not in default, during the pendency of an appeal u/s 246 or upon the TRO, u/s 225(1), to grant further time or postpone the payment of tax to be recovered is no substitute for the power of stay, which is considered by the Supreme Court to be a necessary adjunct to the very powers of the appellate authority;

++ it was pointed out that the powers conferred on the ITO and the TRO cannot be quoted with the powers of the appellate authorities, either in the nature, quality or extent or vis-a-vis the hierarchy. There can be no comparison on the same with each other, they being heterogeneous in nature. It was further, held that the power conferred on the ITO and the TRO cannot be considered to be either an effective substitute so as to render nugatory or destructive of the other. The undoubted power of an appellate authority to grant stay as an adjunct to its appellate jurisdiction, cannot be denied to such authority merely because another authority can grant somewhat similar result oriented relief, which is merely subjected to the process of coercive recovery for the realization of the tax or penalty under dispute;

++ the Asst. CIT cannot be stated to be totally denude of jurisdiction to entertain a prayer from the Assessee not to treat him as an Assessee in default. As pointed out in the case of Paulsons Litho Works, the power of stay confers on the appellate authority cannot be equated to the power granted to the AO u/s 220(6). It is no doubt true that the AO should first consider the Assessee's request for stay of the demand as referred to in the instructions/guidelines issued by the CBDT and directed 20% of the demand to be paid. The Asst. CIT did not afford an opportunity of personal hearing;

++ the disputed communication dated 07.02.2018, cannot be treated to be an order, as it appears to be a reply given to the Assessee's request for grant of stay of the entire demand. On facts, this Court finds that the Assessee has not filed a stay petition before the CIT(A), while filing the appeal on 25.01.2018. It is not known as to why the Assessee has not moved for stay before the appellate authority. Therefore, this is a fit case, where the Assessee has to approach the CIT by way of a stay petition. This so because, according to the Assessee, identical issue is pending in appeals for the earlier AYs and those appeals are pending before the CIT at various stages. However, the Assessee has not prayed for any stay in those appeals, because taxes have been remitted without prejudice. Thus, the Assessee has to necessarily move the CIT by way of a stay petition, and if such petition is moved, then it is open to the CIT to consider the prima facie case which the Assessee would place before the authority and take a decision on merits and in accordance with law;

++ hence, the disputed communication dated 07.02.2018, is directed to be kept in abeyance for a period of four weeks from the date of receipt of a copy of this order. Within such time, the Assessee is directed to file a stay petition before the CIT in the pending appeal dated 25.01.2018, and such stay petition shall be heard on merits and in accordance with law preferably within a period of three weeks from the date on which the stay petition is filed.

(See 2018-TIOL-685-HC-MAD-IT)