Case summary, Income Tax

Stay of demand on payment of an amount lesser than prescribed per cent of disputed tax demand: Jurisdiction of tax authorities to grant a stay

Case: The KEM Hospital and Seth G. S. Medical College Employees Co-Operative Credit Society Ltd vs. Union of India, Bombay HC

Outcome: Assessee

Facts

  • The Assessee was an Association of Persons running a co-operative credit society and providing credit to its members.
  • For the assessment year 2017-18, the Assessing Officer passed the assessment order holding Assessee was a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Treating the Assessee as a co-operative bank, the deduction claimed by the Assessee under section 80P of the Income Tax Act, 1961 was declined by the Assessing Officer.
  • Aggrieved by the order of assessment, Assessee preferred an appeal before the first appellate authority. While the appeal of the Assessee was pending, the Assessee submitted an application with the prayer that the entire demand is stayed/kept in abeyance till disposal of the appeal by the first appellate authority.
  • The contention of the Assessee was that in earlier years, similar orders passed by the Assessing Officer were interfered with by the first appellate authority, wherein it was held that the Assessee was a co-operative society and deduction under Section 80P was allowed to the Assessee. Such orders of the first appellate authority were affirmed by the Income Tax Appellate Tribunal.
  • Therefore, it was contended that there was no reason for the Assessing Officer to take a different view in the assessment order under consideration ignoring the binding decision of the higher authorities for the earlier years. However, the authorities rejected the stay application by referring to the circular of the Central Board of Direct Taxes dated 29.02.2016 and Assessee was asked to pay 20% of the demand.

Key Points

  • In present facts of the case, the authorities did not address the issues raised by the Assessee that in his own case for earlier assessment years against orders passed by the Assessing Officer on the same issue, the first appellate authority had held it to be a co-operative society and entitled to deduction under Section 80P(2) of the Act which was confirmed by the Tribunal. It was not the case of the Assessee that only because it has filed an appeal before the first appellate authority, the entire demand should stay.
  • Therefore, the demand notice was liable to stay till disposal of the appeal by the first appellate authority in case of the Assessee.

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