Gujarat High Court
Vapi Green Enviro Limited vs Deputy Commissioner Of Income ... on 15 March, 2021
Bench: Bhargav D. Karia
C/SCA/563/2021 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 563 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MR. JUSTICE VIKRAM NATH
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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VAPI GREEN ENVIRO LIMITED
Versus
DEPUTY COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI
==========================================================
Appearance:
MR SN SOPARKAR SENIOR ADVOCATE WITH MR B S SOPARKAR(6851)
for the Petitioner(s) No. 1
MRS KALPANAK RAVAL(1046) WITH MR NIKUNT RAVAL for the
Respondent(s) No. 1,2
==========================================================
CORAM: HONOURABLE THE CHIEF JUSTICE MR. JUSTICE VIKRAM
NATH
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 15/03/2021
ORAL JUDGMENT
C/SCA/563/2021 JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Advocate Mr. S.N. Soparkar
assisted by learned advocate Mr. B.S. Soparkar
for the petitioner and learned advocate Mr.
Nikunt Raval with learned Standing Counsel Ms.
Kalpana Raval for the respondents.
2. The petitioner has tendered the draft amendment.
The same is allowed in terms of the draft. To be
carried out forthwith.
3. Rule. Learned advocate Mr. Nikunt Raval waives
service of notice of rule on behalf of the
respondents.
4. Having regard to the issues arising in this
petition which are in a very narrow compass, the
same is taken up for hearing with the consent of
the learned advocates for the respective
parties.
5. By this petition under Articles 226 and 227 of
the Constitution of India, the petitioner has
prayed for the following reliefs :
"(a) Direct the Respondents to issue forthwith
the refunds due to the Petitioner in relation to
the Assessment Years 200203,200607 to 201617
where the refund is due to the Petitioner
immediately without any further delay;
(b)Direct the Respondent to respond to the stay
C/SCA/563/2021 JUDGMENT
applications of the Petitioners in reasonable
time without undue delay and adjustments of
refund.
(c)pending the admission, hearing and final
disposal of this petition, to stay adjustment or
recovery again demand for AY 201718,201819 and
201920
(d) any other and further relief deemed just and
proper be granted in the interest of justice;
(e)to provide for the cost of this petition."
6. Brief facts of the case are that the petitioner
is a limited company incorporated under the
provisions of the Companies Act, 1956. The
petitioner company is formed to implement the
directives of the High Court of Gujarat to treat
effluent and hazardous waste of Vapi Industrial
area. The petitioner is a non profit mutual
concern and its income is exempt from taxation.
The petitioner is regularly filing the return of
income since 20022003 and the assessments were
framed periodically. According to the Assessing
Officer, the petitioner is not eligible for
exemption from income tax and, therefore, the
income of the petitioner was assessed higher
than the returned income. The petitioner being
aggrieved filed appeals before CIT(Appeals) and
the Tribunal and the income of the petitioner
was held to be exempt from tax by the appellate
authorities.
7. The petitioner has provided summary of
C/SCA/563/2021 JUDGMENT
litigation since 20022003 to 20192020 as
under:
AY Status Refund Tax Refund Annexure
Amount determined
by
1 02-03 Departmental appeal Nil. Order giving A-1
arising out of ITAT order (Even then effect to ITAI by
is admitted in Tax refund of AY AO dated
Appeal 681of 2012 and 2012-13 is 14.03.2014
pending for final hearing adjusted
- tagged with 679 and against the
680/2012 non-existing
demand of
2002-03)
2 06-07 Departmental appeal Order giving A-2
(quantum) arising out of ITAT order effect to ITAT by
is admitted in Tax 1,74,97,700/- AO dated
Appeal 689 and 690 of 25.03.2014
2012 and pending for
final hearing
06-07 No appeal is filed Both CIT(A) and A-2.1
(penalty) against the order of But are not ITAT deleted
ITAT of the deletion of refunded after penalty
penalty. the decision of
Rs.1,03,79,028/- are appellate
adjusted twice before authorities.
the decision of appellate
authorities.
