Slum Rehabilitation Authority vs. DDIT (Bombay High Court)

(i) At the very outset, it must be pointed out that the manner in which the Assessing Officer has disposed of the application for stay by impugned order is in complete breach of the directions of this Court as set out herein above. Besides in any event the tests applied to dispose of the stay application by the impugned order are not at all germane to disposing of the stay application. The first test applied is absence of financial hardship being pleaded. This issue was a subject matter of consideration by the Court in UTI Mutual Fund v/s. ITO W. P.
(L) No.523 of 2013 rendered on 6th March 2013 and it was held that it is not the law that in the absence of financial hardship, no stay of recovery can be granted. The Court held that where a strong prima facie case is made out, a direction to deposit would itself cause financial hardship. Therefore, in our view, the Assessing Officer must deal with the prima facie merits of the Petitioner’s case in appeal and if the same is covered against the revenue in view of a decision of a superior forum then the question of considering the issue of financial hardship may not arise. Financial hardship is relevant only when the assessee is unable to make out a case on merits for an unconditional stay of the demand. In this case, the Assessing Officer has not dealt with the prima facie case. Moreover, in the impugned order the Assessing Officer has not dealt with the issue as it has already been dealt with in the Assessment Order. If this justification is to be accepted there is no reason for the Act to provide for a stay of demand by the Assessing officer till the disposal of the appeal by the CIT(A). This is also contrary to the guidelines laid down in UTI Mutual Funds (345 ITR 71) that ‘though the Assessing Officer had made an assessment, he must objectively decide the application for stay considering that an appeal lies against his order..’;

(ii) However it was urged on behalf of the petitioner that a prima facie case by itself would warrant an unconditional stay till the disposal of the appeal by the first appellate authority. A prima facie case would mean an an arguable case on first look/appearance. There are varying shades/degrees of a prima facie case. An issue which stands concluded by a decision of a higher forum in favour of the applicant, if not distinguishable on the face of it, would warrant an unconditional stay. Conversely, if the issue is covered against the applicant by a decision of an higher forum then complete deposit of amounts attributable to the issue would be justified. The fact that the issue is in further appeal would not by itself reduce the binding effect of the decision of the higher forum. Similarly another instance of strong prima facie case which would warrant an unconditional stay would be an instance where the order being appealled against is in breach of principles of natural justice. However where the issue is not concluded one way or the other by a decision of a higher forum, then the Authority considering the stay application would have to prima facie consider on the face of the impugned order, the likelihood of the applicant succeeding in appeal. This need not be detailed examination but a first look examination and on that basis it is for the authority to exercise his discretion in law and grant such stay depending upon likelihood of success in appeal. At this stage various other factors such as financial hardship, balance of convenience etc would enter into consideration to decide the terms of the stay of demand, if any. These are general principles for guidance, illustrative in nature and the Authorities must exercise their discretion in law depending upon the facts before them.