Supreme Court Issues Notice To IT Department On NewsClick's Plea To Stay Tax Demand

The petition, filed through Advocate-on-Record Kumar Dushyant Singh, states that the respondent-tax authorities, vide orders passed in February and November, 2023, arbitrarily rejected NewsClick's application for stay of demand during pendency of its appeal before the Commissioner of Income-Tax (Appeals) against Assessment Order dated December 30, 2022. These orders further directed it to pay 20% of the demand amount before applying afresh for stay of demand.

Reportedly, vide the Assessment Order dated December 30, 2022, the Assessing Officer treated receipts of INR 15.53 crores from one Justice and Education Fund (“JEF”) as “Unexplained Cash Credit” under Section 68 of the Income Tax Act, 1961. A demand for INR 14.8 crores was raised, after disallowing the expenses claimed, and taxing the receipts of INR 15.53 crores @ 60 percent.

Aggrieved by the said orders, NewsClick approached the Delhi High Court, however, its plea was dismissed.

It is alleged that thereafter, the Income Tax Department froze NewsClick's bank accounts, from which the entire demand amount of INR 14.8 crores now appears to have been debited (in effect).

It is NewsClick's grievance that its operations have come to a grinding halt as a result of the impugned orders, despite the Assessment Order, pursuant to which demand has been raised, being unlawful and under challenge in an appeal.

In the petition, it is claimed that the impugned orders are non-speaking, and have been passed without considering NewsClick's contentions on merits, despite the demand raised being high-pitched. It is further claimed that while deciding an application for stay of deposit, "prima facie case, balance of convenience, and irreparable loss are to be considered, and in case any of these factors is not considered, such an order would suffer from arbitrariness and irrationality, and would be liable to be set aside".

Insofar as the Assessing Officer doubted the genuineness of the transaction between Newsclick and JEF on the basis that assessee (NewsClick) could not provide item-wise correlation of expenses incurred on each video, article and script supplied by it to JEF, NewsClick asserts that it provided details and proof of total expenses incurred under each head (such as salaries, consultancy charges, news subscription charges, etc.). However, “no entity can be expected to correlate expenses incurred on each item of service provided. This is an impossible expectation and demonstrates the mala fide targeting of the petitioner.”

NewsClick also pleads that Section 68 has no application to the case, as well as that the entire receipts came through proper banking channels and were shown as part of total revenue in the relevant ITR.

The matter is likely to be listed on January 19, 2023.

Counsels for Petitioner: Senior Advocates Kapil Sibal and Devadatt Kamat; AOR Kumar Dushyant Singh; Advocate Rohit Sharma