Recently, Delhi High Court rejects a plea made by news outlet Newsclick for a stay in the demand, aligned with the income tax department's assessment order from last year. This was sought while their appeal was still under consideration by the Commissioner of Income Tax (Appeals).

The division bench of Acting Chief Justice Manmohan and Justice Mini Pushkarna,  affirmed two rulings made by the Principal Chief Commissioner of Income Tax. These rulings rejected the news portal's request to halt the demand while their appeal was being reviewed.

The court emphasized that the Assessing Officer, in the assessment order, had presented several compelling conclusions against Newsclick. Through a thorough analysis of pertinent facts, the officer essentially asserted that the transaction between the news portal and a foreign entity appeared to be founded on a process akin to 'reverse engineering'.

The court observed, "Considering the aforementioned findings, this Court holds that the petitioner has failed to establish an initial case in its favor. To be conservative in expression, the petitioner has a substantial amount of clarification to provide in the appeal."

It added: “Undoubtedly, the power vested under Section 220(6) of the Act, 1961 is discretionary and it is not mandatory to pre-deposit 20% of the assessed amount to obtain stay of deposit at the stage of filing the appeal before the Commissioner of Income Tax (Appeals).”

Under Section 220(6) of the Income Tax Act, an assessee has the provision to apply for a stay on their outstanding demand provided they have lodged an appeal with the Commissioner of Income Tax (Appeal) within 30 days of receiving the demand notice. This application requests the assessing officer to refrain from classifying the assessee as defaulting.

The bench said that Newsclick's plea of financial stringency based on its balance-sheet inspired no confidence, as according to the Assessing Officer, its accounts were not properly maintained.

The court concluded, "Thus, the writ petition stands dismissed. It's essential to clarify that the observations made by this Court pertain solely to the ongoing writ proceedings and should not influence either party during the subsequent appellate proceedings."

The Assessing Officer noted that the funds anticipated by Newsclick from M/s Justice and Education Fund were prearranged without any explicit details regarding the services associated with them.

“No prudent businessmen will pay such a handsome amount for creation of content without having any exclusivity to the content for even a bare minimum time. This shows that the action of uploading content on People's Dispatch site is just an smoke-screen to justify the receipt of remittance to create the impression that the receipts are in lieu of services provided,” the Assessing Officer had said.

Newsclick has encountered multiple raids conducted by the Enforcement Directorate, the Economic Offences Wing of Delhi Police, and the Income Tax Department starting from 2021. Subsequently, cases have been filed against the news portal under the Prevention of Money Laundering Act (PMLA) and other relevant provisions.

Currently, Newsclick's founder Prabir Purkayastha and Human Resources head Amit Chakraborty are in judicial custody due to a case filed under the Unlawful Activities Prevention Act (UAPA). The case emerged from allegations that the portal received funds for purportedly engaging in pro-China propaganda.

Counsel for Petitioner: Mr. Devadatt Kamat, Sr. Advocate with Mr. Rohit Sharma, Mr. Nikhil Purohit, Mr. Jatin Lalwani, Mr. Rajesh Inamdar and Mr. Anubhav Kumar, Advocates

Counsel for Respondents: Mr. Abhishek Maratha, Mr. Parth Senwal and Mr. Pratyush, Advocates

Case Title: PPK NEWSCLICK STUDIO PVT LTD v. PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX CENTRAL DELHI AND ANR.