The Delhi high court on Wednesday refused to interfere with the order of the Income Tax Appellate Tribunal declining to stay a notice issued by the Income Tax department to the Congress party for recovery of outstanding tax of more than Rs 100 crore.
The high court, however, granted liberty to the political party to approach the ITAT with a fresh stay application bringing to its notice the change in circumstances including that an amount of Rs 65.94 crore has already been recovered by the I-T department following encashment of bank drafts.
“Accordingly, while we find no ground to interfere with the order impugned, we dispose of the writ petition according liberty to the petitioner to approach the ITAT by way of a fresh stay application bringing to its attention the change in circumstances noticed above. An application, if so moved, may be considered by the ITAT with due expedition,” a bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav said.
It said Rs 65.94 crore translates to roughly 48 per cent of the outstanding demand, and this changed circumstance is an aspect which would merit consideration by the ITAT in case the Congress chooses to move a fresh application for stay.
“Whether the aforesaid circumstance would merit protective measures being granted in respect of the balance outstanding demand, and if so to what extent, is an issue which must necessarily be considered by the ITAT in the first instance it being the tribunal which is in seisin (in possession) of the principal appeal. We thus refrain from rendering any conclusive opinion in this respect and leave this aspect open for the consideration of the ITAT,” the high court said.
It passed the order while disposing of the Congress' plea challenging dismissal of its application by the ITAT in which it had sought a stay on the February 13 notice of the I-T department initiating recovery proceedings against it.
The assessing officer had raised a tax demand of more than Rs 100 crore for the assessment year 2018-19 when the income was assessed to be more than Rs 199 crore.
The high court noted that after the Commissioner of Income Tax (Appeals) dismissed the party's appeal against the demand order on March 28, 2023, the petitioner moved an appeal before the ITAT on May 24, 2023 and a stay application was filed only on February 14, 2024.
“This would clearly appear to suggest that the petitioner has been far from vigilant and clearly lax in pursuing the legal remedies which were otherwise available,” it said.
The bench said, “As we read the impugned order, what ultimately appears to have weighed upon the ITAT is of the petitioner having firstly been remiss in taking peremptory steps in respect of a demand which had remained outstanding right from 2021. It failed to abide by the conditions which had been imposed by the AO (assessing officer) while considering its application under Section 220(6) of the Act.
“The petitioner appears to have fallen into deep slumber and stood reawakened only in January 2023 when a notice of demand came to be raised.”
It said the problems that beset the petitioner today are, to a large extent, of its own making and added that the ITAT was justified in rejecting the allegation of the action being either motivated or actuated by mala fides.
Taking note of the adjournments taken by the Congress party before ITAT, the bench said an assessee in default can neither be permitted nor expected to adopt such a casual or lackadaisical approach while faced with a tax demand which had remained outstanding right from 2021 and in respect of which no protective measures were sought or adopted for almost two years between 2021 and 2023.
It said the ITAT's order reflects that due consideration was given to the grounds of challenge and the view taken by the tribunal does not appear to suffer from any manifest illegality which would have warranted the high court to invoke its powers of judicial review.
The counsel for the Congress had urged the court to grant it some protection otherwise the party would collapse.
The I-T department's counsel had informed the court that the original tax demand stood at Rs 102 crore and together with interest it rose to Rs 135.06 crore. He said Rs 65.94 crore stands recovered now.
The tribunal had dismissed the stay application saying, "… we do not find that the recovery notice under Section 226(3) of the Act issued by the assessing officer on February 13, 2024 is lacking in bona fides, so as to require us to intervene."
The party had earlier said the I-T tribunal order freezing its funds was "an attack on democracy" as it had come just ahead of the Lok Sabha elections.
