Jagdish Gandabhai Shah vs. Pr CIT (Gujarat High Court)

(i) The AO rejected the stay application of the petitioner solely on the ground that the assessee has not deposited 15% of the disputed demand either at the time of submitting the stay application or before his stay application is considered. Thus, according to the Assessing Officer-respondent no. 2 herein, before the stay application is submitted and/or considered on merits, the assessee is required to make deposit of 15% of the disputed amount as a pre-deposit. The aforesaid interpretation is made absolutely on misconception and/or misreading of the modified instructions of the CBDT dated 29th February 2016.

(ii) Considering Clause 4 of the modified instructions dated 29th February 2016, as and when stay application is submitted by the assessee requesting to grant stay of demand till disposal of first appeal, it is for the Assessing Officer to pass appropriate order and grant stay of the demand till disposal of first appeal on payment of 15% of the disputed demand; unless the case falls in the category discussed in para [B] of Clause 4 of the modified instructions dated 29th February 2016. Considering the modified instructions dated 29th February 2016 as a whole, there is no such requirement of pre-deposit of 15% of the disputed demand either at the time of submitting stay application or before the stay application of the assessee is considered on merits. Clause 4 of the modified Instructions dated 29th February 2016 reads as under:-

“4. In order to streamline the process of grant of stay and standardize the quantum of lump sum payment required to be made by the assessee as a pre-condition for stay of demand disputed before CIT [A], the following modified guidelines are being issued in partial modification of Instruction No. 1914 :

[B] In a situation where, (a) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted [eg., in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc], or (b) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted [e.g., in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc], the assessing officer shall refer the matter to the administrative Principal CIT/CIT, who after considering all relevant facts shall decide the quantum/proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.”

(iii) Therefore, the interpretation by the Assessing Officer that at the time of submitting stay application and/or before stay application is taken up for consideration on merits, the assessee is required to deposit 15% of the disputed demand as pre-deposit is absolutely based on misinterpretation and/or misreading of the modified Instructions dated 29th February 2016. What Clause-4 provides is that the Assessing Officer may/shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category mentioned in para 4 [B] of the modified instructions dated 29th February 2016. Under the circumstances, the impugned decision of the respondent no. 2 in rejecting the stay application and consequently directing the petitioner to deposit 100% of the disputed demand on the ground that the petitioner has not deposited 15% of the disputed demand as a pre-deposit before his application for stay is considered on merits cannot be sustained and the same deserves to be quashed and set-aside. The matter is required to be remanded to the Assessing Officer to consider the stay application in accordance with law and on merits, in light of the modified instructions dated 29th February 2016 and observations made by us in the present order.

(iv) In case, the Assessing Officer is of the view that any deviation from clause 4 [A] is warranted ie., if the Assessing Officer is of the opinion that case falls within parameters of Clause 4 [B](a) ie., the Assessing Officer is of the opinion that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted, in that case, the Assessing Officer is required to refer the matter to the administrative Principal CIT/CIT, who shall, after considering the relevant facts, decide the quantum/proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand. In case the Assessing Officer is of the opinion that the case falls within the parameters of Clause 4 [B](b) of the modified instruction dated 29th February 2016 ie., if the Assessing Officer is of the view that the nature of addition resulting in the disputed demand is such that payment of lump sum amount lower than 15% is warranted, in that case also, the Assessing Officer is required to refer the matter to the administrative Principal CIT/ CIT, who after considering all the relevant facts, shall decide the quantum/proportion of the demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand. Therefore, the submissions made on behalf of the Revenue that only when the case falls under Clause 4 [B][(b), in that case only, the Assessing Officer is required to refer the matter to the administrative Principal CIT/CIT and not in case when the case falls under Clause 4 [B](a), the aforesaid has no substance. Between clause 4 [B](a) and clause 4 [B] (b), the word used is “or” and therefore, in both the eventualities ie., in case of Clause 4 [B](a) and in case of Clause 4 [B](b) ie., in case the Assessing Officer is of the opinion that the assessee is required to deposit either above 15% or less than 15% of the disputed demand, in that case, the Assessing Officer is required to refer the matter to the Principal CIT/CIT and thereafter, the Principal CIT/CIT is required to take appropriate decision, after considering all the relevant facts and determine the lump sum payment to be made by the assessee for granting stay of the balance demand.

(v) In a case where the Assessing Officer grants stay of demand on payment of 15% of the disputed demand and the assessee is still aggrieved, in that case, a further right is conferred upon the assessee to approach the jurisdictional administrative Principal CIT/CIT for review of the decision of the Assessing Officer.

(vi) Under the circumstances, for the reasons stated above, the impugned decision of the respondent no.2- Assessing Officer rejecting the stay application cannot be sustained and the same deserves to be quashed and set-aside. So far as the decision of the respondent no. 1 is concerned, it appears that after the decision rendered by the respondent no. 2, the assessee filed stay application before the respondent no. 1 and the respondent no. 1 has passed the impugned order mainly considering the order of the Assessing Officer. Therefore, first, the Assessing Officer is required to take appropriate decision on the stay application, as per the modified instruction dated 29th February 2016 and unless the case falls within Clause 4 [B](a) & (b), he is required to pass appropriate order on the stay application, granting stay on payment of 15% of the disputed demand. In case, the Assessing Officer is of the opinion that the case falls within Clause 4 [B](a) or (b), in that case, he is required to follow the procedure as observed hereinabove; more particularly, Clause 4 [B] where the Assessing officer is required to refer the matter to the administrative Principal CIT/CIT and thereafter, the Principal CIT/CIT to take appropriate decision.