The court emphasized the relaxation of the requirement of payment of twenty percent of disputed tax demand in appropriate cases and the necessity for considering the prima facie case, balance of convenience, and irreparable injury in deciding stay applications.

JUDGMENT

Manmohan, J. - Present writ petition has been filed challenging the orders dated 14th March, 2022, 10th March, 2022, 11th February, 2022 and 28th January, 2022 directing the Petitioner to deposit twenty percent of outstanding demand. Petitioner also seeks stay of recovery proceedings arising out of the order dated 12th November, 2021 passed under Section 201(1)/201(1a) of the Income Tax act, 1961 (hereinafter referred to as the 'act') and notice of demand dated 12th November, 2021 issued under Section 156 of the act.

2. Learned counsel for the petitioner states that in the Financial Year 2015-16, the Petitioner purchased 12,70,276 unlisted equity shares of UEM India Private Limited (Now known as Toshiba Water Solutions Private Limited) from non-residents (tax residents of USa) and deducted TDS @ 10% as well as applicable surcharge and cess while remitting sale consideration of Rs.31,51,80,881/-. He states that proceedings were initiated under Section 201(1)/201(1a) of the act against the Petitioner which culminated in passing the order dated 12th November, 2021 vide which the transaction of purchase of shares undertaken by the Petitioner was recharacterised as purchase of depreciable assets and short-term capital gain was computed, pursuant to which a demand of Rs.33,03,55,413/- was raised on the Petitioner.

3. Learned counsel for the Petitioner states that aggrieved by the order dated 12th November, 2021, the Petitioner filed an appeal before CIT(a) and also preferred an application before the assessing Officer under Section 220(6) of the act seeking a stay on recovery of demand raised pursuant to the impugned order. He states that the assessing Officer vide the impugned order dated 28th January, 2022 directed the Petitioner to deposit twenty percent of the total tax demand in terms of CBDT Instruction No. 1914 as amended by Office Memorandum dated 29th February, 2016 and 31st July, 2017 without dealing with any of the submissions of the Petitioner.

4. He states that the Petitioner filed an application for review/stay before CIT in terms of the Office Memorandum dated 29th February, 2016 as modified by the Office Memorandum dated 31st July, 2017. However, the said application was rejected by Respondent no.1 vide order dated 11th February, 2022 stating that the 'application would not qualify for adjudication as a pre-payment of 20% of the disputed demand is necessary'. He states that the petitioner on 21st February, 2022 made another request to respondent no.1 to decide the review application as per prescribed procedure. However, Respondent no.1 passed orders dated 10th March, 2022 and 14th March, 2022 directing the Petitioner to deposit twenty percent of the demand, without providing any reasons for the same.

5. Issue notice. Mr.Ruchir Bhatia, advocate accepts notice on behalf of the Respondents. He states that the transaction, in question, is a colourable device to avoid payment of taxes. He further states that as far as direction to deposit twenty percent of the demand is concerned, the same is in accordance with the Office Memorandums dated 29th February, 2016 and 31st July, 2017.

6. Having heard learned counsel for the parties and having perused the two Office Memorandums, in question, this Court is of the view that the requirement of payment of twenty percent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases. The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th February, 2016 gives instances like where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee.

7. In fact the Supreme Court in the case of PCIT vs. M/s LG Electronics India Pvt. Ltd. 2018 SCC 447 has held that tax authorities are eligible to grant stay on deposi