Facts of the Case

The present writ petition was filed by the Petitioner, M/s Toshiba Corporation, challenging:

  • Order dated 05.05.2022 directing deposit of 20% of the disputed tax demand
  • Orders passed under Sections 201(1) and 201(1A) of the Income Tax Act, 1961
  • Demand Notice issued under Section 156 dated 12.11.2021 for Assessment Year 2016–17

Additionally, the Petitioner sought a direction for expeditious disposal of its pending appeal before the Commissioner of Income Tax (Appeals).

Issues Involved

  1. Whether the Court should interfere with the order directing pre-deposit of 20% of disputed tax demand.
  2. Whether the conditions for grant of stay (prima facie case, balance of convenience, irreparable injury) were satisfied.
  3. Whether directions should be issued for expedited disposal of the appeal.

Petitioner’s Arguments

  • The Petitioner challenged the legality of the pre-deposit requirement imposed by the Assessing Officer.
  • It was contended that the demand raised under Sections 201(1)/201(1A) and consequent recovery proceedings were unjustified.
  • The Petitioner also emphasized the need for early disposal of the appeal to avoid prolonged litigation.

Respondent’s Arguments

  • The Respondents supported the order directing 20% deposit, asserting it was in accordance with law and standard practice.
  • It was argued that while deciding a stay application, three conditions must be satisfied:
    • Prima facie case
    • Balance of convenience
    • Irreparable injury

Court’s Findings

  • The Court observed that three essential factors must be considered in stay matters:
    • Prima facie case
    • Balance of convenience
    • Irreparable injury
  • The Court noted that:
    • The Petitioner did not claim financial hardship
    • Therefore, the condition of irreparable injury was not satisfied
  • Consequently, the Court held that:
    • No ground existed to interfere with the order dated 05.05.2022 directing 20% deposit

Court Order / Final Decision

  • The writ petition was disposed of without interfering with the impugned order.
  • The Court issued the following directions:
    1. The pre-deposit amount shall:
      • Not be given to the payees
      • Be subject to the outcome of the appeal
    2. If the Petitioner succeeds:
      • Full refund of the deposited amount shall be granted
    3. The CIT(A) was directed to:
      • Dispose of the appeal expeditiously, preferably within six months
    4. Time to comply with deposit order was:
      • Extended by four weeks

Important Clarification by Court

  • The deposited amount is only a conditional pre-deposit and:
    • Will not be appropriated during pendency of appeal
    • Will be governed by the final appellate outcome

Sections Involved

  • Section 201(1) – Consequences of failure to deduct or pay tax
  • Section 201(1A) – Interest on such failure
  • Section 156 – Notice of demand under Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2136-DB/MMH30052022CW86292022_185008.pdf

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