Pre-Deposit Of 20% Demand Is Not Precondition For Consideration Of Stay Application During Pendency Of First Appeal: Delhi High Court

The Delhi High Court has held that a 20% pre-deposit demand is not a precondition for consideration of a stay application during the pendency of the first appeal.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the respondent department has clearly erred in proceeding on the assumption that the application for consideration of outstanding demands being placed in abeyance could not have even been entertained without a 20% pre-deposit. The stand as taken is thoroughly misconceived and wholly untenable in law.

The petitioner filed its Return of Income for AY 2018-19, claiming a refund of INR 6,45,65,160 on account of excess taxes deducted at source, which were deducted during the course of the said year. In the course of processing that ROI, notices under Sections 143(2) and 142(1) came to be issued on September 22, 2019 and January 9, 2020, respectively. The petitioner received an intimation, referable to Section 143(1), apprising it of an amount of INR 6,42,30,413 being refundable along with interest. However, when the assessment was ultimately framed and a formal order was passed under Section 143(3) read with Section 144B, various additions came to be made to the income disclosed in the ROI, leading to the creation of a demand of INR 10,26,85,633.

The petitioner preferred an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, which is stated to be pending. Simultaneously, it also moved an application purporting to be under Section 154 of the Act for correction of rectifiable mistakes, which, according to it, were apparent on the face of the record. Along with the rectification application, the petitioner on May 28, 2021, also filed a stay application in respect of the demand so raised. The rectification application, however, came to be perfunctorily rejected in terms of an order.

The assessee contended that the action so initiated and the adjustments affected are wholly arbitrary and illegal inasmuch as there exists no justification for the adjustments being made without their application referable to Section 220(6) being either considered or examined. The very purpose of Section 220(6) has been nullified by the action of the respondents, who have proceeded to make the impugned adjustments without even examining the application of the petitioner for not being treated as an “assessee in default.”.

The court allowed the writ petition and remitted the matter to the respondents, considering the application of the petitioner under Section 220(6).

Counsel For Petitioner: Salil Kapoor

Counsel For Respondent: Abhishek Maratha

Case Title: National Association Of Software And Services Companies (NASSCOM) Versus Deputy Commissioner Of Income Tax (Exemption) Circle 2 (1)

Citation: 2024 LiveLaw (Del) 327

Case No.: W.P.(C) 9310/2022

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