1. At the request of learned counsel for both the parties, petition is being taken up for final disposal at the stage of admission. By this petition under Art. 226 of the Constitution of India, the petitioner challenges the order dt. 21st Jan., 2014 passed by the Dy. CIT-6(1), Mumbai, under s. 220(6) of the IT Act, 1961. By the impugned order, the AO has granted stay against the coercive recovery of tax as determined by assessment order dt. 17th Dec., 2013 on the condition that the petitioner pay 50 per cent of the total demand of Rs. 4,93,19,16,310.
2. The impugned order dt. 21st Jan., 2014 after adjusting the refund of Rs. 1,51,37,10,030 pertaining to asst. yr. 2011-12 under s. 245 of the Act as per the intimation dt. 31 Dec., 2013 has directed the petitioner to pay the balance of Rs. 95,22,48,125 by 30th Jan., 2014.
3. The petitioner carries business of life insurance under the certificate of registration granted by Insurance Regulatory & Development Authority of India (IRDA) under the Insurance Act, 1938. In terms of the requirement of the IRDA (Preparation of Financial Statements and Auditors'' Report of Insurance Companies) Regulations, 2002 r/w s. 211 of the Companies Act, 1956, it has to maintain its two separate accounts namely-- shareholders account and policy holders account which are treated as separate and distinct. There are internal transfer of funds between the two accounts. However, as the petitioner carries a single business its taxable income is worked out by ignoring the internal transfer of funds between the aforesaid two accounts.
4. For the asst. yr. 2012-13, the AO passed an assessment order dt. 17 Dec., 2013 under s. 143(3) of the Act and inter alia, determined the total income of Rs. 12,56,37,89,820. The aforesaid income was determined by treating the internal transfer between the shareholders and the policy holder accounts and vice a versa as a source of income and subjecting the same to the tax as income. This determination was done even though the Tribunal had in its order dt. 14th Sept., 2009 for the asst. yrs. 2005-06 to 2008-09 and the CIT(A) for asst. yrs. 2010-11 and 2011-12 have held that the transfer of funds from shareholder accounts to policy holder account and vice-a-versa is to be ignored for determining the total income of the petitioner as inter se transfer from one account to another is tax neutral.
5. Consequent to the order of assessment dt. 17 Dec., 2013, the AO issued a notice of demand on 17th Dec., 2013 itself to the petitioner under s. 156 of the Act determining a sum of Rs. 4,93,19,16,310 as payable by the petitioner for the asst. yr. 2012-13. Being aggrieved by the assessment order dt. 17th Dec., 2013, the petitioner filed an appeal to the CIT(A) on 7th Jan., 2014 and prayed for early hearing of its appeal in view of the huge demand of tax. However, the CIT(A) by communication dt. 9th Jan., 2014 rejected the petitioner''s request for early hearing.
6. In the meantime, on 8th Jan., 2014, the petitioner filed an application under s. 220(6) of the Act with the AO seeking a stay of the demand of Rs. 4,93,19,16,310 which had primarily arising by seeking to tax inter se transfer of funds from shareholder account to policy holder accounts and vice-versa. It was pointed out by the petitioner that the assessment order dt. 17th Dec., 2013 was contrary to and in defiance of the binding orders of the Tribunal dt. 14th Sept., 2012 for asst. yrs. 2005-06 to 2008-09 and of the CIT(A), dt. 20th June, 2013 for the asst. yrs. 2009-10 to 2011-12 in the petitioner''s own case. In particular, attention was drawn to the Circular No. 530, dt. 6th March, 1989 ( (1989) 76 CTR (St) 102) issued by the Central Board for Direct Tax (CBDT) wherein it has been specifically provided that when the demand in dispute relates to an issue that had been decided in favour of the assessee in an earlier order by an appellate authority, then in such a situation, the assessee should not be treated as an assessee in default and stay should be granted.
7. By the impugned order dt. 20th Jan., 2014, the AO disposed of the petitioner''s stay application under s. 220(6) of the Act by passing the following order:
"(i) A total demand of Rs. 4,93,19,16,310 is raised in this case.
(ii) The assessee is required to pay 50 per cent of total demand i.e., Rs. 2,46,59,58,155.
(iii) As a refund of Rs. 1,51,37,10,030 pertaining to asst. yr. 2011-12 has been adjusted against the above demand under intimation to the assessee under s. 245 dt. 31st Dec., 2013, the assessee should pay the balance demand of Rs. 95,22,48,125 on or before 30th Jan., 2014.
(iv) The balance 50 per cent of the demand can be kept in abeyance till the disposal of appeal by CIT(A) or six months from the date of this order whichever is earlier, subject to payment of Rs. 95,22,48,125 as mentioned in para 3 above."
