2016 (3) TMI 593 - HC - Income Tax

Recovery of tax dues - Consent from BIFR - consent in terms of Section 22 of the SICA Act - Held that - On plain reading of the provisions of Section 22 of the SICA, it cannot be disputed that even coercive action to recover the dues in terms of the Income Tax Act would require the consent from BIFR in terms of the said Act as an inquiry under Section 16 of the SICA is pending. The learned Counsel appearing for the Respondents also does not dispute that the Respondents would take steps to obtain such consent. It cannot be disputed that without obtaining consent in terms of Section 22 of the SICA Act, the Assessing Officer cannot implement the impugned Demands dated 07.12.2015 and 14.12.2015.

Summary

Issues:
Whether demand notices under Section 226(3) of the Income Tax Act, 1961 can take effect without obtaining consent under Section 22 of the Sick Industrial Companies Act, 1985 (SICA).

Analysis:
The judgment involved two petitions with similar points raised, heard together. The main issue was whether demand notices issued by Assessing Officers under the Income Tax Act could be enforced without obtaining consent under the SICA. The Petitioners argued that no coercive action could be taken without BIFR permission as per SICA Section 22, citing a Gujarat High Court judgment. The Respondents claimed entitlement to recover amounts and suggested challenging demands before the Commissioner of Income Tax, assuring necessary consent under SICA. The Court noted that coercive recovery under the Income Tax Act required BIFR consent as per SICA Section 22, acknowledging the need for such consent. Referring to the Gujarat High Court judgment, the Court emphasized that without Section 22 consent, the demands could not be enforced.

The Court found that coercive recovery under the Income Tax Act necessitated BIFR consent as per SICA Section 22 due to a pending inquiry under SICA Section 16. Citing the Gujarat High Court and Supreme Court judgments, the Court reiterated the requirement for BIFR consent before enforcing demands. Consequently, the Court directed that the demands would be implemented by the Respondents only after obtaining the essential consent under Section 22 of the SICA. The judgment disposed of the petitions with liberty for parties to apply.