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Assessing officers should consider genuine difficulties of tax payers while allowing a stay proceeding in tax disputes and should not always seek the mandated 20 per cent of the demand.
The Madras High Court made this observation in the case of Samms Juke Box against the Income Tax Department for the assessment year 2015-16 and asked the Assessing Officer to reconsider the matter.
The Central Board of Direct Taxes (CBDT) had, in a circular in July last year, said that in cases where the outstanding demand is disputed before the Commissioner of Income-Tax (Appeals), the Assessing Officer can grant a stay on the demand till the case is disposed of, if the tax payer pays 20 per cent of the disputed demand.
The Madras High Court noted that while the CBDT has fixed a certain percentage of tax to be paid to stay proceedings, there is also a provision for exception in the circular and it does not completely “oust the jurisdiction of the officer” when considering a plea for stay.
The company, which is involved in conceptualising campaigns at petrol retail outlets/gas stations pan-India and providing branding, marketing and activations, had filed a writ petition before the Madras High Court against the Assessing Officer’s demand for 20 per cent of the disputed amount to stay proceedings.
It had contended that its declared income was just about one fourth of the assessed income and the tax demand is multiple times.
The Supreme Court had also ruled that in case of a dispute, tax authorities can accept less than 20 per cent of the demand amount to stay proceedings.
“The Madras High Court ruling clearly explains that the Assessing Officer should take into consideration the genuine hardship of the taxpayers and has also underlined the jurisdiction of the officer,” said a tax expert who did not wish to be named.
“The issue with respect to the grant of stay subject to payment of a part of the disputed demand has been a matter of debate in various cases particularly when the assessment is ‘high pitched’, that is the income assessed is substantially more than the income declared by the taxpayer,” said KPMG in a note, adding that in many cases the Assessing Officer tends to mechanically stick to the payment of a certain specified percentage of disputed demand by the taxpayer before they consider an application or stay of demand.
When contacted by BusinessLine , Samms Juke Box declined to comment as the matter is subjudice .
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