2004 (11) TMI 44 - HC - Income Tax

Realisation of tax - Sick Industrial Companies (Special Provisions) Act, 1985 - contention of the petitioner is that it is a sick industry registered under the provisions of the Sick Industrial Companies (Special Provisions) Act and an appeal from the order passed by the Board for Industrial and Financial Reconstruction under the SICA is pending before the appellate authority. In view of the pendency of the appeal, it is contended that there is a clear bar for proceeding to recover any amount by the first respondent herein in view of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. - Held that it is obligatory for the first respondent to apply for necessary consent from the appellate authority before taking any execution proceedings for realising the amount due to them. - In these circumstances, the proper course open to the first respondent is to approach the Appellate Authority under the Act and obtain consent before proceeding to realize any amount in execution of the order passed under the Income-tax Act or the Wealth-tax Act as the case may be.

Summary

Issues:
1. Whether recovery proceedings under the Income-tax Act can proceed against a sick industry with pending appeal under the Sick Industrial Companies (Special Provisions) Act, 1985?

Analysis:
The petitioner filed a writ petition seeking relief against notices demanding payment under the Income-tax Act, issued to tenants of a building owned by the petitioner, who is a sick industry registered under the Sick Industrial Companies (Special Provisions) Act, with an appeal pending before the appellate authority. The key contention was the applicability of section 22 of the Sick Industrial Companies (Special Provisions) Act, which suspends legal proceedings against an industrial company with pending inquiries, schemes, or appeals. The respondent argued that recovery under the Income-tax Act is not a distress proceeding falling under section 22. However, the court emphasized that the provision's language encompasses any execution proceeding for realizing amounts due from the company with pending proceedings before the appellate authority.

The court referred to a previous case where it was held that coercive proceedings by a Gram Panchayat without consent are not permissible, indicating that the suspension under section 22 is not limited to distress proceedings only. The court highlighted the legislative intent behind the provision, emphasizing the need to stay execution proceedings to achieve the Act's objectives of industrial revival and scheme preparation by the specially constituted tribunal. It was deemed mandatory for the first respondent to seek necessary consent from the appellate authority before initiating execution proceedings to recover amounts due, failing which penal consequences under section 33 of the Act would apply.

Consequently, the court allowed the writ petition, directing the first respondent not to proceed against the petitioner without obtaining consent while the appeal is pending. It further ordered the deferment of proceedings related to the notices until such consent is obtained, emphasizing the mandatory nature of section 22 and the penal consequences for its violation.