3 07-08 Departmental appeal Order giving A-3
arising out of ITAT order effect to ITAT by
is admitted in Tax 1,96,13,510/- AO dated
Appeal 678 and 680 of 14.03.2014
2012 and pending for
final hearing
4 08-09 Departmental appeal Order giving A-4
arising out of ITAT order effect to ITAT by
is admitted in Tax 2,07,48,030/- AO dated
Appeal 691 and 692 of 14.03.2014
2012 and pending for
final hearing
5 09-10 Departmental appeal in Order giving A-5
Tax Appeal 679 of 1,26,58,790/- effect to ITAT by
2012 is dismissed on (payable) AO dated
low tax effect on 17.01.2017
17.09.2018
6 10-11 Departmental appeal Order giving A-6
arising out of ITAT order effect to CIT(A)
is admitted in Tax 1,86,300/- by AO dated
Appeal 1380 of 2018 (payable) 19.02.2015
and is pending for final
hearing
7 11-12 Departmental appeal Order giving A-7
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arising out of ITAI order Nil effect to ITAT by
is admitted in Tax AO dated
Appeal 1379 of 2018 26.10.2018
and is pending for final
hearing
8 12-13 No scrutiny assessment 154 order A-8
But the Refund arising 68,16,580/-
is adjusted against the (arising out of
(non-existing) demand advance
of AY 2002-03 with tax,TDS)
credit date 21.04.2014
9 13-14 Departmental appeal Order giving A-9
arising out of order of effect to CIT(A)
CIT(A) is filed in ITAT 10,62,410/- by AO dated
as 153/SRT/2018 and is 18.01.2018
pending for hearing
10 14-15 Departmental appeal 3,73,54,430/- Order giving A-10
arising out of order (Working effect to CIT(A)
CIT(A) is filed in ITAI as sheet not BY AO dated
732/SRT/2018 and is provided) 14.07.2020
pending for hearing
11 15-16 Petitioner has 11,03,679/- Order giving A-11
succeeded in appeal (Working effect to CIT(A)
before CIT(A), sheet not BY AO dated
Departmental has not provided) 13.07.2020
yet filed appeal before
ITAI
12 16-17 Petitioner has 1,31,82,538/- Order giving A-12
succeeded in appeal (Working effect to CIT(A)
before CIT(A), sheet not by AO dated
department has not yet provided) 13.07.2020
filed appeal before ITAI
13 17-18 Assessment is framed A-13
u/s 143(3) and the
demand raised of Rs.
6,78,90,372/- is
requested to be stayed.
Stay application is not
decided by the Revenue
despite reminders
14 18-19 143(1) Intimation is A-14
issued disallowing
exemption and rising
demand of Rs.
16,41,93,510/- Stay
application is failed.
15 19-20 143(1) Intimation is A-15
issued disallowing
exemption and raising
demand of Rs.
16,53,67,377/- Stay
application is filed.
8. It is the case of the petitioner that though the
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petitioner has succeeded before CIT(Appeals),
Tribunal and High Court, refund due to the
petitioner have not been paid by the
respondents.
9. Respondent no.1 Assessing Officer continues to
assess the income of the petitioner without
giving the benefit of exemption despite the
petitioner succeeding before the Tribunal and
raised demand so as to adjust the same against
the existing refunds year after year and thereby
not issuing refund to the petitioner. According
to the petitioner, respondent no.1 Assessing
Officer has adjusted refunds for the assessment
years 20122013, 20162017 and 20192020 against
the demands raised for the assessment years
20022003, 20142015 and 20182019.
10. The petitioner preferred an application
dated 7.2.2020 before the respondent no.2
Principal Commissioner of Income Tax, Valsad
for stay of outstanding demand raised pursuant
to order passed by the Assessing Officer on
assessment of the income of the petitioner for
Assessment Years 20172018, 20182019 and 2019
2020 without granting benefit of exemption
contrary to the decision of Income Tax Appellate
Tribunal(for short "ITAT") in earlier years.
