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Attention taxpayers! Stay orders may not be enough as taxman looks to meet revenue target

The income tax department is reportedly moving to lift stay orders obtained by taxpayers from Income Tax Appellate Tribunals that go beyond six months

twitter-logoBusinessToday.In | March 11, 2019 | Updated 16:07 IST
Attention taxpayers! Stay orders may not be enough as taxman looks to meet revenue target

The government had revised the direct tax collections target for the current fiscal to Rs 12 lakh crore in the Interim Budget, but with collections still lagging far behind - total net collection as on March 7, 2019, reportedly stood at a little over Rs 8.45 lakh crore - the taxman is getting desperate, and creative with chasing revenues before the month ends.

According to The Economic Times, the income tax department is now moving to lift some stay orders obtained by taxpayers from Income Tax Appellate Tribunals (ITAT) that function as a quasi-judicial authority. Sources told the daily that a few applications to this effect have already been filed in ITAT and more are expected by March 15. Significantly, if a stay can be vacated in the next few weeks, the taxpayer would come under immediate pressure to pay up before end-March.

The decision to move ITAT was reportedly endorsed by PC Mody, chairman, Central Board of Direct Taxes (CBDT), during a recent video conference with senior tax officials. The logic behind this action stems from a Supreme Court ruling that clarified that stay orders, irrespective of whether a case is criminal or civil, cannot extend beyond six months except in exceptional cases. "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..." the apex court had said in the case of Asian Resurfacing of Road Agency & others versus CBI last March. Hence, the tax department is currently looking at cases where the tribunals extended stay orders beyond six months.

In case of disputed tax demands, taxpayers can challenge the assessment order before Commissioner of Income Tax Appeals and is required to deposit 20% of the amount on obtaining a stay. The assessee can subsequently approach ITAT if the appeal is dismissed. The Tribunal may grant a stay for six months and even extend it for another six months but it rarely goes beyond a year.

Hence, the taxman's crackdown on ITAT stays means that assessees would now need to approach the High Court for reinstatement of stay beyond six months. According to experts, the shortfall in tax collections so far has also translated into delayed refunds, high-pitched demands and aggressive recovery of tax deducted at source (TDS).

"The SC's [Supreme Court] decision may not apply to proceedings before ITAT as ITAT is not a court and tax proceedings cannot be equated with trials," senior chartered accountant Dilip Lakhani told the daily. "In cases 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."

According to the CBDT spokesperson, the department in its normal course of functioning "is interested in the expeditious disposal of each case on merits, including those involving stay matters" and taking each case to a logical conclusion "may, at times, necessitate moving for vacation of stay depending on the facts of each case". The spokesperson added that the collection of revenue accruing from such efforts "may only be incidental".

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