2019 (3) TMI 1559 - HC - Income Tax

Provisional attachment u/s 281B of bank accounts - applications for stay on recoveries u/s 220(6) rejected without providing reasoning in orders - claim for eligibility u/s 10(23FB) allowed by CIT(A) and Tribunal in earlier years - HELD THAT - In the present case, we note that both the impugned order dated 29th January, 2019 passed by the respondent no.1 Assessing Officer and order dated 14th February, 2019 passed by the respondent no.2 Pr. CIT have completely ignored the binding directions of this Court of the manner in which the stay applications are to be disposed of and the test to be applied while considering grant of a stay of demand under Section 220(6) pending disposal of appeal by CIT(A). In fact, none of the two orders set out even briefly the issue involved and the submissions of the parties in support of its application for stay and yet both the orders dispose of the stay application, adverse to the petitioner. On the above ground itself, the impugned order dated 29th January, 2019 of the Assessing Officer and 14th February, 2019 of the Pr. CIT are unsustainable. The order under Section 281B was issued just two days before the assessment order was passed and neither does the order mention any basis for apprehension of the Revenue nor does the affidavit state any reasons in support of the action nor any submission made in support of its order dated 18th December, 2018 under Section 281B of the Act. Moreover, the notices under Section 226(3) of the Act were issued on 19th December, 2018 to the petitioner s bankers. This without any amount being due from the petitioner to the Revenue on that date and calling upon the petitioner s bankers to pay over the amounts of the petitioner lying with them to the Income Tax Department. We also set aside the notice dated 15th February, 2019 by which the refund of ₹ 21.41 Crores available to the Petitioner for the Assessment Year 2013-14 is adjusted against the outstanding demand of ₹ 52.78 Crores for subject assessment year and direct the refund of ₹ 21.41 Crores to the Petitioner in accordance with law; and We set aside the order dated 18th December, 2018 passed under Section 281B of the Act. This as the Revenue has not been able to justify the basis of their apprehension that if the Petitioner s assets are not attached, the interest of the Revenue in recovering its dues would be prejudiced. we have to express our dismay at the conduct of the Officers of the Revenue in this matter. We pride ourselves as a State which believes in rule of law. Therefore, the least that is expected of the Officers of the State is to apply the law equally to all and not be over zealous in seeking to collect the revenue ignoring the statutory provisions as well as the binding decisions of this Court. The action of Respondent nos.1 and 2 as adverted to in para 14 herein above clearly indicates that a separate set of rules was being applied by them in the case of the Petitioner. Equal protection of law which means equal application of law has been scarified in this case by the Revenue. It appears that the Petitioner is being singled out for this unfair treatment. The desire to collect more revenue cannot be at the expense of Rule of law. In the above view, we direct the Respondent-Revenue to pay cost of ₹ 50,000/( Rupees Fifty thousand only) to the Petitioner for the unnecessary harassment, it had to undergo at the hands of the Revenue.

Issues Involved:
1. Provisional attachment under Section 281B of the Income Tax Act, 1961.
2. Notices under Section 226(3) attaching the Petitioner’s bank accounts.
3. Rejection of the Petitioner’s applications for stay on recoveries under Section 220(6).
4. Adjustment of refund under Section 245 against the outstanding demand.
5. Conduct of the Revenue officers and adherence to legal procedures.

Issue-wise Detailed Analysis:

1. Provisional Attachment under Section 281B:
The Petitioner challenged the order dated 18th December 2018, issued by the Assessing Officer (AO) for provisional attachment of its bank account under Section 281B. The Court observed that the attachment order was issued without proper justification and just two days before the assessment order was passed. The Revenue failed to provide a basis for apprehending that the tax dues would be in jeopardy. The Court set aside the order, noting that the Revenue did not justify the necessity of the attachment.

2. Notices under Section 226(3) Attaching Bank Accounts:
The Petitioner contested the notices dated 19th December 2018, issued under Section 226(3) to its bankers, which sought to recover amounts from its bank accounts. The Court found that these notices were issued when no amount was due from the Petitioner, making them contrary to Section 226(3). The Court set aside these notices and directed the Revenue to redeposit the amount withdrawn from the Petitioner’s bank account along with interest.

3. Rejection of Stay Applications under Section 220(6):
The Petitioner’s applications for stay of demand pending appeal were rejected by the AO and the Principal Commissioner of Income Tax (Pr. CIT). The Court noted that the orders rejecting the stay did not adhere to the guidelines laid down in previous judgments, which require a detailed consideration of the issues and submissions. The Court found the rejection arbitrary and unsustainable, granting an unconditional stay of the demand until the disposal of the appeal by the Commissioner of Income Tax (Appeals) [CIT(A)].

4. Adjustment of Refund under Section 245:
The Petitioner objected to the adjustment of a refund due for the Assessment Year 2013-14 against the demand for the Assessment Year 2015-16. The Court held that the adjustment was done without following the mandatory procedure of giving prior intimation to the Petitioner, as required by Section 245 and as established in the case of Hindustan Unilever Ltd. The Court set aside the adjustment notice and directed the refund to be processed in accordance with law.

5. Conduct of Revenue Officers:
The Court expressed dismay at the conduct of the Revenue officers, highlighting their high-handed and unfair actions towards the Petitioner. The officers were found to have acted in defiance of statutory provisions and binding judicial decisions, causing unnecessary harassment to the Petitioner. The Court emphasized the importance of equal application of law and rule of law, directing the Revenue to pay costs of ?50,000 to the Petitioner for the undue harassment.

Conclusion:
The Court allowed the Petition, setting aside the impugned orders and notices, granting an unconditional stay of the demand, and directing the Revenue to refund the amounts withdrawn and adjusted, along with interest. The Court also imposed costs on the Revenue for their unfair conduct.

← Previous Next →