2004 (3) TMI 27 - HC - Income Tax

Stay of the recovery proceedings - Notice of attachment under section 226(3) - order made by the respondent-authorities under section 220(6) - order of assessment came to be made under section 143(3) creating a demand - It may be noted that when the appeal before the Commissioner (Appeals) was preferred, MTNL had not filed any application for stay. In fact, the stay application has been preferred only after the COD disposed of the application. The petitioner s appeal as well as application for stay is pending before the Commissioner of Income-tax (Appeals), it will be for him to decide the same in accordance with the law. It may also be noted that the powers under article 226 of the Constitution of India are discretionary. In the instant case, when there is an appropriate forum to grant relief, it is not necessary for this court to interfere.

Summary

Issues:
1. Challenge to notice of attachment under the Income-tax Act, 1961.
2. Quashing of order made under section 220(6) of the Income-tax Act.
3. Rejection of clearance to file a writ petition for seeking stay of demand.
4. Application for stay of demand rejected by Committee on disputes.
5. Request to permit prosecution of writ petition before the High Court.
6. Consideration of discretionary power under article 226 of the Constitution of India.

Analysis:
1. The petitioner, Mahanagar Telephone Nigam Ltd. (MTNL), approached the High Court seeking to quash the notice of attachment under section 226(3) of the Income-tax Act, 1961, and the order made under section 220(6) of the Act. The petitioner had appealed against the assessment order creating a substantial demand, but various attempts for stay of demand were unsuccessful before the appropriate forum, the Commissioner of Income-tax (Appeals).

2. The Committee on disputes rejected the clearance for MTNL to pursue a writ petition before the High Court seeking a stay of demand. Referring to the Supreme Court decisions emphasizing the necessity of clearance for litigation, the High Court held that in the absence of clearance, the petition cannot be entertained. Despite arguments for interference under article 226 to prevent the petitioner from being left without a remedy, the court maintained that when there is an appropriate forum available, interference is unnecessary.

3. The petitioner's subsequent application to prosecute the writ petition was also dismissed due to the earlier rejection of clearance. The court highlighted that the powers under article 226 are discretionary and noted that the appeal and stay application were pending before the Commissioner of Income-tax (Appeals), emphasizing that it is within his jurisdiction to decide on the matter in accordance with the law.

4. The court emphasized the importance of following the Supreme Court directives regarding the necessity of clearance for litigation. The rejection of clearance by the Committee on disputes was a crucial factor in the dismissal of the writ petition. The court reiterated that without clearance, the proceedings cannot be proceeded with, aligning with the legal principles established by the Supreme Court in previous judgments.

5. Ultimately, the High Court dismissed the writ petition considering the absence of clearance and the availability of an appropriate forum for the petitioner to seek relief. The discretionary power under article 226 was not exercised in this case, emphasizing the importance of following established legal procedures and respecting the jurisdiction of the Commissioner of Income-tax (Appeals) in deciding on the appeal and stay application.