2018 (4) TMI 577 - HC - Income Tax

Notice under section 226(3) - disallowance of additional depreciation -attachment orders - Held that - In the instant case, the petitioner is in the position of filing an appeal and they seek to set aside the finding rendered by the Commissioner of Income Tax (Appeals)-III, Coimbatore only on one issue, viz., with regard to the disallowance of additional depreciation, totalling ₹ 66,35,246/- on building, plant and machinery in respect of two milk chilling plant commissioned at Aayilpatti and Karur and the Assessing officer disallowed the same observing that the assets were not put to use during the year. Thus, following the factual position, this court is inclined to grant interim protection to the petitioner till they approach Income Tax Appellate Tribunal (ITAT) by way of an appeal and such interim protection shall be subject to a condition. The impugned notice shall remain stayed subject to the condition that the petitioner pays 20% of the the disputed tax on the additional depreciation claimed under section 32(1)(iia) of the Act on the sum of ₹ 66,35,246/- and such payment shall be made, within one week from the date of receipt of a copy of this order. Subject to compliance of the said condition, attachment of the the petitioner s bank account shall stand lifted.

Summary

Issues:
Challenge to notice under section 226(3) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged a notice issued under section 226(3) of the Income Tax Act, 1961, by the 1st respondent, claiming a due amount of ?6,82,18,782. The petitioner contended that the notice was issued prematurely, as they had not yet filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the order passed by the Commissioner of Income Tax (Appeals)-III, Coimbatore. The petitioner argued that the notice should be set aside based on the timeline for filing an appeal and cited a previous judgment in support of their contention.

The Standing Counsel for the 1st respondent argued that the notice was valid, as the petitioner had been informed that only by filing an appeal to the Tribunal could a stay be considered. The petitioner had filed a petition for rectification under section 154 of the Income Tax Act, 1961, after a communication on this matter. The Standing Counsel maintained that there was no error in issuing the notice under section 226(3).

The main issue for consideration in the writ petition was whether the 1st respondent was justified in issuing the notice under section 226(3) of the Income Tax Act, 1961. The court noted that the petitioner had not yet filed an appeal with the ITAT against the order of the Commissioner of Income Tax (Appeals)-III, Coimbatore, as the deadline for filing the appeal was still pending. The court acknowledged that in some cases, individuals may choose not to file an appeal and accept the Appellate Authority's decision. However, in this case, the petitioner intended to appeal, particularly regarding the disallowance of additional depreciation on certain assets. Consequently, the court granted interim protection to the petitioner until they file an appeal with the ITAT, subject to a condition of paying 20% of the disputed tax within a week.

In conclusion, the court stayed the impugned notice on the condition that the petitioner makes the specified payment. The petitioner was allowed to file an appeal with the ITAT, and failure to comply with the conditions would nullify the benefits of the court order. The ITAT was directed to consider the payment while deciding on any stay petition from the petitioner. The writ petition was disposed of with no costs, and connected miscellaneous petitions were closed.