8. Ms. Arati Vissanji, learned counsel for the petitioner in support of the petition submits as under:
(a) The impugned order rejecting the stay application does not meet with the requirements of the manner in which stay applications are to be disposed of as laid down by this Court in the matter of
(b) The assessment order dt. 17th Dec., 2013 for the asst. yr. 2012-13 was passed, ignoring the binding decision of the Tribunal, dt. 12th Sept., 2012 in the petitioner''s own case on an identical issue, covering the asst. yrs. 2005-06 to 2008-09 by merely holding that the view of the Tribunal is untenable.
(c) The impugned order ignores the fact that the AO deliberately delayed giving effect to the order of CIT(A) dt. 20th June, 2013 in a mala fide manner and gave effect to it only after having passed the assessment order dt. 17th Dec., 2013 for the asst. yr. 2012-13. Thus, it could then issue an intimation under s. 245 of the Act on 31st Dec., 2013 and adjust the refund of Rs. 1,51,37,10,030 pertaining to asst. yr. 2011-12 as against the demand for asst. yr. 2012-13.
(d) Although appeal from assessment order dt. 17th Dec., 2013 has been filed with the CIT(A) on 7th Jan., 2014, the request for early hearing was rejected. This was so even though the appeal involves a high demand and is otherwise covered by the decision of the Tribunal.
9. On the other hand, Mr. Suresh Kumar, learned counsel appearing for the respondents, supports the impugned order dt. 21st Jan., 2014 passed by the AO under s. 220(6) of the Act. It is further submitted that the petitioner can apply to the CIT(A) on the administrative side to secure a stay of the demand under s. 220(6) of the Act. It is urged that this Court should not entertain this petition.
10. We have considered the rival submissions. We find it shocking that in spite of the orders of the Tribunal and the CIT(A), on identical issues for the earlier asst. yrs. 2005-06 to 2011-12, the AO in the order dt. 17th Dec., 2013 has ignored them. The assessment order dt. 17th Dec., 2013 ignores it on the ground that the view of the Tribunal is not tenable. In our hierarchical system of jurisprudence, it is not open to the lower authority to ignore the binding decision of a superior authority unless the order of the superior authority has been stayed. In fact, the Supreme Court in the matter of
"6: .........
It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, Revenue officers are bound by the decisions of the appellate authorities. The order of the appellate Collector is binding on the Asstt. Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Asstt. Collectors and the appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not ''acceptable'' to the Department--in itself an objectionable phrase and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws."
On the aforesaid ground alone, there ought to have been a stay of the demand till the disposal of the appeal by CIT(A).
11. Moreover, we find that the action of the AO in not giving effect to the order of the CIT(A), dt. 20th June, 2013 for the asst. yr. 2011-12 till 31st Dec., 2013 does not appear bona fide. The effect was given to the order of CIT(A) after six months i.e., only on raising a demand on completion of assessment for asst. yr. 2012-13. It is apparent that the Revenue is keen in not giving petitioner its refund and are acting contrary to and in defiance of orders passed by the appellate authorities.
12. Besides, the impugned order is a non-speaking order and does not consider at all the petitioner''s submissions. It is particularly submitted that the issue is covered in their favour by order of the Tribunal and CIT(A) in their own case. In view thereof, the demand itself was not sustainable. The reliance placed upon the Circular No. 530, dt. 6th March, 1989 by the petitioner specifically provides that an assessee would not be considered to be an assessee in default, if the demand in dispute relates to an issue which has been decided in favour of assessee by an order of appellate authority. The aforesaid circular was issued in the context of the manner in which the AO has to exercise its discretion under s. 220(6) of the Act while granting a stay of the demand.
13. Besides, the impugned order does not comply with the parameters laid down for disposing of the stay application as laid down by this Court in the matter of KEC International Ltd. (supra). The impugned order dt. 20th Jan., 2014 is not sustainable and is, therefore, set aside, save and except to the extent amount of refund of Rs. 1,51,37,10,030 pertaining to asst. yr. 2011-12 has been already adjusted against the adjudicated demand by issue of intimation under s. 245 of the Act.
14. In view of the above facts, it is imperative that the CIT(A) gives a priority to the petitioner''s appeal for the asst. yr. 2012-13 and hear the same as expeditiously as possible and preferably by 30th April 2014. However, in the meantime, the respondents shall not take any coercive action to recover the balance amount of tax and interest payable as per assessment order dt. 17 Dec., 2013 and demand notice dt. 17th Dec., 2013 for the asst. yr. 2012-13.
The aforesaid stay of the demand notice for the asst. yr. 2012-13 would continue till the CIT(A) finally decides the appeal of the petitioner and for a period of four weeks thereafter, in case the decision is adverse to the petitioner.
Writ petition is disposed of in the above terms with no order as to costs.
