2012 (3) TMI 173 - HC - Income Tax

Writ petition - stay petition - recovery of dues - attachment - notice issued under Section 226(3) attaching the bank accounts - demand contained in notice is for more than Rs.26 crores and according to the Standing Counsel for the respondents substantial amounts are available in the Bank accounts of the petitioners - result of the notices above mentioned, the entire bank operations have been stopped and as a consequence there of, their business operations have also been stopped Held that - pendency of the appeals filed by the petitioners, petitioners directed to pay Rs.5 crores in two equal monthly installments - the notice issued by the respondent under Section 226(3) of the Income Tax Act will stand stayed on the payment of the Ist installment, Writ petition is disposed of as above.

Summary

Issues:
1. Challenge to orders of assessment
2. Garnishee notice under Section 226(3) of the Income Tax Act
3. Bank accounts attachment
4. Stay of notice pending appeal
5. Timely disposal of appeals by the appellate authority

Analysis:
The writ petitions involved challenges to the orders of assessment issued to a partnership firm and a partner in the firm. The firm had filed an appeal against the assessment order, which was pending consideration. Meanwhile, a garnishee notice under Section 226(3) of the Income Tax Act was issued, demanding a substantial amount from the petitioners and attaching their bank accounts, leading to a halt in their business operations.

The main contention of the petitioners was the adverse impact of the notice on their business due to the attachment of bank accounts. The court acknowledged the significant amount demanded and the pending appeals. To address the situation, the court directed the petitioners to pay Rs.5 crores in two equal monthly installments, staying the notice upon the payment of the first installment. This decision aimed to balance the interests of the tax authorities and the petitioners, allowing the business to continue operations.

Furthermore, the court instructed the appellate authority to expedite the disposal of the appeals within 8 weeks of receiving a copy of the judgment. This directive ensured a timely resolution of the pending appeals, providing the petitioners with a fair opportunity to present their case before the appellate authority. Overall, the judgment sought to mitigate the immediate financial burden on the petitioners while ensuring a prompt resolution of the legal proceedings.