2014 (1) TMI 141 - HC - Income Tax

Recovery proceedings - Held that - The petitioner s appeal is pending before CIT (A), the recovery proceedings should be initiated only after the decision in appeal - CIT(A) has inherent power to do all that necessary for the just disposal of the appeal and the same would include the power to stay the demand pending disposal of the appeal before it - The petitioner has already filed a stay application before the CIT(A) in its pending appeal - Petition was disposed with a direction to CIT(A) to hear and decide the petitioner s stay application as expeditiously as possible, preferably within four weeks from today.

Summary

Issues:
Challenge to coercive tax recovery under the Income Tax Act, 1961 based on an assessment order. Appeal filed before CIT(A) pending, while Assessing Officer initiated recovery proceedings. Petitioner's contention that recovery should await appeal decision or stay application.

Analysis:
The petition challenged the coercive tax recovery under the Income Tax Act, 1961 by the Assessing Officer following an assessment order. The petitioner had filed an appeal before CIT(A) against the assessment order, which was still pending when the Assessing Officer initiated recovery proceedings. The petitioner argued that the recovery should not proceed until a decision is made on the appeal or the stay application filed. The petitioner's bank accounts were attached, and the petitioner sought restoration of the status quo ante until the appeal decision.

The respondents opposed the petition, citing Section 220(6) of the Act and CBDT instruction No.1914, claiming that the Assessing Officer was not restrained from initiating recovery proceedings as done in this case. They argued that the petitioner had not applied for a stay either from the Assessing officer or from the CIT, thus justifying the recovery actions taken.

The High Court considered the arguments and noted that the CIT(A) has the inherent power to stay the demand pending the appeal's disposal. The petitioner had filed a stay application before the CIT(A), emphasizing the need for justice to be served. The Court directed the CIT(A) to decide on the petitioner's stay application expeditiously, preferably within four weeks. Until the decision on the stay application, the Assessing Officer was prohibited from withdrawing any amount from the petitioner's bank accounts that were attached. The attachment was to continue until the CIT(A) made a decision on the stay application, and even after an adverse decision, a two-week period was granted before any withdrawals could be made.

The Court clarified that the order was passed without prejudice to the rights and contentions of the parties and without delving into the merits of the petition. The petition was disposed of with no order as to costs, providing relief to the petitioner by ensuring a fair process in dealing with the tax recovery issue.