NewsClick has a lot to answer: Delhi High Court rejects news portal's plea for stay on income tax demand

The Delhi High Court recently rejected a plea by online news portal NewsClick seeking a stay on the income tax demand [PPK Newsclick Studios Pvt Ltd v Principal Chief Commissioner of Income Tax Central Delhi and Anr]..In an order passed on November 29, a Division Bench of Acting Chief Justice Manmohan and Justice Mini Pushkarna observed that NewsClick has a lot to answer when it comes to its financial dealings as highlighted in the order passed by the assessing officer.The Bench held that there was no prima facie case in NewsClick’s favour. “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 favour. To put it mildly, the petitioner has a ‘lot to answer’ in the appeal… Accordingly, the writ petition is dismissed,” the Court ordered.However, the Bench clarified that these observations are only in context of the writ proceedings and will not prejudice the parties at the appellate proceedings..NewsClick approached the High Court challenging the orders dated November 3, 2023 and February 20, 2023 passed by the Income Tax department.These orders dismissed NewsClick’s application for stay of demand during the pendency of the appeal against the assessment order dated December 30, 2022. NewsClick also prayed for stay of demand during the pendency of the appeal before the Commissioner of Income Tax (Appeals).It was argued that the discretion to stay the demand during the pendency of an appeal must be exercised judiciously and reasonably based on relevant grounds with due application of mind. However, in this case, there is complete violation of this mandate as the orders are arbitrary in nature, have been passed mechanically and suffer from complete non-application of mind, it was contended. The Court was told that orders failed to consider that NewsClick has a strong prima facie case on merits and that there is no requirement for a pre-deposit for the purposes of granting stay of deposit under Section 220(6) of the Income Tax Act, 1961..After considering the case, the Court held that while it is not mandatory to pre-deposit 20% of the assessed amount to obtain stay of deposit at the stage of filing the appeal, in the present case, assessing officer has given several cogent findings against NewsClick.“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 Bench noted.It added that as pointed out by the assessing officer, the news portal’s plea of financial stringency also inspires no confident as the accounts have not been properly maintained..Senior Advocate Devadatt Kamat and advocates Rohit Sharma, Nikhil Purohit, Jatin Lalwani, Rajesh Inamdar and Anubhav Kumar appeared for NewsClick.Income Tax Department was represented through advocates Abhishek Maratha, Parth Senwal and Pratyush. .[Read Order]