1. At the request of learned Counsel for both the parties, Petition is being taken up for final disposal at the stage of admission.
2. By this petition under Article 226 of the Constitution of India, the petitioner challenges the order dated 21 January 2014 passed by the Deputy Commissioner of Income Tax 6(1), Mumbai under Section 220(6) of the Income Tax Act, 1961 (the Act). By the impugned order, the Assessing Officer has granted stay against the coercive recovery of tax as determined by assessment order dated 17 December 2013 on the condition that the petitioner pay 50% of the total demand of Rs.493,19,16,310/-.
3. The impugned order dated 21 January 2014 after adjusting the refund of Rs.151,37,10.030/- pertaining to Assessment Year 2011-12 under Section 245 of the Act as per the intimation dated 31 December 2013 has directed the petitioner to pay the balance of Rs.95,22,48,125/-by 30 January 2014.
4. The petitioner carries business of life insurance under the certificate of registration granted by Insurance Regulatory & Development Authority of India (IRDA) under the Insurance Act, 1938. In terms of the requirement of the IRDA, (Preparation of Financial Statements and Auditors' Report of Insurance Companies) Regulations, 2002 read with Section 211 of the Companies Act, 1956, it has to maintain its two separate accounts namely - Share holders Account and Policy holders Account which are treated as separate and distinct. There are internal transfer of funds between the two accounts. However, as the petitioner carries a single business its taxable income is worked out by ignoring the internal transfer of funds between the aforesaid two accounts.
5. For the Assessment Year 2012-13, the Assessing Officer passed an Assessment Order dated 17 December 2013 under Section 143(3) of the Act and inter alia, determined the total income of Rs.12,563,789,820/-. The aforesaid income was determined by treating the internal transfer between the share holders and the policy holder accounts and vice-a-versa as a source of income and subjecting the same to the tax as Income. This determination was done even though the Income Tax Appellate Tribunal (the Tribunal) had in its order dated 14 September 2009 for the assessment years 2005-06 to 2008-09 and the CIT(A) for Assessment Years 2010-11 and 2011-12 have held that the transfer of funds from share holder accounts to policy holder account and vice-a-versa is to be ignored for determining the total income of the petitioner as inter-se transfer from one account to another is tax neutral .
6. Consequent to the order of Assessment dated 17 December 2013, the Assessing Officer issued a notice of demand on 17 December 2013 itself to the petitioner under Section 156 of the Act determining a sum of Rs.493,19,16,310/- as payable by the petitioner for the Assessment Year 2012-13. Being aggrieved by the Assessment Order dated 17 December 2013, the petitioner filed an appeal to the CIT (A) on 7 January 2014 and prayed for early hearing of its appeal in view of the huge demand of tax. However, the CIT(A) by communication dated 9 January 2014 rejected the petitioner's request for early hearing.
7. In the meantime, on 8 January 2014, the petitioner filed an application under Section 220(6) of the Act with the Assessing Officer seeking a stay of the demand of Rs.493,19,16,310/- which had primarily arising by seeking to tax inter-se transfer of funds from share holder account to policy holder accounts and vice-a-versa. It was pointed out by the petitioner that the Assessment Order dated 17 December 2013 was contrary to and in defiance of the binding orders of the Tribunal dated 14 September 2012 for Assessment Years 2005-06 to 2008-09 and of the CIT (A) dated 20 June 2013 for the Assessment Years 2009-10 to 2011-12 in the petitioner's own case. In particular, attention was drawn to the Circular No.530 dated 6 March 1989 issued by the Central Boards for Direct Tax (CBDT) wherein it has been specifically provided that when the demand in dispute relates to an issue that had been decided in favour of the assessee in an earlier order by an Appellate Authority, then in such a situation, the assessee should not be treated as an assessee in default and stay should be granted.
8. By the impugned order dated 20 January 2014, the Assessing Officer disposed of the petitioner's stay application under Section 220(6) of the Act by passing the following order:—
"(i) A total demand of Rs.493,19,16,310/- is raised in this case.
(ii) The assessee is required to pay 50% of total demand i.e. Rs.2,46,59,58,155/-.
(iii) As a refund of Rs.151,37,10,030/- pertaining to A. Y. 2011-12 has been adjusted against the above demand under intimation to the assessee u/s. 245 dated 31/12/2013, the assessee should pay the balance demand of Rs.95,22,48,125/-on or before 30/01/2014.
(iv) The balance 50% of the demand can be kept in abeyance till the disposal of appeal by CIT(A) or six months from the date of this order whichever is earlier, subject to payment of Rs.95,22,48,125/- as mentioned in para 3 above."
