Calcutta High Court Stays Recovery in High-Pitched Assessment Pending First Appeal
Background and Context
The Calcutta High Court in Great Barter Private Limited Vs ACIT examined whether recovery proceedings could continue in the case of a high-pitched assessment when a statutory appeal was already pending and an application under Section 220(6) of the Income Tax Act 1961 had been decided by directing pre-deposit of 20% of the demand.
Two intra-court appeals were preferred against a common order of the Single Judge, who had dismissed writ petitions challenging the Assessing Officer’s decision on the stay application. The Division Bench addressed both appeals together, as they raised identical issues of law and fact relating to:
- The scope of powers under
Section 220(6) - The concept of “high-pitched” assessments
- The approach to recovery when an appeal before the Commissioner of Income Tax (Appeals) is pending
Before dealing with the substantive controversy, the Court first addressed the delay in filing the appeals.
Condonation of Delay
Application for Condonation
An interlocutory application, I.A. No.CAN 1 of 2020 (Old CAN 2510 of 2020), was filed to condone a delay of 469 days in presenting the intra-court appeal. A similar application was also on record in the connected matter (Old CAN 2504 of 2020).
The Court:
- Heard submissions of counsel for the assessee and the Revenue
- Examined the affidavit explaining the reasons for delay
On being satisfied that sufficient cause had been shown, the Division Bench:
- Condoned the delay in filing both appeals
- Allowed the applications for condonation
- Declined to award any costs in relation to the delay applications
Thus, the appeals were treated as validly instituted and taken up for final adjudication.
Facts Leading to the Writ Petitions and Appeals
Challenge Before the Single Judge
The assessee had earlier filed writ petitions challenging an order of the Assistant Commissioner of Income Tax, Central Circle-I(1), Kolkata, who had decided an application under Section 220(6).
Key features of the impugned order:
- The Assessing Officer had required the assessee to pay 20% of the tax demand determined in the assessment order
- This 20% payment was stipulated as a pre-condition for grant of stay of recovery pending disposal of the appeal before the Commissioner of Income Tax (Appeals)
The assessee had placed several grounds both before the Assessing Officer and in the writ petitions to assail this condition, which were noticed by the Single Judge. However, the Single Judge dismissed the writ petitions essentially on the reasoning that:
- The assessee had not pleaded “hardship” in the application under
Section 220(6) - Therefore, the order of the Assessing Officer could not be faulted
This led the assessee to prefer intra-court appeals before the Division Bench.
Nature of Assessment and Appeal Status
The Division Bench noted several crucial factual aspects:
- The assessments in question were high-pitched.
- The assessee had filed a loss return, but the Assessing Officer had completed assessment by determining positive income, resulting in substantial tax demand.
- The assessee had filed statutory appeals before the Commissioner of Income Tax (Appeals), the second respondent, on 25 January 2018, within the prescribed limitation period.
- Those appeals had remained pending for more than two years by the time the intra-court appeals were heard.
- Counsel for the assessee informed the Court that the notice of demand had not yet been enforced till the date of hearing of the appeals.
These facts formed the backdrop against which the Court evaluated the legality and propriety of insisting on a 20% pre-deposit when the appeal itself remained undecided for an inordinately long period.