The petitioner again on 5.3.2020 requested for
stay of the outstanding demand raised against
the petitioner.
C/SCA/563/2021 JUDGMENT
11. The petitioner thereafter wrote a letter on
30.9.2020 to issue the refunds due to the
petitioner on account of order giving effect to
the orders passed by the appellate authority.
The petitioner also filed an application for
stay of demand on 16.12.2020 for assessment
years 20182019 and 20192020. According to the
petitioner, as none of the applications of the
petitioners were considered or decided and the
refund due to the petitioner is continued to be
adjusted by the respondent authority, the
petitioner has preferred this petition with the
aforesaid prayers.
12. The coordinate bench of this Court (Coram :
Hon'ble Mr. Justice J.B. Pardiwala and Hon'ble
Mr. Justice Ilesh J. Vora) passed the following
order on 12.01.2021 :
"1. We have heard Mr. B.S.Soparkar, the learned
counsel appearing for the writ applicant.
2. Let Notice be issued to the respondents,
returnable on 09.02.2021. We are of the view
that during the interregnum period, the Deputy
Commissioner of Income Tax (Appeals), Vapi
Circle, Vapi, is expected to look into the
application filed by the writ applicant dated
30.09.2020 (at Annexure E to the writ
application) at the earliest and take
appropriate decision on the same in accordance
with law. We also expect the Deputy Commissioner
of Income Tax (Appeals), Vapi Circle, Vapi, to
look into the applications filed by the writ
applicant over a period of time making a request
for stay of demand raised vide orders passed
C/SCA/563/2021 JUDGMENT
under Section 143 (1) and Section 143 (3) of the
Income Tax Act, 1961 for different assessment
years. Let this exercise be undertaken by the
next date of hearing. The outcome of such
exercise will be helpful to this Court in
resolving the controversy."
13. Thereafter the following order was passed
on 10.02.2021 :
"1. We have heard Mr. S.N.Soparkar, the learned
Sr. Counsel appearing for the writ applicant and
Mrs. Kalpana K. Raval, the learned Sr. Standing
Counsel appearing for the respondents.
2. Mrs. Raval submits that, she needs some time
to look into the matter. Post this matter for
final disposal on 17.02.2021. Till the next date
of hearing, let there shall be an interim relief
in terms of Para 7 (c). Reply, if any, shall be
filed on, or before 15.02.2021 and copy of the
same shall be furnished to the learned
Additional Solicitor General of India appearing
for the respondents."
14. Learned Senior Advocate Mr. S.N. Soparkar
appearing for the petitioner submitted that the
respondents did not comply with the directions
as per the order dated 12.1.2021, wherein it was
expected that the order would be passed in stay
application for AYs 20172018, 20182019 and
20192020. It was submitted that respondent no.2
passed an order dated 1.2.2021 only for AY 2017
2018 rejecting the application for complete stay
of the demand and instead of deciding the
application of the petitioner dated 30.9.2020,
respondent no.1 has issued notice of demand for
AY 20172018 on 4.2.2021 for Rs.6,78,90,372/.
C/SCA/563/2021 JUDGMENT
It was therefore, submitted that the impugned
order passed by respondent no.2 dated 1.2.2021
for AY 20172018 under section 220(3) of the
Act, 1961 rejecting the application for complete
stay of the demand is contrary to the fact that
when dispute in the appeal is covered in favour
of the assessee by the order of the appellate
authority, stay of demand is required to be
granted under section 220(6) of the Act, 1976
till the disposal of the appeal by the
CIT(Appeals).
