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2016 (3) TMI 687 - HC - Income TaxAttachment orders - Rectification Application under Section 154 - Held that - The action of the Assessing Officer in attaching the petitioners bank accounts under Section 226(3) of the Act as well as subsequent withdrawal of the attached amounts from the bank accounts is without jurisdiction and bad in law. The petitioners have a statutory right to its stay application being heard and disposed of before the Revenue can adopt any coercive proceedings on the basis of the Notice of demand under Section 156 of the Act issued to the assessee. This action on the part of the Assessing Officer, if permitted, would lead Section 220(6) of the Act becoming redundant. In the above view, the Notice under Section 226(3) of the Act issued by the Assessing Officer to the petitioners bankers are quashed and set aside. Further, the Assessing Officer is directed to deposit the amount of ₹ 7,59,185/in HDFC Bank, Fort, Mumbai and ₹ 34,265/in State Bank of India, Byculla, Mumbai within a period of one week from today. The Assessing Officer to dispose of the petitioners pending stay application in accordance with law.
Issues:
Challenge to attachment of bank accounts under Section 226(3) of the Income Tax Act, 1961 without notice. Disposal of rectification application under Section 154 of the Act. Withdrawal of funds from bank accounts without notice. Pending application for stay under Section 220(6) of the Act. Jurisdiction and legality of actions by Assessing Officer. Analysis: The petition challenges the attachment of bank accounts under Section 226(3) of the Income Tax Act, 1961, without prior notice to the petitioners. The petitioners also contest the withdrawal of funds from their accounts without any notification, which they argue is against established legal principles. The Assessing Officer passed an order under Section 143(3) r/w Section 263 of the Act, determining a substantial tax amount due, leading to the petitioners filing an appeal to the Commissioner of Income Tax (Appeals) and an application for rectification of the order. The Assessing Officer disposed of the rectification application under Section 154, rejecting it on the grounds that no mistake was apparent from the records, and directed the petitioners to pay the demanded amount within a specified time frame. The petitioners emphasize their right to file an application for stay under Section 220(6) of the Act, which is still pending before the Assessing Officer. They argue that coercive recovery measures cannot be taken until their stay application is decided. The court notes that the Assessing Officer's order did not address the petitioners' contention regarding the issue being in their favor based on a Tribunal's previous decision. The court stresses that the application for stay, filed alongside the rectification application, remains undetermined, highlighting the necessity for its consideration before any coercive actions. The court rules that any coercive tax recovery actions are impermissible until the petitioners' stay application is resolved. It deems the attachment of bank accounts and subsequent fund withdrawals by the Assessing Officer as lacking jurisdiction and unlawful. The court asserts the petitioners' statutory right to have their stay application heard and decided before any coercive actions can be taken based on the demand notice issued. Consequently, the court quashes the notices issued to the petitioners' bankers under Section 226(3) and directs the Assessing Officer to return the withdrawn amounts to the respective bank accounts promptly. Additionally, the Assessing Officer is instructed to address the pending stay application in accordance with the law. In conclusion, the court disposes of the Writ Petition, ruling in favor of the petitioners and emphasizing the importance of due process and adherence to statutory provisions in tax matters.
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