2012 (9) TMI 160 - HC - Income Tax

Non satisfying of conditions stipulated u/s 54B - assessment u/s 143(3) - recovery proceedings - Held that - As the bank account of the petitioner in the State Bank of India and certain immovable properties had been attached pursuant to the said assessment order that would substantially cover the tax demand made against the petitioner direction to the third respondent to dispose of the appeal filed by the petitioner on merits and no recovery proceedings shall be initiated against the petitioner - assessee s writ allowed accordingly.

Summary

Issues involved:
1. Assessment under Section 143(3) of the Income Tax Act, 1961
2. Rejection of petition under Section 220(6) of the Income Tax Act, 1961
3. Attachment of bank account and properties
4. Compliance with conditions under Section 54B of the Income Tax Act, 1961

Assessment under Section 143(3) of the Income Tax Act, 1961:
The petitioner filed a return of income for the assessment year 2009-2010, admitting a total income of Rs.1040. Subsequently, the case was selected for scrutiny under the computer-assisted scrutiny system, and an assessment was completed under Section 143(3) of the Income Tax Act, 1961, raising a demand of Rs.49,52,600. The petitioner had sold agricultural land and invested in residential house plots. Despite providing evidence, the assessment was completed without due consideration. The petitioner appealed before the Commissioner of Income Tax (Appeals), and the matter was pending. The High Court directed the Commissioner to dispose of the appeal within four weeks and ordered no recovery proceedings until final orders are passed.

Rejection of petition under Section 220(6) of the Income Tax Act, 1961:
The petitioner filed a petition under Section 220(6) of the Income Tax Act, 1961, requesting to keep the tax demand in abeyance. The petition was rejected, and the petitioner was directed to pay 50% of the outstanding demand without sufficient reasons. The Court found the rejection arbitrary and referred to a relevant legal decision. The High Court ordered no recovery proceedings until the appeal was disposed of by the Commissioner.

Attachment of bank account and properties:
The petitioner's bank account and certain properties were attached following the assessment order. The petitioner argued that the attached properties' value exceeded the tax demand, ensuring sufficient protection for the Department. The Court acknowledged this and directed the Commissioner to decide on the appeal within four weeks. Recovery proceedings were stayed until the appeal's final orders.

Compliance with conditions under Section 54B of the Income Tax Act, 1961:
The respondents argued that the petitioner did not meet the conditions under Section 54B regarding capital gains from the sale of agricultural lands. They contended that the petitioner had earned capital gains and could not claim financial hardship. However, the High Court focused on the attachment of properties exceeding the tax demand and directed the Commissioner to handle the appeal promptly.

In conclusion, the High Court's judgment addressed various issues related to the assessment under the Income Tax Act, rejection of the petitioner's petition, attachment of assets, and compliance with relevant tax provisions. The Court emphasized the need for a fair consideration of evidence and directed the tax authorities to handle the appeal promptly while staying recovery proceedings.