MUMBAI: Some taxpayers may be in for a nasty surprise in the next few weeks if the taxman has his way.
The income tax (I-T) department is stepping in to lift some of the stay orders obtained by taxpayers from appellate tribunals which function as quasi judicial authority.
The rationale behind the department’s action is a Supreme Court ruling that stay orders, irrespective
of whether a case is criminal or civil, will not extend beyond six months except in exceptional cases.
Thus, the department is focusing on cases where I-T Appellate Tribunal (ITAT) has extended stay orders beyond six months.
The move is aimed to shore up revenue before March 31: if a stay can be vacated in the next few weeks, the taxpayer would come under immediate pressure to pay up before fiscal closing.
“But the SC’s decision may not apply to proceedings before ITAT as ITAT is not a court and tax proceedings cannot be equated with trials,” said senior chartered accountant Dilip Lakhani.
A few applications (to vacate stay orders) have already been filed in ITAT and more are expected by March 15, sources told ET. It is learnt that the decision to move ITAT was endorsed by PC Mody, chairman, Central Board of Direct Taxes (CBDT), during a recent video conference with senior tax officials.
The tax department’s desperation stems from a stiff target of Rs 12 lakh crore fixed in the Interim Budget. Total net collection as on March 7, 2019, was a little over Rs 8.45 lakh crore — up from Rs 7.79 lakh crore till February 20.
Tax professionals, who are familiar with the department’s high-pitched demands, delayed refunds, and aggressive recovery of tax deducted at source (TDS) are somewhat taken aback by the recent development.
“Considering the facts of a case, the ITAT judiciously grants extension beyond 6 months... in case where Tribunal has given ruling in favour of the assessee after interpreting the law in a particular manner, and on the same law point there is a subsequent SC decision overruling the earlier position, then it can be construed that there was mistake apparent from record; but, when ITAT has stayed the demand based on facts the above principle of law cannot apply,” said Lakhani.
In the case Asian Resurfacing of Road Agency & others versus Central Bureau of Investigation (CBI), which the I-T department is relying on, the apex court on March 28, 2018, said: “Delay in trials affects the faith in Rule of Law and efficacy of the legal system. It affects social welfare and development. Even in civil or tax cases it has been laid down that power to grant stay has to be exercised with restraint… In cases where stay is granted in future, the same will end on expiry of six months from the date of such order unless similar extension is granted by a speaking order. The speaking order must show that the case was of such exceptional nature...”
Having received the assessment order, a taxpayer can first challenge the order before Commissioner of I-T Appeals and is required to deposit 20% of the amount on obtaining a stay; if the appeal is dismissed, the assessee can move the ITAT. The Tribunal may grant a stay for six months and even extend it for another six months but rarely beyond a year.
“This means assessees would now need to approach high court for reinstatement of stay after 6 months. The department’s stance is purely aimed at augmenting collection.
A stay pending justice is a right which assessees enjoy... Such applications by the department may not carry the right message, particularly for high-pitch assessments….,” said Mitil Chokshi, partner at Chokshi & Chokshi.
CBDT’s responseResponding to ET’s query, a CBDT spokesperson said: “…the department in its normal course of functioning is interested in the expeditious disposal of each case on merits, including those involving stay matters. Each case needs to be taken to a logical conclusion which may, at times, necessitate moving for vacation of stay depending on the facts of each case.
That it may result in a collection of revenue may only be incidental.” “The apex court in its recent decision has also endorsed periodic review of such matters, an action which is routinely being done by the department while monitoring all cases, including those which may involve stay matters,” the person added.
The income tax (I-T) department is stepping in to lift some of the stay orders obtained by taxpayers from appellate tribunals which function as quasi judicial authority.
The rationale behind the department’s action is a Supreme Court ruling that stay orders, irrespective
of whether a case is criminal or civil, will not extend beyond six months except in exceptional cases.
Thus, the department is focusing on cases where I-T Appellate Tribunal (ITAT) has extended stay orders beyond six months.
The move is aimed to shore up revenue before March 31: if a stay can be vacated in the next few weeks, the taxpayer would come under immediate pressure to pay up before fiscal closing.
“But the SC’s decision may not apply to proceedings before ITAT as ITAT is not a court and tax proceedings cannot be equated with trials,” said senior chartered accountant Dilip Lakhani.
A few applications (to vacate stay orders) have already been filed in ITAT and more are expected by March 15, sources told ET. It is learnt that the decision to move ITAT was endorsed by PC Mody, chairman, Central Board of Direct Taxes (CBDT), during a recent video conference with senior tax officials.
The tax department’s desperation stems from a stiff target of Rs 12 lakh crore fixed in the Interim Budget. Total net collection as on March 7, 2019, was a little over Rs 8.45 lakh crore — up from Rs 7.79 lakh crore till February 20.
Tax professionals, who are familiar with the department’s high-pitched demands, delayed refunds, and aggressive recovery of tax deducted at source (TDS) are somewhat taken aback by the recent development.
“Considering the facts of a case, the ITAT judiciously grants extension beyond 6 months... in case where Tribunal has given ruling in favour of the assessee after interpreting the law in a particular manner, and on the same law point there is a subsequent SC decision overruling the earlier position, then it can be construed that there was mistake apparent from record; but, when ITAT has stayed the demand based on facts the above principle of law cannot apply,” said Lakhani.
In the case Asian Resurfacing of Road Agency & others versus Central Bureau of Investigation (CBI), which the I-T department is relying on, the apex court on March 28, 2018, said: “Delay in trials affects the faith in Rule of Law and efficacy of the legal system. It affects social welfare and development. Even in civil or tax cases it has been laid down that power to grant stay has to be exercised with restraint… In cases where stay is granted in future, the same will end on expiry of six months from the date of such order unless similar extension is granted by a speaking order. The speaking order must show that the case was of such exceptional nature...”
Having received the assessment order, a taxpayer can first challenge the order before Commissioner of I-T Appeals and is required to deposit 20% of the amount on obtaining a stay; if the appeal is dismissed, the assessee can move the ITAT. The Tribunal may grant a stay for six months and even extend it for another six months but rarely beyond a year.
“This means assessees would now need to approach high court for reinstatement of stay after 6 months. The department’s stance is purely aimed at augmenting collection.
A stay pending justice is a right which assessees enjoy... Such applications by the department may not carry the right message, particularly for high-pitch assessments….,” said Mitil Chokshi, partner at Chokshi & Chokshi.
CBDT’s responseResponding to ET’s query, a CBDT spokesperson said: “…the department in its normal course of functioning is interested in the expeditious disposal of each case on merits, including those involving stay matters. Each case needs to be taken to a logical conclusion which may, at times, necessitate moving for vacation of stay depending on the facts of each case.
That it may result in a collection of revenue may only be incidental.” “The apex court in its recent decision has also endorsed periodic review of such matters, an action which is routinely being done by the department while monitoring all cases, including those which may involve stay matters,” the person added.
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