15. Learned Senior Advocate Mr. Soparkar submitted
that reliance placed by respondent no.2 on the
CBDT instruction no. 1914 dated 2.12.1993 is not
applicable in the facts of the case when the
issue pending before the CIT(Appeals) is
squarely covered by the decision of ITAT in
favour of the petitionerassessee for earlier
assessment years. Therefore, rejection of the
application for complete stay of the demand till
final disposal of the appeal before CIT(Appeals)
is justified as the Assessing Officer has denied
the benefits of exemption which is held in
favour of the petitionerassessee for earlier
assessment years by the appellate authority. It
was therefore, submitted by learned Senior
Advocate Mr. Soparkar that the order rejecting
the application preferred by the petitioner
under section 220(3) of the Act is liable to be
quashed and set aside and complete stay of the
C/SCA/563/2021 JUDGMENT
outstanding demand raised against the petitioner
is required to be granted in addition that
outstanding refund due to the petitioner should
also be directed to be paid within a stipulated
time.
16. Reliance was placed on the decision of this
Court in case of Madhu Silica (P) Ltd. v.
Commissioner of Incometax reported in (1977)
227 ITR 350 and decision of Bombay High Court
in case of IDBI Federal Life Insurance Co. Ltd.
Mumbai v. The Deputy Commissioner of Incometax
6(3)(1), Mumbai & Ors dated 17.3.2017 in Writ
Petition No.639/2017 in support of the above
submissions.
17. On the other hand, learned Standing Counsel Ms.
Kalpana Raval assisted by learned advocate Mr.
Nikunt Raval submitted that the petitioner has
erroneously claimed that it has succeeded in
appeals for AYs 20062007 to AY 20162017. It
was pointed out that the matter is subjudice
and pending before this Court or the ITAT and
has not achieved finality. It was submitted that
the respondents were under legal obligation to
adjust the refunds as per section 245 of the
Income Tax Act,1961 after giving adequate
opportunity to the petitioner and accordingly,
the refunds due to the petitioner for earlier
years were adjusted by the respondents against
the outstanding demand. Reliance was placed on
C/SCA/563/2021 JUDGMENT
the decision in case of Vodafone Idea Ltd v.
ACIT decided by the Supreme Court vide order
dated 14.12.2018 in W.P. (Civil) No.2730/2018,
wherein it is held that withholding of refund
against demand payable for earlier years is
justified. It was therefore, submitted that the
respondents have rightly withheld the refund and
adjusted the same against the outstanding
demands as per the provisions of the Act,1961
after considering the representations made by
the petitioner in consonance with the principles
of natural justice.
18. It was further submitted that the petitioner
is not entitled to seek protection or exemption
from imposition of tax liability by claiming to
be a body formed in compliance of the order of
the High Court as no charitable activity of
public interest is undertaken by the petitioner
since the huge surplus earned year after year is
utilized for the purpose of investments even
involving nonmembers for it business
activities. It was therefore, submitted that the
issue of granting exemption is yet to be decided
by the High Court and hence the respondent no.2
has rightly rejected the application for stay
preferred by the petitioner by impugned order
dated 1.2.2021 passed under section 220(3) of
the Act, 1961 after giving opportunity of
hearing to the petitioner. It was further
submitted that the petitioner has an alternative
C/SCA/563/2021 JUDGMENT
and efficacious remedy under the Act, 1961 and
reliance was placed on decision of Supreme Court
in case of CIT v. Chhabil Dass Agarwal reported
in 357 ITR 357 (SC) and various other decisions
in support of above submission. Learned
advocate Mr. Raval submitted that CBDT
instruction no. 1914 has been considered in the
impugned order passed under section 220(3) of
the Act, 1961 which provides that demand will be
stayed only if there are valid reasons for doing
so and that mere filing of an appeal against the
assessment order will not be a sufficient reason
to stay the recovery of demand. It was
therefore, submitted that no interference is
required to be made in the impugned order of
rejection of stay application of the petitioner
and further the respondents were justified in
adjustment of the refunds due to the petitioner
for earlier years against the outstanding
demand.
