Delhi High Court Denies NewsClick's Stay Plea on Income Tax Demand, Questions Financial Dealings

Delhi High Court Denies NewsClick's Stay Plea on Income Tax Demand, Questions Financial Dealings

In a recent ruling, the Delhi High Court rejected online news portal NewsClick's request for a stay on an income tax demand arising from an assessment order.

The Delhi High Court's ruling casts a shadow over NewsClick's finances. Acting Chief Justice Manmohan and Justice Mini Pushkarna, in their late November ruling, pointed to "a lot to answer" in NewsClick's financial dealings, based on an assessing officer's report.

The Bench concluded that NewsClick had not provided sufficient prima facie evidence to justify a stay on the income tax demand.

Considering the aforementioned findings, the Court concluded that the petitioner had failed to meet the initial burden of proof necessary for this case.

The Court held that the assessment officer's report raises questions regarding the petitioner's financial transactions. Therefore, the writ petition is dismissed.

The Court clarified that its observations pertain solely to the present writ proceedings and shall not prejudice either party in the forthcoming appellate stage.

NewsClick filed a writ petition in the High Court, objecting to Income Tax department assessments issued on November 3 and February 20.

Two separate rulings, one by the Income Tax Department and another by the Commissioner of Income Tax (Appeals) denied NewsClick's application to postpone payment of a disputed tax assessment until the appeal is settled.

The power to stay demands, it was argued, should be wielded cautiously and only upon demonstration of strong grounds relevant to the pending appeal.

However, in the present case, counsel contended that the orders constituted a clear violation of this established principle, displaying arbitrariness, mechanical application, and a complete failure to engage in reasoned analysis.

It was submitted to the Court that the orders overlooked NewsClick's compelling prima facie case on the merits and the absence of a statutory requirement for pre-deposit under Section 220(6) of the Income Tax Act, 1961.

While acknowledging the absence of a statutory requirement for pre-deposit 20 per cent of the assessed amount under Section 220(6) of the Income Tax Act, 1961, in the present case, the Court found the cogent findings of the assessing officer against the petitioner to be compelling grounds for denying the stay of deposit request.

“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 observed.

The Court found merit in the assessing officer's concerns regarding the integrity of the news portal's financial records, casting doubt on the validity of their claims of financial stringency.

Senior Advocate Devadatt Kamat, along with Advocates Rohit Sharma, Nikhil Purohit, Jatin Lalwani, Rajesh Inamdar, and Anubhav Kumar, appeared for NewsClick. The Income Tax Department was represented by Advocates Abhishek Maratha, Parth Senwal, and Pratyush.