2019 (1) TMI 117 - HC - Income Tax

Garnishee orders - stay petitions - subject matter assessment years has not attained the finality - Held that - Interest of the both parties will be protected, if the petitioner is directed to pay a sum of ₹ 15,00,000/- towards the assessment year 2008-09, without prejudice to their contention in the appeal before the First Appellate Authority for the purpose of lifting the impugned garnishee orders. Accordingly, these Writ Petitions are allowed and the impugned orders are set aside, subject to condition the petitioner pays a sum of ₹ 15,00,000/- (Rupees Fifteen Lakhs only) towards assessment year 2008-09 before the 4th respondent within a period of four weeks from the date of receipt of copy of this order. It is made clear that the said payment is without prejudice to the contentions of either parties in the above appeal pending before the Appellate Authority.

Summary

Issues involved:
1. Challenge to garnishee orders issued under Section 226(3) of the Income Tax Act, 1961 for arrears of tax amounts.
2. Validity of garnishee orders in light of pending tax case appeals.
3. Financial hardship faced by the assessee due to the impugned orders.

Analysis:
1. The petitioner challenged two garnishee orders issued under Section 226(3) of the Income Tax Act, 1961, one against an individual and another against a government entity, for recovery of arrears totaling ?1,35,02,995.
2. The assessment years in question were 2003-04 to 2008-09, with pending Tax Case Appeals and an appeal before the First Appellate Authority. The revenue claimed outstanding tax amounts and penalties against the petitioner.
3. The petitioner argued that the garnishee orders were premature as the tax case appeals were pending, questioning the liability. The revenue contended that no stay was granted for the appeal related to the assessment year 2008-09.
4. The High Court noted the financial hardship faced by the petitioner and the disputed tax amounts. It found that the impugned orders could not be justified when the liability was under appeal and reserved for orders.
5. The Court held that the garnishee orders for recovering ?57,26,285 for assessment years 2003-04 to 2007-08 were not sustainable. However, for the assessment year 2008-09, the petitioner was directed to pay ?15,00,000 within four weeks, without prejudice to their appeal before the First Appellate Authority.
6. The judgment allowed the writ petitions, setting aside the impugned orders subject to the petitioner making the specified payment within the stipulated time. Failure to comply would result in the automatic restoration of the orders without further reference to the Court.