19. Having heard the learned advocates for the
respective parties and having gone through the
materials on record, it emerges that the
outstanding demand raised by the respondent
against the petitioner for AYs 20172018, 2018
2019 and 20192020 pertains to denial of
exemption benefit to the petitioner under
sections 11 and 12 of the Act, 1961 treating the
petitioner liable to pay the tax on the income
assessed on denial of concept of mutuality
C/SCA/563/2021 JUDGMENT
contrary to the decision of the appellate
authority in favour of the petitioner. It
appears that the respondents have ignored the
which reads as under :
"220(6) Where an assessee has presented an
appeal under section 246[or section 246A] the
Assessing Officer may in his discretion and
subject to such conditions as he may think fit
to impose in the circumstances of the case,
treat the assessee as not being in default in
respect of the amount in dispute in the appeal,
even though the time for payment has expired, as
long as such appeal remains undisposed of."
20. Under section 119 of the Act, 1961, the
Central Board of Direct Taxes may from time to
time issue such orders/instructions/directions
as it may deem fit to the income tax authorities
for proper administration of the Act, 1961 and
in exercise of such powers, the Board has issued
instruction no. 1914 dated 2.2.1993 stating how
the stay application filed by the assessee is to
be disposed of. Guidelines for staying demand in
the said instructions read as under :
"C.GUIDELINES FOR STAYING DEMAND
(i) A demand will be stayed only if
there are valid reason for doing so. Mere
filing an appeal against the assessment
order will not be sufficient reason to stay
the recovery of demand. A few illustrative
situation where stay could be granted
are
C/SCA/563/2021 JUDGMENT
(a) if the demand in dispute related to
issues that have been decided in assessee's
favour by an appellate authority or court
earlier; or
(b)if the demand in dispute has arisen
because the Assessing Officer had adopted
an interpretation of law in respect of
which there exist conflicting decisions of
one or more High Courts ( not of the High
Court under whose jurisdiction the
Assessing Officer is working); or
(c ) if the High Court having jurisdiction
has adopted a contrary interpretation but
the Department has not accepted that
judgment.
It is clarified that in these situation
also, stay may be granted only in respect
of the amount attributable to such disputed
points. Further where it is subsequently
found that the assessee has not cooperated
in the early disposal of appeal or where a
subsequent pronouncement by a higher
appellate authority or court alter the
above situation, the stay order may be
reviewed and modified. The above
illustration are,of course, not exhaustive.
(ii) In granting stay, the Assessing
Officer may impose such conditions as he
may think fit. Thus he may,
(a) require the assessee to offer suitable
security to safeguard the interest of
revenue;
(b) require the assessee to pay towards
the disputed taxes a reasonable amount in
lump sum or in installments ;
(c)require an undertaking from the assessee
that he will cooperate in the early
disposal of appeal failing which the stay
order will be cancelled;
(d) reserve the right to review the order
passed after expiry of reasonable period,
say upto 6 months, or if the assessee has
C/SCA/563/2021 JUDGMENT
not cooperated in the early disposal of
appeal, or where a subsequent pronouncement
by a higher appellate authority or court
alter the above situation;
(e) reserve a right to adjust refunds
arising, if any against the demand.
(iii) Payment by insalments may be
liberally allowed so as to collect the
entire demand within a reasonable period
not exceeding 18 months.
(iv)Since the phrase 'stay of demand' does
not occur in section 220(6) of the Income
tax Act, the Assessing Officer should
always use in any order passed under
section 220(6) [or under section 220(3) or
section 220(7)], the expression that occurs
in the section viz, that he agrees to treat
the assessee as not being in default in
respect of the amount specified,subject to
such conditions as he deems fit to impose.
(v) While considering an application under
section 220(6), the Assessing Officer
should consider all relevant factors having
a bearing on the demand raised and
communicate his decision in the form
speaking order."
21. From the above provisions of the Act, 1961 and
the instructions of CBDT, the respondents were
required to use their discretion for granting
stay, more particularly, when the Tribunal in
earlier year has held in favour of the
petitionerassessee and therefore, from the
narration of the facts and the provisions
noticed above, the conditions necessary for
exercise of discretion in favour of the assessee
under section 220(6) of the Act apparently
exists in favour of the assessee in the present
C/SCA/563/2021 JUDGMENT
case.
