2015 (8) TMI 559 - HC - Income Tax

Demand ex facie - attachment orders - Although in demand said order the assessee has been asked to pay 50 per cent. of the demand, a mere look at the demand would show that the assessee was asked to deposit 100 per cent. of the demand - Held that - On a reading of paragraph 10 of the assessment order it shows that a sum of ₹ 26,35,09,093 has been added to the income of the assessee on the ground as this income has been added is that the quantity of the pure gold as declared was mixed with alloy bringing down the proportion of the pure gold in the product from 24 carats to 22 carats. An excess quantity than what was declared was produced and sold in the market for the added back amount. This is not quite correct. According to the summary of stock which is annexed to the writ petition at page 177 thereof and is also part of the writ petitioner s audited accounts, the quantity of the gold of 24 carats which was said to have been converted into 22 carats upon addition of alloy was in fact of only 22 carats. It is nobody s case that that particular quantity of the gold was further converted into gold of lesser carat value. The addition made on the said basis is prima facie erroneous. Therefore, writ petitioner has a substantial case to be tried before the Commissioner (Appeals). The petitioner should be relieved of some of the rigours of this attachment by discharging the attachment with regard to the cash credit account of the petitioner with Allahabad Bank, Bowbazar Branch. See K. M. Adam v. ITO 1957 (10) TMI 32 - MADRAS HIGH COURT which opines that a loan fund cannot said to be a debt of the bank to the customer nor could it be said to be money on account of the customer. Hence, it cannot be attached. - Decided in favour of assessee.

Summary

Issues:
1. Demand from the Income-tax Department upon the assessee-writ petitioner for a significant sum.
2. Assessment order pending appeal before the Commissioner of Income-tax (Appeals).
3. Order requiring the assessee to pay 50% of the demand under section 220(6) of the Income-tax Act, 1961.
4. Rejection of the request for staying the demand by the Commissioner of Income-tax.
5. Annulling of the order dated July 17, 2014.
6. Prima facie case of the assessee challenging the demand.
7. Addition of income based on incorrect grounds.
8. Attachment of bank accounts by income tax authorities.
9. Relief sought from the attachment.
10. Disposal of the appeal by a specified date.
11. Direction regarding the continuation of attachment and operation of bank accounts.
12. Final disposition of the application.

Analysis:

1. The judgment addresses a demand of Rs. 12,11,86,487 from the Income-tax Department on the assessee for the assessment year 2011-12. The assessee's appeal against the assessment order is pending before the Commissioner of Income-tax (Appeals), highlighting a significant financial burden on the petitioner.

2. Under section 220(6) of the Income-tax Act, 1961, an order was issued requiring the assessee to pay 50% of the total demand, amounting to Rs. 2.10 crores initially and the remaining Rs. 8.40 crores in installments. However, a discrepancy arose as the demand appeared to require 100% payment, leading to a challenge by the assessee.

3. The Commissioner of Income-tax rejected the assessee's request for staying the demand, prompting further legal actions by the petitioner to challenge the unjust demand and seek relief from the stringent financial obligations imposed by the tax authorities.

4. The judgment acknowledges the efforts of the petitioner's counsel in establishing a prima facie case showing errors in the addition of income by the tax authorities. The assessment order's basis for adding Rs. 26,35,09,093 to the income is challenged, with discrepancies highlighted in the conversion of gold carats, supporting the petitioner's case.

5. In response to the attachment of the petitioner's bank accounts, the judgment provides relief by discharging the attachment on the cash credit account with a specific bank, citing legal precedents to support the decision and ease the financial constraints faced by the assessee.

6. The judgment directs the Commissioner of Income-tax (Appeals) to expedite the appeal process and dispose of the case by a specified date, ensuring timely resolution of the legal dispute and providing clarity on the continuation of attachment and operation of bank accounts until the appeal's conclusion.

7. Ultimately, the judgment concludes by disposing of the application, deeming the allegations in the writ petition not admitted, and allowing the parties to obtain a certified copy of the order upon compliance with formalities, thereby bringing closure to the legal proceedings surrounding the tax demand and attachment issues.