9. Ms. Arati Vissanji, learned Counsel for the petitioner in support of the petition submits as under: —
(a) |
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The impugned order rejecting the stay application does not meet with the requirements of the manner in which stay applications are to be disposed of as laid down by this Court in the matter of KEC International Ltd. v. B.R. Balakrishnan [2001] 251 ITR 158/119 Taxman 974 and the UTI Mutual Funds v. ITO [2012] 345 ITR 71/206 Taxman 341/19 taxmann.com 250 (Bom.). The impugned order ignores the prima fcie case of the petitioner as reflected in the binding orders of the Tribunal and CIT(A) for the Assessment Years 2005-06 to 2011-12. |
(b) |
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The Assessment Order dated 17 December 2013 for the Assessment Year 2012-13 was passed, ignoring the binding decision of the Tribunal dated 12 September 2012 in the petitioner's own case on an identical issue, covering the Assessment Years 2005-06 to 2008-09 by merely holding that the view of the Tribunal is untenable. |
(c) |
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The impugned order ignores the fact that the Assessing Officer deliberately delayed giving effect to the order of CIT(A) dated 20 June 2013 in a mala fide manner and gave effect to it only after having passed the Assessment Order dated 17 December 2013 for the Assessment Year 2012-13. Thus, it could then issue an intimation under Section 245 of the Act on 31 December 2013 and adjust the refund of Rs.151,37,10,030/- pertaining to Assessment Year 2011-12 as against the demand for Assessment Year 2012-13. |
(d) |
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Although appeal from Assessment Order dated 17 December 2013 has been filed with the CIT(A) on 7 January 2014, the request for early hearing was rejected. This was so even though the appeal involves a high demand and is otherwise covered by the decision of the Tribunal. |
10. On the other hand, Mr. Suresh Kumar, learned Counsel appearing for the respondents support the impugned order dated 21 January 2014 passed by the Assessing Officer under Section 220(6) of the Act. It is further submitted that the petitioner can apply to the CIT(A) on the administrative side to secure a stay of the demand under Section 220(6) of the Act. It is urged that this Court should not entertain this petition.
11. We have considered the rival submissions. We find it shocking that in-spite of the order of the Tribunal and the CIT(A), on identical issues for the earlier Assessment Years 2005-06 to 2011-12. The Assessing Officer in the order dated 17 December 2013 has ignored them. The Assessment Order dated 17 December 2013 ignores it on the ground that the view of the Tribunal is not tenable. In our hierarchical system of jurisprudence, it is not open to the Lower Authority to ignore the binding decision of a Superior Authority unless the order of the Superior Authority has been stayed. In fact, the Supreme Court in the matter of Union of India v. Kamlakshi Finance Corpn. Ltd. [1991] 55 ELT 433 has in similar circumstances held that:—
"6 :- … … ...
It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the order of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws."
On the aforesaid ground alone, there ought to have been a stay of the demand till the disposal of the appeal by CIT(A).
12. Moreover, we find that the action of the Assessing Officer in not giving effect to the order of the CIT(A) dated 20 June 2013 for the Assessment Year 2011-12 till 31 December 2013 does not appear bonafide. The effect was given to the order of CIT(A) after six months i.e. only on raising a demand on completion of assessment for Assessment Year 2012-13. It is apparent that the revenue is keen in not giving petitioner its refund and are acting contrary to and in defiance of orders passed by the Appellate Authority.
13. Besides, the impugned order is a non-speaking order and does not consider at all the petitioner's submissions. It is particularly submitted that the issue is covered in their favour by order of the Tribunal and CIT(A) in their own case. In view thereof, the demand itself was not sustainable. The reliance placed upon the Circular No.530 dated 6 March 1989 by the petitioner specifically provides that an assessee would not be considered to be an assessee in default, if the demand in dispute relates to an issue which has been decided in favour of assessee by an order of Appellate Authority. The aforesaid circular was issued in the context of the manner in which the Assessing Officer has to exercise its discretion under Section 220(6) of the Act while granting a stay of the demand.
14. Besides, the impugned order does not comply with the parameters laid down for disposing of the stay application as laid down by this Court in the matter of KEC International Ltd. (supra). The impugned order dated 20 January 2014 is not sustainable and is, therefore, set aside, save and except to the extent amount of refund of Rs.151,37,10,030/- pertaining to Assessment Year 2011-12 has been already adjusted against the adjudicated demand by issue of intimation under Section 245 of the Act.
15. In view of the above facts, it is imperative that the CIT (A) gives a priority to the petitioner's appeal for the Assessment Year 2012-13 and hear the same as expeditiously as possible and preferably by 30 April 2014. However, in the mean time, the respondents shall not take any coercive action to recover the balance amount of tax and interest payable as per Assessment Order dated 17 December 2013 and demand notice dated 17 December 2013 for the Assessment Year 2012-13.
The aforesaid stay of the demand notice for the Assessment Year 2012-13 would continue till the CIT(A) finally decides the appeal of the petitioner and for a period of four weeks thereafter, in case the decision is adverse to the petitioner.
16. Writ Petition is disposed of in the above terms with no order as to costs.