Thursday, November 6, 2014

AO can’t disregard ITAT’s stay order to collect pending tax dues on basis of consent letter from assessee

If Tribunal grants stay of recovery of demand, the Assessing Officer cannot collect the pending amount from assessee even after obtaining a consent letter from him.


a)The AO made a reference to Transfer Pricing Officer for determining the arm's length price of the international transactions. Thereafter an order was passed by the AO raising additional demand.

b)The assessee made an application before the ITAT, Mumbai for stay of demand. The Tribunal granted stay. Despite a specific direction by the Tribunal, the AO collected the demand by obtaining a consent letter from the assessee during the subsistence of the said order.

c)Though the case was posted from time to time, the same was adjourned at the request of the learned D.R. or for want of time, and, hence, the assessee had filed a fresh stay application for extension of the stay.

The Tribunal held as under:

1)Neither the assessee nor the Revenue had the right to flout the decision of the Tribunal and the AO, being an officer functioning under the Government of India, it was his obligation to follow the directions of the superior authority and even if there was consent he should not have collected the amount.

2)We have recently come across other cases where similar consent letters were obtained or the Department had collected tax despite the stay order passed by the ITAT. We deplore this practice and direct the Chief CIT to issue a letter to all the concerned AOs not to adopt this kind of approach of obtaining consent letters and to respect the orders passed by the Tribunal.

3)Thus, stay was granted on collection of outstanding demand for a further period of six months and AO was directed to refund the amount collected contrary to the order passed by the ITAT alongwith interest. – JOHNSON & JOHNSON LTD. V. ACIT [2014] 51 1 (Mumbai - Trib.)