2015 (3) TMI 890 - HC - Income Tax

Stay against attachment of six bank accounts appropriating the amounts therefrom for its payments of the penalty levied rejected - petitioner is a Government of Haryana undertaking - refusal of exemption under Section 10(23C)(iv) - The tax dues have already been paid. In addition thereto, pursuant to the attachment of the accounts, an amount of about ₹ 11.27 crores has already been appropriated by the respondents-Department against a demand of ₹ 51 crores towards interest - Held that - Two drafts amounting to ₹ 4 crores and ₹ 18 crores, we have been informed, have been prepared by the Bank for payment to the Department but the respondents have been restrained from withdrawing the same, by the interim order passed by this Court on 17.11.2014.he Bank shall, therefore, cancel the drafts and credit the same to the account of the petitioner. We are, however, not inclined to entertain the prayer for refund of the amount of about ₹ 11.27 crores, at this stage. The same must await the decision of the appeal before the CIT(Appeals). Considering the fact that the petitioner is a statutory Corporation and receives grants also from the Central Government, it would be proper that no coercive action is taken against the demand of penalty till the decision of the appeal before the CIT (Appeals). - stay granted

Issues:
1. Challenge to attachment of bank accounts for penalty payment under the Income Tax Act, 1961.
2. Entitlement to exemption under Section 10(23C)(iv) and registration under Section 12AA of the Act.
3. Rejection of stay application by CIT (Appeals) without a hearing.
4. Appropriation of funds by the Department against interest demand.
5. Restraining the Department from withdrawing drafts prepared for payment.
6. Refund of appropriated amount pending appeal decision.
7. Coercive action against penalty demand pending appeal decision.

Analysis:
1. The petitioner, a Government of Haryana undertaking, challenged the attachment of its bank accounts for penalty payment under the Income Tax Act, 1961. The respondents claimed that the petitioner did not have exemption under Section 10(23C)(iv) and registration under Section 12AA of the Act, leading to pending proceedings regarding the exemption refusal. The Division Bench expressed hope for a quick decision on the petitioner's appeal before the CIT (Appeals).

2. The petitioner's application for stay on the penalty payment was rejected by the CIT (Appeals) without a hearing, citing that the pendency of the appeal is not a sufficient ground for granting a stay. However, the petitioner argued that there were other factors, including its constitution and statutory functions, supporting the stay application.

3. An amount of approximately &8377; 11.27 crores was already appropriated by the respondents against a demand of &8377; 51 crores towards interest. The petitioner's request for a refund was not entertained at that stage, pending the appeal decision before the CIT (Appeals). The Court directed the Bank to cancel drafts prepared for payment to the Department and credit the amount to the petitioner's account.

4. Considering the petitioner's status as a statutory corporation receiving grants from the Central Government, the Court ruled against any coercive action on the penalty demand until the CIT (Appeals) decides on the appeal. The petitioner was instructed not to seek adjournments before the CIT (Appeals). The writ petition was disposed of accordingly, with the Court emphasizing the importance of the appeal decision in determining further actions regarding the penalty demand.

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