The Delhi High Court has issued a recent directive to the Assessing Officer (AO), mandating a fresh review of the application submitted by the Indian public policy think tank, Centre for Policy Research (CPR). CPR's application seeks a stay on the income tax demand for the fiscal year 2022-23.

The division, comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav, overturned the Assessing Officer's decision dated May 3, which dismissed CPR's application for a stay on the demand. They stipulated that the think tank must deposit 20% of the outstanding demand as a prerequisite for receiving protection.

The bench noted that the Assessing Officer failed to assess the prima facie merits of CPR's challenge or address the issue of undue hardship. The court criticized the AO for seemingly adopting a "mechanical approach," basing their decision solely on the absence of a 20% pre-deposit by CPR, without considering other pertinent factors.

“In view of the above, and in our considered opinion, there would appear to be no justification to retain the instant petition on our board. The ends of justice would in fact warrant the matter being remitted to the AO for considering the stay application moved by the writ petitioner afresh,” the court said.

In the contested order, the Assessing Officer declined CPR's plea to suspend the outstanding demand.

Consequently, the Assessing Officer dismissed the think tank's petition for a stay on the income tax demand, citing the absence of evidence regarding the payment of 20 percent of the outstanding demand. The AO remarked that the mere filing of an appeal against the assessment order did not constitute sufficient grounds to suspend the demand.

Subsequently, the Assessing Officer requested CPR to submit at least 20% of the outstanding demand and provide evidence of payment by May 9. Failure to comply would result in CPR being categorized as an "assessee in default," with the AO indicating the initiation of coercive measures for recovering the outstanding demand in accordance with the provisions of the Income Tax Act, 1961.

The Foreign Contribution Regulation Act (FCRA) registration of CPR has been revoked by the Union Ministry of Home Affairs. This registration had been previously suspended since February last year. While under suspension, CPR petitioned the Delhi High Court for permission to utilize 25% of its "unutilized funds" in fixed deposits to pay its employees' salaries, a plea that was granted.

In a recent development, the Supreme Court dismissed the appeal filed by the Income Tax Department against the stay granted to CPR regarding the cancellation of its registration under Section 12A of the Income Tax Act.

Counsel for Petitioner: Mr. Arvind P. Datar, Sr. Adv. with Mr. Sachit Jolly, Ms. Soumya Singh, Ms. Disha Jham, Mr. Devansh Jain, Mr. Aditya Rathore & Mr. Abhyudaya Bajpai, Advs

Counsel for Respondents: Mr. Zoheb Hossain, Spl. Counsel with Mr. Vipul Agarwal, SSC, Mr. Sanjeev Menon, Mr. Gibran Naushad & Ms. Sakshi Shairwal, JSCs