2012 (10) TMI 253 - HC - Income Tax

Exemption under Section 12A accorded by CIT Patiala - petitioner-Authority contested that AO overlooked the exemption - Held that - The effect of exemption granted or claimed by the petitioner-Authority pursuant to order dated 28.9.2005 can be raised by the petitioner before the Appellate Authority who shall be obligated to consider the same while deciding the petitioner s appeal - as not in dispute that the assessment order dated 30.12.2011 raising demand of Rs. 19,32,36,475/- towards income tax, penalty/interest etc. for the AY 2009-10 is already under challenge in appeal before the CIT (A), thus dispose of this writ petition with a direction to the CIT(A)-respondent No. 2 to decide the petitioner-Authority s pending appeal within a period of 4 months from the date of receipt of certified copy of this order. In order to protect the interest of the Revenue the petitioner- Authority is directed not withdraw or encash its fixed deposits to the tune of Rs. 20 crores till the decision of appeal by respondent No. 2, while it shall be at liberty to encash the rest of the FDRs.

Issues:
1. Challenge to notice under Section 226(3) of the Income Tax Act regarding demand raised for assessment year 2009-10.
2. Grievance regarding exemption under Section 12A of the Act overlooked by the Assessing Officer.
3. Pending appeal before the Commissioner of Income Tax (Appeals) against the assessment order.
4. Direction for the Commissioner of Income Tax (Appeals) to decide the pending appeal within a specified period.
5. Interim order restraining encashment of fixed deposits and directive regarding withdrawal of funds for tax liability.

Analysis:

1. The petitioner, an Urban Planning and Development Authority, challenged a notice dated 14.3.2012 under Section 226(3) of the Income Tax Act for a demand of Rs. 19,32,36,475 for the assessment year 2009-10, based on an assessment order dated 30.12.2011. The petitioner contended that the Assessing Officer failed to consider the exemption granted under Section 12A by the Commissioner of Income Tax in 2005.

2. The petitioner highlighted that upon registration under Section 12A, it became eligible for benefits under Sections 11 and 12 of the Act from 1.4.2005. The Court acknowledged that the assessment order was under appeal before the Commissioner of Income Tax (Appeals), and both the petitioner's claim for exemption and the Revenue's counter-affidavit could be addressed by the Appellate Authority during the appeal process.

3. The Court directed the Commissioner of Income Tax (Appeals) to expedite the decision on the petitioner's appeal, preferably within four months from the date of the order. An interim order had previously restrained both parties from encashing the petitioner's fixed deposits, with a specific instruction for the petitioner not to withdraw more than necessary for regular activities.

4. The petitioner's counsel informed the Court that the fixed deposits exceeded Rs. 90 crores while the tax demand was around Rs. 20 crores. To ensure the Revenue's interests were safeguarded, the Court prohibited the encashment of fixed deposits worth Rs. 20 crores until the appeal decision, allowing the petitioner to utilize the remaining fixed deposits as needed.

5. Ultimately, the Court disposed of the case with these directives, emphasizing the importance of protecting the Revenue's interests while allowing the petitioner to manage its financial obligations within the specified constraints.

This detailed analysis encapsulates the key legal issues, arguments, and directives outlined in the judgment, providing a comprehensive understanding of the Court's decision.

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