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Synopsis

The Delhi High Court has recently rejected the plea filed by online news portal NewsClick seeking a stay on the income tax demand.

In an order issued on November 29, a division bench comprising Acting Chief Justice Manmohan and Justice Mini Pushkarna stated that NewsClick has substantial explanations to provide regarding its financial transactions, as highlighted in the assessing officer's order.

The bench concluded that NewsClick failed to establish a prima facie case in its favor. The court's order read, "Keeping in view the aforesaid findings, this Court is of the view that the petitioner has not been able to make out a prima facie case in its favor. To put it mildly, the petitioner has a 'lot to answer' in the appeal… Accordingly, the writ petition is dismissed."

However, the bench clarified that these observations are specific to the writ proceedings and will not prejudice the parties in the appellate proceedings.

NewsClick had approached the high court challenging orders dated November 3, 2023, and February 20, 2023, passed by the Income Tax Department. These orders rejected NewsClick's application for a stay of demand during the appeal against the assessment order dated December 30, 2022. NewsClick also sought a stay of demand during the appeal before the Commissioner of Income Tax (Appeals).

NewsClick argued that the discretion to stay the demand during the appeal's pendency should be exercised judiciously, reasonably, and with due application of mind. The petitioner contended that the orders were arbitrary, passed mechanically, and lacked proper consideration.

The court was apprised that the orders failed to recognize that NewsClick had a strong prima facie case on merits and that there was no need for a pre-deposit under Section 220(6) of the Income Tax Act, 1961, for granting a stay of deposit.

After deliberation, court held that while it's not mandatory to pre-deposit 20% of the assessed amount for obtaining a stay at the appeal's filing stage, the assessing officer had made cogent findings against NewsClick.

The bench noted, "In fact, the Assessing Officer after analyzing a number of relevant facts, has virtually held that the transaction between the petitioner and the foreign entity was based on 'reverse engineering'."

The court added that, as highlighted by the assessing officer, NewsClick's plea of financial stringency lacked confidence due to inadequately maintained accounts.

Case Title: PPK Newsclick Studios Pvt Ltd v. Principal Chief Commissioner of Income Tax Central Delhi and Anr.