22. This Court in case of AIR Conditioning
Specialists Pvt. Ltd. v. Union of India and
others reported in (1996) 221 IR 739 has held
that it is settled law that unless and until
decision is reversed by a superior Court, it
holds the field and when a point is concluded
by a decision by the higher Courts, all Sub
ordinate Courts and authorities within the
territory of the appellate authority are bound
by it and must scrupulously follow the said
decision in letter and spirit. Respondent no.1
Assessing Officer is therefore, bound by the
order passed by the Tribunal in the earlier
years on the same issue of granting exemption
from income tax to the petitioner. It may be
true that the Assessing Officer would like to
keep the issue live till the highest court
concludes and arrive at final decision and
therefore, may have taken a contrary view than
the decision of the Tribunal but,in such
circumstances, when the appeal is preferred by
the assessee before CIT(Appeals) under section
246 of the Act, 1961, the assessee is entitled
to get complete stay against the demand not by
treating the assessee being in default in
respect of amount in dispute in appeals.
23. We are of the view that rejection of the stay
application is nothing but harassment to the
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assessee as there is no distinction between the
facts of the pending appeals from the order of
the Tribunal and CIT(Appeals) rendered in favour
of the assessee for the earlier years and
hence, CIT (Appeals) is bound to follow the
order of the Tribunal for earlier years. The
Principal CIT therefore, ought to have granted
complete stay of the outstanding demand in the
pending appeals for AYs 20172018, 20182019 and
20192020 as the issue arising for consideration
stands concluded by the decision of the higher
forum i.e. the Tribunal as the view taken by the
Assessing Officer in the appeal against the
petitioner is contrary to what has been held in
the previous years, without there being any
material change in facts or law. Therefore, when
the issue arising in the appeals of AYs 2017
2018, 20182019 and 20192020 which is pending
before CIT(Appeals) stand concluded as of now,
in favour of the petitionerassessee by order of
the Tribunal for earlier assessment years, it
would be appropriate to direct the respondent
no.2 Principal CIT to grant stay of the demand
raised by the Assessing Officer for the
assessment years 20172018, 20182019 and 2019
2020 till such time as CIT (Appeals) decides the
appeals of the petitioner.
24. With regard to the prayer of the petitioner to
grant refund for the earlier years is concerned,
where refund is due to the petitionerassessee,
C/SCA/563/2021 JUDGMENT
pursuant to the order giving effect passed by
the Assessing Officer on account of the appeals
preferred by the petitioner being allowed by the
Tribunal, issue is no more resintegra. This
Court in case of Jugal Kishore Mahendra Biyani
v. Income Tax Officer reported in (2020) 114
taxmann.com 530(Gujarat) has held that when
Revenue accepted that the assessee was entitled
to refund as claimed and when the petitioner
assessee has made repeated requests and sent
reminders to the respondent authority, if no
refund is granted and now the contention is
taken before this Court that under section 245
of the Act, refund cannot be granted as same is
required to be adjusted against outstanding
demand pending against the petitioner, cannot be
accepted because, as of now as the demand raised
against the petitioner for the assessment years
20172018, 20182019 and 20192020 are already
stayed by this order, the respondent authorities
are required to process the refund payable to
the petitioner and issue refund due at the
earliest.
25. In view of the facts of the case, we dispose of
this petition with a direction to the
respondents to grant stay against outstanding
demand for A.Y. 201718 to 201920 during the
pendency of the appeals before the CIT(Appeals)
and further direct to release the refund to
which the petitionerassessee is entitled to for
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the earlier years from assessment year 20022003
onwards in accordance with the provisions of
section 244A(1) of the Act, 1961 within a period
of six weeks from the date of receipt of this
order.
26. Rule is made absolute to the aforesaid extent.
No order as to cost.
Direct service is permitted.
(VIKRAM NATH, CJ)
(BHARGAV D. KARIA, J)
RAGHUNATH R NAIR
