2018 (9) TMI 1867 - AT - Income Tax

Recovery of disputed liability in respect of the assessee from the assessee s debtor - stay of demand - HELD THAT - The fact of the loan given to Mr.Darmendra Bafna being the issue in dispute, the Revenue is directed to recover the disputed liability in respect of the assessee from the assessee s debtor as recognized by the Revenue being Mr.Darmendra Bafna whose address has been provided by the assessee. The attachments in respect of the assets of the assessees, which have been done by the Revenue, shall remain unaltered. The Bank account, if any, of the assessee which have been attached by the Revenue, shall stand lifted. It must be understood that when all the assets of the assessees have already been attached, obviously the assessee would be incapable of making any further payments as assessee would be unable to take loans by mortgaging the assets. However, the debtors of the assessee are still available and enforceable. Recovery of disputed tax against the assessees is stayed with liberty to the Revenue to proceed with the recovery of the disputed tax in respect of the assessees from the hands of the assessee s debtors, Mr.Darmendra Bafna of M/s Surana Corporation Limited. Till such time that the debt due to the assessees from Mr.Darmendra Bafna, has not been fully recovered as against the disputed demand against the assessee, no enforcement or encashment of the assets of the assessees shall be executed by the Department.

Summary

Issues: Stay of recovery of disputed tax liability, Loan given to Mr. Darmendra Bafna, Recovery from debtor, Assets seizure, Enforcement of recovery

Stay of Recovery of Disputed Tax Liability:
The Stay Petitions were filed by the assessee for the assessment years 2006-07 and 2012-13, involving a total demand of &8377; 3.18 crores. The demand arose due to cash loans given to Mr. Darmendra Bafna of M/s. Surana Corporation Ltd. The assessee's assets were seized by the Department, including silver articles. The Tax Recovery Officer proposed liquidating the assets against the demand. The assessee submitted that the disputed demand could be recovered from Mr. Darmendra Bafna, providing his address. The Revenue argued for the payment of the disputed tax liability without granting a stay of recovery.

Loan Given to Mr. Darmendra Bafna:
The loans given to Mr. Darmendra Bafna were not properly explained during the assessment proceedings, resulting in penalties under sections 271D and 271E of the Act. The unexplained loan amount of &8377; 4.65 crores was added in the case of C. Kishanlal and Sons HUF. Additionally, assets found during a search were added as unexplained income for AY 2012-13 in the case of Late Mr. Champalal, with an outstanding balance tax amounting to &8377; 15.93 lakhs.

Recovery from Debtor:
The Tribunal directed the Revenue to recover the disputed liability from the assessee's debtor, Mr. Darmendra Bafna, whose address was provided by the assessee. The attachments on the assets of the assessees were to remain unaltered. However, the Bank accounts attached by the Revenue were to be lifted. The recovery of disputed tax against the assessees was stayed, allowing the Revenue to proceed with recovery from the hands of the debtors. No enforcement or encashment of the assets would be executed until the debt due from Mr. Darmendra Bafna was fully recovered against the disputed demand.

Assets Seizure and Enforcement of Recovery:
Given that the assessee's assets were already attached, the Tribunal recognized the inability of the assessee to make further payments or take loans by mortgaging the assets. Hence, the recovery against the assessees was stayed, emphasizing the availability and enforceability of the debtors. The Department was directed to recover the disputed tax from the assessee's debtors until the debt due from Mr. Darmendra Bafna was fully recovered. The Stay Petitions filed by the assessees were partly allowed, with the Order pronounced in the Open Court on September 14, 2018, at Chennai.