2017 (7) TMI 919 - HC - Income Tax

Recovery notice - stay proceedings - Held that - Provisions of Section 2(B)(iii) read with Section 220(6) of the IT Act, this court is of the opinion that it shall be left for the assessing officer at the first instance to decide the application for grant of stay moved by the petitioner and which is pending consideration before him including that of grant of complete stay of the execution of the recovery notice. In the event if the application is decided against the interest of the petitioner, it shall be left open for the petitioner to avail the remedy available under the said circular of moving before the Principal Commissioner, Income Tax challenging the order of assessing officer made under Section 220(6) of the IT Act. Needless to mention that since the said clause 2(B)(iii) empowers the authorities for grant complete waiver of the pre-deposit part, the authority concerned, pending consideration the stay application, both at the stage of assessing officer as well as if it is moved before the Principal Commissioner, Income Tax, they shall not take any coercive steps for making the recovery. Taking into consideration the entire factual matrix of the case, and with the consent of the counsel for 60th the parties this court is also of the view that ends of justice would meet if the appeal preferred by the petitioner itself is decided by the Commissioner (Appeals) at the earliest preferably within a period of three months.

Summary

Issues:
1. Challenge to recovery notice issued under Section 226(3) of the Income Tax Act.
2. High assessment amount compared to declared income.
3. Pending appeal and application for stay under Section 220(6) of the IT Act.
4. Prematurity of the writ petition.
5. Interpretation of Circular No. 1914/1993 and relevant provisions for grant of stay.

Analysis:

1. The petitioner challenged a recovery notice issued under Section 226(3) of the Income Tax Act, claiming it was premature as the appeal and stay application were pending. The petitioner argued that the assessed amount was significantly higher than the declared income, warranting interim relief. The respondents contended that the petition was premature and that the petitioner had further remedies available before seeking writ relief.

2. The petitioner's declared income of ?15,07,690 was assessed at ?21,62,18,744, more than 133 times the initial amount. The petitioner appealed this assessment, and a demand notice for the assessed amount was issued, prompting the petitioner to apply for a stay under Section 220(6) of the IT Act. However, the recovery notice to creditors was issued before a decision on the stay application, leading to the petitioner's challenge.

3. The court referred to a judgment by the Karnataka High Court in a similar case, emphasizing the need to protect the petitioner's interests until the appeal or stay application was decided. The respondents argued that the assessing officer had the authority to consider the stay application and that premature writ jurisdiction was invoked. The court highlighted the assessing officer's discretion in granting stays under relevant provisions.

4. The court analyzed Circular No. 1914/1993, which empowered authorities to consider applications for stay in cases of high-pitched assessments. It emphasized the need for assessing officers to evaluate if the assessment was unreasonably high or would cause genuine hardship to the assessee. The court aligned with the Karnataka High Court's view on the factors to be considered while deciding on stay applications.

5. Considering the circumstances, the court held that the assessing officer should decide on the stay application first, and if unfavorable, the petitioner could appeal to the Principal Commissioner, Income Tax. The court directed that no coercive steps be taken during the pendency of the stay application. Additionally, it urged for a speedy resolution of the petitioner's appeal within three months for the interest of justice.