2016 (7) TMI 1054 - HC - Income Tax

Stay of demand - attachment orders - Held that - The petitioner made an application for stay to the Commissioner of Income Tax seeking a Review of the order dated 2nd June, 2016 passed by the Assessing Officer. The Commissioner of Income Tax has not yet disposed of the petitioners application dated 7th June, 2016 seeking a stay in terms of Section 220(6) of the Act. However, pending disposal of the petitioner s stay application, the Assessing Officer by an order dated 28th June, 2016 passed under Section 226(3) of the Act has attached the petitioners bank account. We are of the view that when the petitioners application for stay under Section 220(6) of the Act is pending disposal before the Authorities under the Act, no coercive proceedings should be taken till its disposal. Taking coercive proceedings when an application for stay under Section 220(6) of the Act is pending would make the Section redundant. The Revenue is free to take action for recovery only after disposal of the application for stay adverse to the assessee. In the above view, by way of an interim order, we vacate the attachment Notice dated 28th June, 2016 made by the Assessing Officer upon the petitioners bankers.

Summary

Issues:
1. Challenge to attachment of bank account by the Revenue.
2. Rejection of application for stay by Assessing Officer.
3. Pending disposal of stay application, attachment of bank account by Assessing Officer.

Analysis:
The High Court considered the challenge against the attachment of the petitioner's bank account by the Revenue. The petitioner had filed an application for stay of demand under Section 226(3) of the Income Tax Act, 1961, which was pending disposal. The Court noted that the petitioner's application for stay should prevent coercive proceedings until its disposal to avoid rendering the relevant section redundant. Despite the absence of the respondent Revenue, the Court adjourned the matter to allow for proper representation. The Court restrained the Revenue from further action on the attachment notice but did not disturb the attachment itself. The petitioner was directed to communicate the Court's order to the Revenue.

Regarding the rejection of the petitioner's application for stay by the Assessing Officer, the Court observed that the order lacked discussion on the petitioner's case and did not meet the standards set by previous judgments. The petitioner had filed an appeal before the Commissioner of Income Tax (Appeal) and made a review application for the Assessing Officer's decision. However, pending the disposal of the stay application, the Assessing Officer proceeded to attach the petitioner's bank account under Section 226(3) of the Act. The Court emphasized that coercive actions should not be taken while a stay application is pending, as it would defeat the purpose of the relevant section. Consequently, the Court issued an interim order to vacate the attachment notice made by the Assessing Officer on the petitioner's bankers.

In conclusion, the High Court granted relief to the petitioner by vacating the attachment notice on their bank account as an interim measure. The Court highlighted the importance of considering stay applications before resorting to coercive actions, ensuring fairness and adherence to legal procedures. The judgment aimed to maintain the balance between tax recovery measures and protecting the rights of the assessee, emphasizing the need for proper assessment and decision-making by the tax authorities.