2018 (5) TMI 1267 - HC - Income Tax

Recovery of dues - Justification issuing notice u/s 226(3) - Held that - The appeal time for preferring an appeal against the order passed by the CIT (A) dated 15.03.2018 expires only on 18.05.2018, if in the meantime, the demand is enforced and the tax is recovered then the very purpose of filing an appeal will be negated and such an appeal is liable to become infractuous. Therefore, the Authority has to necessarily wait till the the expiry of appeal time, which in the instant case stated to be expired on 18.05.2018. Therefore, till then the impugned notice should be kept in abeyance. Thus, for the above reasons, the writ petitions are disposed of by directing the respondent to keep the impugned notice dated 28.03.2018 in abeyance till 25.05.2018. Within such time, it is open to the assessee to approach the ITAT and secure appropriate orders.

Summary

Issues:
1. Quashing of notice under Section 226(3) of the Income-tax Act, 1961
2. Seeking a writ of prohibition to prevent coercive steps for recovery of alleged liability for Assessment Year 2011-12

Analysis:
Issue 1: The petitioner sought to quash the notice issued by the respondent under Section 226(3) of the Income-tax Act, 1961. The petitioner argued that the notice was issued prematurely before the expiry of the appeal period against the order passed by the CIT (A) dated 15.03.2018. The petitioner contended that the notice was without jurisdiction and contrary to the law. The petitioner highlighted that the debts were secured with the Indian Bank, which had a first charge over all present and future assets, including receivables. The petitioner emphasized that the notice was issued in violation of a judgment of the Hon'ble Supreme Court. The Court acknowledged the validity of the petitioner's argument and directed the respondent to keep the impugned notice in abeyance until the expiry of the appeal period.

Issue 2: In the second writ petition, the petitioner sought a writ of prohibition to restrain the respondent from taking coercive steps for the recovery of the alleged liability for the Assessment Year 2011-12. The petitioner had previously filed writ petitions challenging proceedings by the Principal Commissioner of Income Tax and seeking a direction for expedited disposal of appeals before the CIT (A). The Court noted that the earlier writ petitions had been disposed of, and the appeal filed by the petitioner had been dismissed by the CIT (A). The Court, however, emphasized the importance of allowing the appeal period to expire before enforcing recovery, to ensure the efficacy of the appeal process. Consequently, the Court directed the respondent to keep the notice in abeyance until the appeal period expired, allowing the petitioner to approach the ITAT for appropriate orders.

In conclusion, the Court disposed of the writ petitions by directing the respondent to withhold the notice until the appeal period lapsed, giving the petitioner the opportunity to seek relief from the ITAT. The Court clarified that it had not expressed any opinion on the merits of the case and allowed the petitioner to present all issues before the ITAT. No costs were awarded, and the connected miscellaneous petitions were closed accordingly.