2017 (8) TMI 1304 - HC - Income Tax

Eligibility of notices issued under Section 226(3) - third respondent has directed the petitioners to deposit the entire tax as per the assessment orders and produce proof of such payment - Held that - It will be appropriate for the first respondent to pass order on the petition for stay of demand as the same has been presented on 25.04.2016. In the meantime, if the petitioners are compelled to pay the tax as quantified in the order of assessment, the petition for stay of demand itself would become infructuous. Therefore, there will be a direction to the first respondent to consider the petitioners petition for stay of demand dated 25.04.2016 and pass orders on merits and in accordance with law, after affording an opportunity of personal hearing, as expeditiously as possible, preferably within a period of four weeks from the date of receipt of a copy of this order. Till such time, the impugned notices shall be kept in abeyance.

Summary

Issues:
Challenge to notices under Section 226(3) of the Income Tax Act, 1961; Pending appeal before the Commissioner of Income Tax (Appeals) and petition for stay of demand; Request to keep impugned notices in abeyance pending appeal decision.

Analysis:
The petitioners filed writ petitions challenging notices issued by the third respondent under Section 226(3) of the Income Tax Act, 1961, directing them to deposit the entire tax as per assessment orders. The petitioners had appealed to the Commissioner of Income Tax (Appeals) against the assessment orders and filed a petition for stay of demand, which was pending consideration. Despite informing the third respondent about the pending stay petition, impugned notices were issued. The court noted that it would be appropriate for the Commissioner to decide on the stay petition filed by the petitioners, as paying the tax before a decision on the stay petition would render it infructuous. Therefore, the court directed the Commissioner to consider the petitioners' stay petition and pass orders expeditiously, preferably within four weeks, while keeping the impugned notices in abeyance until then.

The court emphasized the importance of the Commissioner deciding on the petition for stay of demand, given the circumstances of the case. It highlighted that if the petitioners were forced to pay the tax before a decision on the stay petition, the purpose of seeking a stay would be defeated. Therefore, the court directed the Commissioner to evaluate the stay petition on its merits, provide a personal hearing opportunity, and issue orders promptly within four weeks to ensure justice is served. The court ordered that the impugned notices should be kept in abeyance until a decision is made on the stay petition to maintain the integrity of the legal process and protect the petitioners' rights.

In conclusion, the writ petitions challenging the notices under Section 226(3) of the Income Tax Act, 1961, were disposed of by the court. No costs were imposed, and connected miscellaneous petitions were closed. The court's decision focused on ensuring procedural fairness and timely resolution of the petitioners' appeal and stay petition, emphasizing the need for the Commissioner to act promptly and in accordance with the law to prevent any injustice to the petitioners.