2012 (6) TMI 381 - HC - Income Tax

Petitioner challenging the communications issued by the 1st respondent permitting the petitioner to pay 30% of the tax assessed - interpretation and understanding of the proviso to Section 2(15) - charitable purpose - the petitioner submits that his Bank Accounts have been frozen Held that - It cannot be disputed that the question regarding interpretation and understanding of the proviso to Section 2(15) of the Act has to be dealt with by the Tribunal before whom the proceedings have been already initiated by the petitioner - the respondents do not have any intention to disturb or affect the services provided by the petitioner, but at the same time, the petitioner has to show its bonafides by paying substantial portion of the legitimate tax due as called upon vide the communication addressed addressed by the Additional Director - it is just and appropriate to direct the Corporation on Additional Director direction to deposit a sum of rupees one crore by 31.3.2012 and continue to pay for every month on or before 15th of each month, subject to this the bank accounts of the corporation shall be de-frozen

Summary

Issues:
Challenge to communications by Additional Director of Income Tax, demand recovery, appeal disposal delay, interpretation of Section 2(15) proviso, coercive steps via garnishee notice, bank account freeze, tax assessed payment, financial difficulties consideration, service paralization risk, bonafide payment requirement, public impact concern, breathing time allowance, freezing condition, appeal expeditious disposal.

Analysis:
The petitioner challenged communications by the Additional Director of Income Tax and sought relief against demand recovery and delayed disposal of appeals. The main issue pertained to the interpretation of the proviso to Section 2(15) of the Income Tax Act, which was crucial for the pending appeal before the Tribunal. The immediate grievance focused on coercive actions through a garnishee notice, resulting in the freezing of the petitioner's bank accounts, leading to the paralysis of its activities.

The petitioner, a Government undertaking, faced severe consequences due to the frozen bank accounts, hindering its operations. Despite efforts to resolve the matter by approaching different authorities and making partial payments, coercive measures were initiated. The court considered the financial difficulties faced by the petitioner and the necessity to balance tax obligations with the continuity of public services provided by the petitioner.

Acknowledging the seriousness of the situation and the impact on public welfare, the court directed the petitioner to make significant payments towards the tax demand while allowing some breathing time. The freezing of bank accounts was to be lifted upon the deposit of a specified amount by a certain date, with subsequent monthly payments required. Failure to comply would result in the reinstatement of freezing measures, with the revenue retaining the right to initiate further legal actions if conditions were violated.

The judgment emphasized the importance of expeditiously resolving the appeal pending before the Tribunal, urging cooperation from both parties. The court granted permission for legal representation to be filed within a specified timeframe, ensuring procedural compliance. The overall decision aimed to balance the petitioner's financial obligations with the need to maintain essential public services, providing a structured approach to address the complex issues raised in the case.