Delhi High Court Directs Assessing Officer To Decide Centre For Policy Research's Application To Stay Income Tax Demand Afresh

The Delhi High Court has recently directed the Assessing Officer (AO) to decide afresh the application moved by the Indian public policy think tank Centre for Policy Research (CPR) seeking a stay of the income tax demand for the year 2022-23.

A division bench comprising of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav set aside the Assessing Officer's order passed on May 03 disposing of CPR's application for stay of the demand, while requiring the think tank to deposit 20% of the outstanding demand as a pre-condition for granting protection.

The bench observed that the AO neither considered the prima facie merits of the challenge raised by CPR nor did it deal with the issue of undue hardship.

The court said that the AO appeared to have “mechanically proceeded” on the premise that since CPR had not made a pre-deposit of 20%, the application for a stay of demand could not be considered.

“In view of the above, and in our considered opinion, there would appear to be no justification to retain the instant petition on our board. The ends of justice would in fact warrant the matter being remitted to the AO for considering the stay application moved by the writ petitioner afresh,” the court said.

It added: “We, accordingly, allow the instant writ petition and set aside the impugned order dated 03 May 2024. The matter shall in consequence stand remitted to the AO who shall examine the application for stay of demand afresh and bearing in mind the legal principles as enunciated in NASSCOM.”

Vide the impugned order, the AO refused to accede to CPR's request to keep the outstanding demand in abeyance.

Accordingly, the AO rejected the think tank's request for a stay of income tax demand as it had not submitted proof of making the requisite payment of 20 percent of the outstanding demand.

The AO had observed that merely filing of appeal against the assessment order did not form any reasonable cause for keeping the demand in abeyance.

The AO had then requested CPR to deposit at least 20% of the outstanding demand and furnish the proof of payment on or before May 09. In case of failure, the AO added, that CPR shall be treated as an "assessee in default" and that coercive measures would be taken for recovery of the outstanding demand as per the existing provisions of the Income Tax Act, 1961.

The Union Ministry of Home Affairs has cancelled the Foreign Contribution Regulation Act (FCRA) registration of CPR. The said registration was earlier suspended in February last year.

During the suspension, the Delhi High Court last year allowed CPR's plea seeking permission to utilise 25% of “unutilized funds” in the fixed deposits towards the payment of salaries of its employees.

Earlier this year, the Supreme Court dismissed the Income Tax Department's appeal against the stay granted in favour of CPR in respect of cancellation of its registration under Section 12A of the Income Tax Act.

Counsel for Petitioner: Mr. Arvind P. Datar, Sr. Adv. with Mr. Sachit Jolly, Ms. Soumya Singh, Ms. Disha Jham, Mr. Devansh Jain, Mr. Aditya Rathore & Mr. Abhyudaya Bajpai, Advs

Counsel for Respondents: Mr. Zoheb Hossain, Spl. Counsel with Mr. Vipul Agarwal, SSC, Mr. Sanjeev Menon, Mr. Gibran Naushad & Ms. Sakshi Shairwal, JSCs

Title: CENTRE FOR POLICY RESEARCH v. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 14, DELHI & ANR.

Citation: 2024 LiveLaw (Del) 589

Click here to read order