2012 (4) TMI 217 - HC - Income Tax

Petition for grant of interim stay Demand imposed under order framed u/s 143(3) application filed for providing interim stay rejected by Adl CIT and stay petition rejected by CIT garnishee notice issued u/s 226(3) Held that - Mere fact that appeal has been filed is no ground for granting stay particularly when the petitioner- assessee has sound financial position. Huge amount of arrears of tax if not paid would unnecessarily result in the payment of interest by a public body like the assessee-petitioner. No infirmity found in the order Petition dismissed.

Issues:
1. Quashing of orders passed by the Commissioner and Addl. Commissioner of Income Tax
2. Dismissal of application for staying tax demand and issuance of garnishee order
3. Legal grounds for rejecting the request of interim stay
4. Consideration of financial position of the petitioner-assessee in tax liability matters
5. Lack of provision in the Income Tax Act for the rescue of the petitioner-assessee

Analysis:
1. The petitioner filed a petition under Article 226 seeking to quash the order passed by the Commissioner and Addl. Commissioner of Income Tax. The orders dated 20.3.2012 and 12.3.2012 dismissed the application for staying the tax demand and directed the petitioner to deposit the outstanding demand failing which coercive steps would be taken. Additionally, a prayer was made to quash the garnishee order passed under Section 226(3) of the Income Tax Act, 1961, attaching the petitioner's accounts and initiating coercive steps. The court noted the completion of assessment under Section 143(3) of the Act, creation of a demand of crores of rupees, and the subsequent rectification application filed by the petitioner which was disposed of on the same day, leading to a total demand of Rs.32,40,98,857/-.

2. The Additional Commissioner rejected the request for interim stay, emphasizing that the mere filing of an appeal is not sufficient reason to stay recovery of demand, especially when the petitioner is in a sound financial position with good liquidity funds. The Commissioner of Income Tax III also rejected the application for stay, leading to the issuance of a garnishee notice under Section 226(3) of the Act. The court, after hearing the petitioner's counsel, held that tax liability is not ordinarily stayed, particularly when the petitioner has a sound financial position. The court emphasized that the huge amount of arrears of tax, if not paid, would result in unnecessary interest payments by the petitioner.

3. The court highlighted that there is no provision in the Income Tax Act that could assist the petitioner in this situation. It was concluded that the impugned orders passed by the respondent authorities did not have any legal infirmity warranting interference by the court. Consequently, the writ petition was dismissed. The court made it clear that any observations in the order should not be construed as an expression of opinion on the merits of the controversy. The judgment emphasized the importance of considering the financial position of the assessee in tax liability matters and the lack of provisions for the rescue of the petitioner in such situations.

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