The Delhi High Court has dismissed a plea by news portal NewsClick seeking a stay on the income tax demand during pendency of appeal before the Commissioner of Income Tax (Appeals).

A bench of Acting Chief Justice Manmohan and Justice Mini Pushkarna said the news portal has not been able to make out a prima facie case in its favour and added that the petitioner has “a lot to answer” in the appeal before the Commissioner of Income Tax (Appeals).

“In the present case, the assessing officer in the assessment order has given a number of cogent findings against the petitioner. In fact, the assessing officer after analysing 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 said in an order passed on November 29 and made available on the court’s website on Monday night.

It further said, “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”.

The high court said the petitioner’s plea of financial stringency based on its balance-sheet also inspires “no confidence” as according to the assessing officer, the accounts have not been properly maintained.

“Accordingly, the writ petition is dismissed. However, this court clarifies that the findings given by this court are only in the context of the present writ proceedings and shall not prejudice either of the parties at the stage of the appellate proceedings,” the bench made it clear.

NewsClick has approached the high court challenging the orders of November 3, 2023 and February 20, 2023 passed by the Income Tax Department.

By these orders, the IT Department had dismissed NewsClick’s application for stay of demand during the pendency of the appeal against the assessment order of December 30, 2022.

The portal also prayed for stay of demand during the pendency of the appeal before the Commissioner of Income Tax (Appeals).

The counsel for the petitioner argued before the high court 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.

He contended that it must not be exercised arbitrarily or capriciously or based on irrelevant considerations.

The lawyer contended that there was 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 argued that the 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.

On this, the bench said undoubtedly, the power vested under Section 220(6) of the Act is discretionary and it is not mandatory to pre-deposit 20 per cent of the assessed amount to obtain stay of deposit at the stage of filing the appeal before the Commissioner of Income Tax (Appeals).

However, the assessing officer has given several cogent findings against the portal, it noted.

The assessing officer had observed that the amount of funds to be received by NewsClick from M/s Justice and Education Fund was “predetermined without any specifications about the services”.

NewsClick founder Prabir Purkayastha and Human resources head Amit Chakraborty are lodged under judicial custody in an anti-terror law Unlawful Activities (Prevention) Act (UAPA) case registered by Special Cell of Delhi Police for allegedly receiving money to spread pro-China propaganda.

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