Adhiraj Cements vs. Union Of INDIA

Held

The High Court allowed the writ petition at the admission stage, quashing the impugned order dated March 23, 2023. The Court held that the authorities concerned must pass a speaking order on the application seeking waiver of pre-deposit, considering the facts and circumstances of the case objectively, in accordance with the provisions of Section 220(6) of the Income Tax Act, 1961. The Court found that the impugned order, which summarily rejected the waiver application without providing reasons, was not in line with the principles laid down by the Delhi High Court in the cited cases, which emphasized the need for objective consideration and reasoned orders. The reasoning was that the authorities have discretion under Section 220(6) to grant waiver or stay on amounts less than 20 percent of the disputed demand, and such applications cannot be summarily rejected. The Court directed the respondents to reconsider the petitioner's application for waiver of pre-deposit on its own merits and take an appropriate decision at the earliest, before initiating coercive steps. Other reliefs sought by the petitioner were left open for consideration at the appropriate stage.

Facts

The petitioner, Adhiraj Cements, filed a writ petition challenging an order dated March 23, 2023, passed by the ITA-3(1) Raipur. This order summarily rejected the petitioner's claim for waiver of pre-deposit while filing an appeal against an assessment order dated September 22, 2022. The ITA-3(1) Raipur directed the petitioner to deposit at least 20 percent of the demand raised. The petitioner argued that the authorities should have passed a speaking order on their application for waiver before proceeding with the appeal on merits. The respondents contended that the petitioner had a remedy of review, making the writ petition premature. However, the Court noted that the impugned order reflected the opinion of the Principal Commissioner of Income Tax, rendering a review potentially an empty formality.

Key Issues

1. Whether the Commissioner, Income Tax could have passed an order rejecting the petitioner's claim for waiver of pre-deposit without passing a speaking order on the application filed along with the appeal, as per Section 220(6) of the Income Tax Act, 1961? Petitioner's arguments: The petitioner contended that when an appeal is filed along with an application for waiver of pre-deposit, the authorities must pass a specific speaking order on the waiver application before proceeding with the appeal on its merits. They argued that the officer has discretion under Section 220(6) of the Income Tax Act to impose conditions for pre-deposit, and this discretion should be exercised objectively. The petitioner relied on Delhi High Court decisions in Dr. BL Kapur Memorial Hospital Vs. Commissioner of Income Tax and TATA Teleservices Limited Vs. Commissioner of Income Tax, which in turn relied on the Supreme Court's decision in PCIT Vs. M/s LG Electronics India Pvt. Ltd., holding that tax authorities have discretion to grant stay or waiver on amounts less than 20 percent of the disputed demand. Respondents' arguments: The respondents argued that the petitioner had an alternative remedy of review before the Principal Commissioner, and therefore, the writ petition should not be entertained at this juncture.