Saturday, April 13, 2013

S. 220(6): AO reminded that he is not mere “tax gatherer” & cautioned to follow guidelines for recovery of tax

Rajasthani Sammelan Sarvoday vs. ADIT (Bombay High Court)

S. 220(6): AO reminded that he is not mere "tax gatherer" & cautioned to follow guidelines for recovery of tax

The assessee, a public charitable trust, filed a ROI returning Nil income. The AO passed a s. 143(3) assessment order holding that the assessee was not eligible for s. 11 exemption on the ground that the receipt of donations by it amounted to a commercial activity and assessed its total income at Rs. 3.51 crores. The assessee filed an application for stay u/s 220(6). Without dealing with the stay application, the AO directed the assessee to pay the demand within 3 days and threatened coercive proceedings in the event of failure. The assessee filed an application before the DIT who directed it to pay 50% of the demand by March 2012 and the balance in installments. No reasons were given on why the stay application was not acceded to. The assessee filed a Writ Petition to challenge the direction: HELD by the High Court:

In the present case, as in several cases which have come up before this Court and particularly in the month of March, it is evident that the AO & DIT have both had scant regard to the parameters which have been laid down by this Court for disposal of stay applications in KEC International Ltd 251 ITR 158 & UTI Mutual Fund. No reasons are indicated. The orders do not contain a prima facie evaluation of the issues which would arise in appeal. In UTI Mutual Fund, this Court was constrained to issue a cautionary observation to the effect that AOs and Appellate Authorities, when they dispose of applications for stay, act as quasi judicial authorities and not merely as tax gatherers of the Revenue. While they have a duty of protecting the interests of the Revenue, they need to mitigate the hardship to the assessee and applications for stay must be considered objectively. The assessee does have serious issues to be urged before the CIT (A) and the AO & DIT ought to have granted a complete stay of demand u/s 220(6)
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Related Judgements
Tata Toyo Radiators Pvt Ltd vs. UOI (Bombay High Court) In several judgments of this Court, the parameters for the exercise of jurisdiction u/s 220(6) of the Act have been spelt out. In KEC International Ltd. v. B.R. Balakrishnan 251 ITR 158, the importance of reasoned orders being passed on the stay applications was emphasized. The AOs consistently refuse…
Paramount Health Services vs. ACIT (Bombay High Court) In KEC International it was noted that in a large number of matters orders are passed perfunctorily by the department only with an idea of effecting recovery before March 31, though such orders could have been passed earlier in detail and after recording proper reasons. The law laid down…
UTI Mutual Fund vs. ITO (Bombay High Court) S. 220(6): Guidelines laid down on how stay applications should be dealt with The assessee, a mutual fund, was a beneficiary of a trust named India Corporate Loan Securitisation Trust which was set up for securitising a loan of Rs.300 crores by issue of Pass Through Certificates (PTCs)….

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