SC questions HC order asking Congress to move ITAT for stay on tax demand

Supreme Court/ File pic

The Supreme Court on Monday questioned the Delhi High Court's decision asking the Congress party to approach the Income Tax Appellate Tribunal (ITAT) for a stay on the Income Tax demand notice for recovery of outstanding dues of more than Rs 100 crore.

A bench of Justices BV Nagarathna and N Kotiswar Singh, which issued notice on the plea of the Congress against the March 13 high court order, however, said the ITAT can proceed on the political party's appeal.

"How can the high court ask the petitioner (Congress) to go back to ITAT when it came in appeal against the tribunal's order? The high court was not right in not exercising its jurisdiction," the bench observed. Additional Solicitor General N Venkataraman, appearing for the Income Tax department, informed the court that the recovery of the outstanding amount has already been made and the issue in question is of only academic interest now.

Senior advocate Vivek Tankha, appearing for the Congress party, submitted that the high court should have exercised its jurisdiction and at least granted an interim stay on the demand notice.

The bench then issued notice to the I-T department and said, "The pendency of this special leave petition will not come in the way of the ITAT deciding the plea before it." On March 13, the high court refused to interfere with the order of the ITAT declining to stay the notice issued by the I-T department.

The high court, however, granted liberty to the political party to approach the ITAT with a fresh stay application bringing to its notice the change in the circumstances including that an amount of Rs 65.94 crore has already been recovered by the I-T department by way of encashment of bank drafts.

"Accordingly, while we find no ground to interfere with the order impugned, we dispose of the writ petition according to liberty to the petitioner to approach the ITAT by way of a fresh stay application bringing to its attention the change in circumstances noticed above. An application, if so moved, may be considered by the ITAT with due expedition," the high court had ordered.

It had said Rs 65.94 crore translates to roughly 48 per cent of the outstanding demand, and this changed circumstance is an aspect which would merit consideration by the ITAT in case the Congress party chooses to move a fresh application for stay.

"Whether the aforesaid circumstance would merit protective measures being granted in respect of the balance outstanding demand, and if so to what extent, is an issue which must necessarily be considered by the ITAT in the first instance it being the tribunal which is in seisin (in possession) of the principal appeal. We thus refrain from rendering any conclusive opinion in this respect and leave this aspect open for the consideration of the ITAT," the high court had said.

It had passed the order while disposing of the Congress' plea challenging dismissal of its application by the ITAT in which it had sought a stay on the February 13 notice of the I-T department initiating recovery proceedings against it.

The assessing officer had raised a tax demand of more than Rs 100 crore for the assessment year 2018-19 when the income was assessed to be more than Rs 199 crore.

The high court had noted that after the Commissioner of Income Tax (Appeals) dismissed the party's appeal against the demand order on March 28, 2023, the petitioner moved an appeal before the ITAT on May 24, 2023 and a stay application was filed only on February 14, 2024.

"This would clearly appear to suggest that the petitioner has been far from vigilant and clearly lax in pursuing the legal remedies which were otherwise available," it had said.

The high court bench had said from the impugned order, what ultimately appears to have weighed upon the ITAT is of the petitioner having first been remiss in taking peremptory steps in respect of a demand which had remained outstanding right since 2021.

"The petitioner appears to have fallen into deep slumber and stood reawakened only in January 2023 when a notice of demand came to be raised," the high court had said.

It had said the problems that beset the petitioner (Congress) today are, to a large extent, of its own making and added that the ITAT was justified in rejecting the allegation of the action being either motivated or actuated by mala fides.

The counsel for the Congress had urged the high court to grant it some protection otherwise the party would collapse.

The I-T department's counsel before the high court had informed the bench that the original tax demand stood at Rs 102 crore and together with interest it rose to Rs 135.06 crore. He said Rs 65.94 crore stands recovered now.

The tribunal had on March 8 dismissed the stay application saying, "… we do not find that the recovery notice under Section 226(3) of the Act issued by the assessing officer on February 13, 2024 is lacking in bona fides, so as to require us to intervene." The party had earlier said the I-T tribunal order freezing its funds was "an attack on democracy" as it had come just ahead of the Lok Sabha elections.

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