2016 (7) TMI 1305 - HC - Income Tax

Recovery notice under Section 226(3) - recovery of penalty u/s 271(1)(c) - demand of stay - extension of stay - Held that - We will assume that the order dated 05.06.2015 was not limited in time and that, therefore, recovery of the penalty was contrary to the order. In our view, however, there was no wilful disobedience on the part of the respondents in having recovered the amount. They were under the impression that the order dated 05.06.2015 was operative only for 180 days, which is the period stipulated in the Act. Even assuming that the order dated 05.06.2015 was in existence, this would, at the highest, be only a bona fide error in perception on the part of the officer. There is no question of contempt. In any event, an affidavit has been filed by the officer apologizing for the same. Even assuming that the action was contrary to the order, the apology ought, in the circumstances, to be accepted. It is not necessary to consider the effect of the order dated 05.06.2015 for ultimately by the order dated 03.02.2016, the final stay order was passed which was restricted to only 180 days. This period would come to an end on 02.08.2016. The ends of justice would be met as in the event of the stay being extended by the Tribunal for any period, the respondents shall refund the amount recovered, but subject to any conditions imposed by the Tribunal.

Summary

Issues:
1. Quashing of notice under Section 226(3) of the Income Tax Act, 1961
2. Refund of amount by the respondents
3. Restraining State Bank of India from taking coercive steps
4. Time-bound disposal of appeal by Income Tax Appellate Tribunal

Analysis:

1. The petitioner sought the quashing of a notice dated 04.01.2016 issued under Section 226(3) of the Income Tax Act, 1961, along with a writ of mandamus for the refund of an amount of ?10.50 crores. The petition was based on the recovery of penalty allegedly made in violation of an interim order granted by the Tribunal. The Assessing Officer had imposed a penalty under Section 271(1)(c) on 18.02.2014, which was affirmed by the CIT (Appeals) on 02.07.2014. The Tribunal initially granted a stay application for 180 days on 30.09.2014. Subsequently, on 05.06.2015, another application for stay was adjourned sine die with directions not to take coercive measures for recovery. The appeal was heard on 26.08.2015, and a reference was made to the President of the Tribunal for placing the appeal before a third member on 06.01.2016. The third member extended the stay by 180 days on 03.02.2016.

2. Despite the stay orders granted by the Tribunal on 05.06.2015 and 03.02.2016, the respondents issued a recovery notice under Section 226(3) and proceeded with the recovery from the petitioner's bank account. The court noted that there was no wilful disobedience on the part of the respondents, as they believed the stay order was only valid for 180 days as per the Act. The court accepted an affidavit filed by the officer apologizing for any perceived error and stated that there was no contempt involved. The final stay order was restricted to 180 days, ending on 02.08.2016.

3. The court concluded that the ends of justice would be met by ordering that in the event of the Tribunal extending the stay for any period, the respondents should refund the recovered amount, subject to any conditions imposed by the Tribunal. The petition was accordingly disposed of, considering the circumstances and the stay orders issued by the Tribunal.

This detailed analysis of the judgment provides a comprehensive understanding of the issues raised, the legal proceedings, and the court's final decision in the case.