2019 (1) TMI 1085 - HC - Income Tax

Stay petition - stay on recoveries on the condition of depositing ₹ 18 Crores - interim injunction against the recovery of the unpaid tax and interests - Held that - Tribunal had passed an order on 10th November, 2017, protecting the Petitioner-Trust against the recoveries of unpaid tax and interest on the condition that, the Petitioner-Trust deposits with the Department, a total sum of ₹ 18 Crores in three equal installments. Since Petitioner-Trust could neither have these conditions altered, nor could the Petitioner-Trust fulfill the conditions, the Tribunal later on passed the impugned order on 18th December, 2018, rejecting the stay applications of the Petitioner-Trust. This would give rise to recovery of entire tax of around ₹ 142 Crores with interest. It would be open to and in fact, department has initiated coercive recovery. Whatever be the interim events, we cannot lose sight of the fact that the Tribunal in its order dated 10th November, 2017 had found prima facie case in favour of the Petitioner which persuaded the Tribunal to grant stay against and further recoveries on the condition of depositing ₹ 18 Crores. Not protecting the Petitioner-Trust at this stage, may have severe adverse effect on running its several educational and medical institutions, rendering the staff jobless and students without college. Therefore, put the Petitioner-Trust back to the same position as on 10th November, 2017. The Tribunal had granted conditional stay to the Petitioner-Trust, which order, in any case, the Department had not challenged. However, we cannot lose sight of passage of time in between. We, therefore, insist that the Petitioner-Trust deposits with the Department a total sum of ₹ 20 Crores, upon which, there shall be stay against further recoveries. Petitioner-Trust would also cooperate for the early disposal of the Appeals before the Tribunal. Petition is disposed of with the following directions (i) Petitioner-Trust shall deposit in its bank account such amount as may be necessary so as to make the total balance available between all accounts of the Petitioner-Trust to a minimum of ₹ 20 Crores. This shall be done within six weeks from today. It is clarified that this requirement of raising a total of ₹ 20 Crores would include a sum of ₹ 1,11,37,877/payable by the Government of India to the Petitioner-Trust which also Income Tax Department has attached; (ii) As soon as this is done, the Petitioner shall intimate it to the Department in writing.

Issues:
1. Challenge to the conditional order of the Tribunal dated 10th November, 2017
2. Dismissal of the Petition by the High Court on grounds of misconduct
3. Challenge to the order of the Tribunal dated 18th December, 2018
4. Coercive recovery initiated by the Department
5. Petitioner's request for removal of bank account attachments
6. Petitioner's plea for relief against recoveries to sustain educational and medical institutions
7. Dispute regarding educational grants with the State Government
8. Directions for the Petitioner-Trust to deposit funds and cooperate with Tribunal's Appeals

Analysis:
1. The Petitioner-Trust challenged the conditional order of the Tribunal dated 10th November, 2017, which required a deposit of &8377; 18 Crores in three installments for stay against tax recoveries. Despite failing to alter or fulfill these conditions, the Tribunal dismissed fresh stay applications on 18th December, 2018, leading to potential recovery of &8377; 142 Crores with interest. The High Court noted the Tribunal's earlier finding of a prima facie case in favor of the Petitioner-Trust, emphasizing the adverse impact on educational and medical institutions if not protected.

2. The High Court previously dismissed the Petition due to misconduct involving misrepresentation and withdrawal of funds from bank accounts. This led to contempt proceedings and jail terms. However, the current challenge to the Tribunal's order of 18th December, 2018 was considered as a fresh cause of action, distinct from past events, warranting a separate examination on its merits.

3. The Department initiated coercive recovery against the Petitioner-Trust, prompting the Petitioner to seek removal of bank account attachments. The Court acknowledged the need to balance the Department's recovery efforts with the Petitioner's ability to sustain essential services provided by its institutions.

4. A dispute with the State Government regarding educational grants was highlighted, with the Division Bench's order directing retention of funds by the State Government pending further directions. The Petitioner-Trust was advised to seek appropriate relief through the Co6 ordinate Bench in the pending Petition concerning these funds.

5. In the final directions, the Court instructed the Petitioner-Trust to deposit a total of &8377; 20 Crores in its bank accounts within six weeks, including funds attached by the Income Tax Department. Upon compliance, the Department would withdraw and adjust the amount against outstanding dues, with a stay on further recoveries until the final disposal of the Appeals before the Tribunal. The Petitioner-Trust was also directed to cooperate for the expedited resolution of the Appeals.

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