1998 (3) TMI 15 - HC - Income Tax

Summary

Issues:
1. Stay of demand under Income-tax Act, 1961
2. Jurisdiction of Delhi High Court over the matter
3. Compliance with the procedure of reference to the Committee on Disputes
4. Suspension of impugned order of assessment
5. Operations of orders under section 226(3) of the Income-tax Act

Analysis:

1. Stay of demand under Income-tax Act, 1961:
The petitioner, a public sector undertaking, faced a tax liability of Rs. 1,418 crores for the assessment year 1994-95. Despite filing appeals and seeking stay of demand, the application for stay was rejected, and the petitioner was only allowed payment in three installments. The petitioner then approached the ITAT for a stay of demand, but no order was passed. The court acknowledged the statutory obligation of the ITAT to dispose of such applications promptly.

2. Jurisdiction of Delhi High Court:
Respondents objected to the jurisdiction of the Delhi High Court, citing that the assessing authorities and relevant bodies were situated in Allahabad. However, the court held that the failure of the High Power Committee and the ITAT, both situated in Delhi, to address the petitioner's grievances within its territorial jurisdiction justified the court's intervention.

3. Compliance with the procedure of reference to the Committee on Disputes:
The petitioner followed the procedure of reference to the Committee on Disputes on 3rd February 1998, as directed by the Supreme Court in previous cases involving similar disputes. The court emphasized the importance of adhering to the process outlined by the Supreme Court for resolving such disputes.

4. Suspension of impugned order of assessment:
In line with the Supreme Court's directives, the court ordered the suspension of the impugned order of assessment dated March 27, 1997, until the Committee on Disputes made a decision on the reference of dispute made by the petitioner. This suspension aimed to prevent any coercive recovery measures that could disrupt the petitioner's operations.

5. Operations of orders under section 226(3) of the Income-tax Act:
The court clarified that the operations of the orders issued under section 226(3) by respondent No. 3 would remain suspended and should not be enforced until a decision was made by the Committee on Disputes. This interim protection was deemed necessary to safeguard the petitioner's day-to-day functioning, given its essential service provision and significant government shareholding.

Overall, the court emphasized the importance of following legal precedents set by the Supreme Court in similar cases and granted interim relief to the petitioner pending the resolution of the dispute by the Committee on Disputes. The matter was scheduled for further hearing to monitor the progress and potential interim directions from the Committee.