2001 (3) TMI 1011 - AT - Income Tax

Summary

Issues Involved:
1. Application for stay of outstanding tax demand.
2. Legality of recovery actions taken by the Assessing Officer.
3. Prima facie case on merits of the appeal.
4. Conduct of the income-tax authorities.

Summary:

1. Application for Stay of Outstanding Tax Demand:
This is an application for stay of the outstanding demand of Rs. 43,65,82,270 relating to the assessment year 1997-98. The assessee, Maharashtra State Electricity Board, contested the application of section 115JA of the Income-tax Act, 1961, by the Assessing Officer, which led to a tax demand. The tax demand was confirmed on appeal, and the assessee sought to stay the demand pending the Tribunal's decision.

2. Legality of Recovery Actions Taken by the Assessing Officer:
The assessee moved the Hon'ble Bombay High Court, which ordered a temporary stay on recovery proceedings. Despite this, the Assessing Officer issued garnishee orders u/s 226(3) to the assessee's bankers on 1-3-2001, recovering the outstanding amount. The Tribunal noted that the income-tax authorities were aware of the pending stay application and the scheduled hearing on 2-3-2001. The Tribunal held that the Assessing Officer's actions were technically correct but lacked procedural propriety and rationality, rendering the Tribunal's power to grant stay nugatory.

3. Prima Facie Case on Merits of the Appeal:
The Tribunal acknowledged that the assessee had an arguable case on the merits, involving the interpretation of section 115JA and the definition of a "company" under the Income-tax Act. The Tribunal noted the potential applicability of the CBDT Circular No. 762, which exempts companies engaged in the business of power generation from the minimum alternate tax provisions.

4. Conduct of the Income-tax Authorities:
The Tribunal criticized the undue haste shown by the Assessing Officer in enforcing the garnishee orders, terming it as contrary to the principles laid down by the Hon'ble Bombay High Court in Mahindra & Mahindra Ltd.'s case. The Tribunal emphasized the need for administrative actions to be governed by the rule of law and noted that the Assessing Officer's actions exhibited a lack of faith in the judicial process.

Conclusion:
The Tribunal directed the Assessing Officer to refund the amount of Rs. 43,65,82,270 collected under section 226(3) within two weeks and stayed the recovery till the disposal of the appeal, subject to the assessee furnishing security to the satisfaction of the Assessing Officer. The appeal was posted for hearing on 2nd April 2001, and the stay application was allowed in these terms.