AO Can’t Insist Upon Depositing 20% of Disputed Demand Without Considering Undue Hardship of Assessee | HC

Case Details: Sushen Mohan Gupta vs. PCIT - [2024] 161 taxmann.com 257 (Delhi)

Judiciary and Counsel Details

• Yashwant Varma & Purushaindra Kumar Kaurav, JJ.
• Balbir Singh, Sr. Adv. Sachit Jolly, Ms Soumya Singh, Ms Disha Jham & Devansh Jain, Advs. for the Petitioner.
• Prashant Meharchandani, SSC Akshat Singh, Ms Ritika Vohra & Utkarsh Kandpal, Advs. for the Respondent.

Facts of the Case

Assessee was subjected to a search and seizure operation under section 132 of the Income-tax Act. Notice under section 153A was issued for the relevant assessment year raising demand. The Assessing Officer (AO) passed the assessment order, and the assessee filed an appeal before the CIT(A). During the pendency of the appeal, the assessee filed a stay application before the AO. The AO disposed of the stay application, directing the assessee to deposit 20% of the outstanding demand.

Aggrieved by the order, the assessee filed stay application before the Principal Commissioner of Income Tax (PCIT). PCIT disposed of the stay application by directing the assessee to deposit 40% of the demand.

Aggrieved-assessee filed a writ petition before the Delhi High Court.

High Court Held

The High Court held that the PCIT failed to examine the prima facie merits of the challenge raised with respect to the assessment orders and evaluate the challenge’s prima facie merits. The PCIT placed the assessee under a harsher burden of depositing 40% of the outstanding demand instead of the direction framed by the AO, which had merely insisted upon the assessee depositing 20% as a pre-condition for considering its application for stay.

Both authorities have failed to deal with prima facie merits, the likelihood of success, and undue hardship. The impugned orders were consequently rendered wholly unsustainable on the aforesaid score alone.

Accordingly, the writ petition was allowed.