2019 (4) TMI 863 - HC - Income Tax

Stay on recovery - Notice u/s 226(3) by the AO for attachment of bank account - Provisional attachment u/s 281B - HELD THAT - It was the petitioner's contention that the issue of eligibility for claim u/s 10(23FB) stood concluded in its favour by orders of the CIT(A) for the Assessment Year 2014- 15 and by the Tribunal for the AY 2013- 14 and there are no material changes in facts and law which would warrant a different view for the Assessment Year 2016 -17. This fact viz. the issue being concluded by the orders of the Appellate Authorities is also noticed by the AO in his assessment order dated 20th December, 2018. In fact, the assessment order dated 20th December, 2018 after accepting the above facts refused to follow the same on the ground that the orders of both the Appellate Authorities i.e. CIT(A) and Tribunal on this issue are subject matters of further appeal before a higher forum by the respondents. The orders of higher forums, unless stayed are binding on the lower authorities in the herarchical system of jurisprudence adopted by us. Thus, it is not open to the lower authorities to seek to enforce decisions contrary to and in defiance of the orders of the higher forums in the absence of any change in the facts and/or in law. Thus, while dealing with an application for stay of demand pending the disposal of an appeal before the CIT(A), the demand relatable to the assessment order being contrary to the orders of appellate authorities ought to be stayed for the mere asking. Normally, on setting aside the orders u/s 220(6), we restore the application to the Authorities for fresh consideration in accordance with law. However, looking at the conduct of the Assessing Officer and Pr. CIT in this particular case, restoring the stay application to them for fresh disposal would not serve any purpose. This for the reason that the conduct of the respondent nos. 1 and 2 in this case has been high handed and manifestly unfair towards the petitioner being in defiance of settled law. We have come to this view not only for the manner in which the stay application is disposed of by the respondent nos. 1 and 2 but from the manner in which the notices for attachment, notice / demands for recoveries made, refunds adjusted beginning with order under Section 281B of the Act and ending with notice dated 15th February, 2019 adjusting the refund with the pending demands. We grant an unconditional stay of the demand for Assessment Year 2015 -16 u/s 220(6) till the petitioner's appeal against the order dated 20th December, 2018 before the CIT(A) is disposed of and for a period of two weeks from the communication of the order to the petitioner Set aside the notice issued under Section 226(3) of the Act by the Assessing Officer to the petitioner's bankers and direct the Revenue to deposit the amount of ₹ 14.62 croers (in respect of Assessment year 2016- 17) withdrawn from the petitioner's bank account along with appropriate interest at the bank lending rate from the date of the withdrawal to the date of redeposit into the petitioner's bank account. We also set aside the notices dated 15th February, 2019 by which the refund of ₹ 60.46 Crores and ₹ 12.42 Crores available to the petitioner for the Assessment Years 2012- 13 and 2013 -14 respectively is adjusted against the outstanding demand of ₹ 51.32 Crores for subject assessment year and direct the refund of ₹ 60.46 lakhs and ₹ 12.42 Crores to the petitioner in accordance with law We set aside the order dated 18th December, 2018 passed u/s 281B. 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. Before parting, 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.

Summary

Issues Involved:
1. Provisional attachment under Section 281B of the Income Tax Act.
2. Issuance of notices under Section 226(3) of the Income Tax Act.
3. Rejection of applications for stay on recoveries under Section 220(6) of the Income Tax Act.
4. Adjustment of refunds against outstanding demand under Section 245 of the Income Tax Act.
5. Conduct of the Revenue Officers.

Issue-wise Detailed Analysis:

1. Provisional Attachment under Section 281B:
The petitioner challenged the order dated 18th December 2018, which provisionally attached its bank accounts under Section 281B of the Income Tax Act. The court found that the order was issued just two days before the assessment order and did not mention any basis for the apprehension of the Revenue. The affidavit filed by the Assessing Officer also failed to provide reasons supporting the action. Consequently, the court set aside the order dated 18th December 2018, under Section 281B, as the Revenue could not justify its apprehension that the petitioner’s assets needed attachment to protect the Revenue’s interest.

2. Issuance of Notices under Section 226(3):
The petitioner contested the notices dated 19th December 2018, issued under Section 226(3) to its bankers, which demanded payment of amounts lying in the petitioner’s bank accounts. The court noted that these notices were issued when no amount was due from the petitioner to the Revenue. The issuance of such notices was found to be in defiance of Section 226(3), which allows such action only when an amount is due. Therefore, the court set aside the notices and directed the Revenue to redeposit the withdrawn amount of ?14.62 crores along with appropriate interest into the petitioner’s bank account within three weeks.

3. Rejection of Stay Applications under Section 220(6):
The petitioner’s applications for a stay on recoveries were rejected by the Assessing Officer and the Principal Commissioner of Income Tax (Pr. CIT). The court observed that both the orders failed to follow the binding directions of the court on how stay applications should be disposed of. The orders did not briefly set out the issues involved or the petitioner’s submissions, and the decisions were made without considering the petitioner’s contention that the issue of eligibility under Section 10(23FB) was already concluded in its favor by appellate authorities for earlier assessment years. The court found the rejection of the stay applications to be unsustainable and granted an unconditional stay of the demand for Assessment Year 2015-16 until the petitioner’s appeal is disposed of by the CIT(A).

4. Adjustment of Refunds under Section 245:
The petitioner objected to the adjustment of refunds for Assessment Years 2012-13 and 2014-15 against the outstanding demand for Assessment Year 2016-17. The court noted that the adjustment was made without proper intimation to the petitioner, in defiance of the law laid down in Hindustan Unilever Ltd. vs. DCIT, which mandates that the Revenue must provide intimation and consider objections before making such adjustments. The court set aside the notices dated 15th February 2019 and directed the refund of ?60.46 lakhs and ?12.42 crores to the petitioner.

5. Conduct of the Revenue Officers:
The court expressed dismay at the conduct of the Revenue Officers, noting that their actions were high-handed and manifestly unfair. The officers ignored statutory provisions and binding decisions of the court, displaying a planned attempt to make it impossible for the petitioner to challenge their actions. The court emphasized that the state must apply the law equally and not be overzealous in revenue collection at the expense of the rule of law. Consequently, the court directed the Revenue to pay costs of ?50,000 to the petitioner for the unnecessary harassment.

Order:
The court allowed the petition, setting aside the impugned orders and notices, granting an unconditional stay on the demand, directing the redeposit of withdrawn amounts with interest, and ordering the refund of adjusted amounts. The Revenue was also directed to pay costs to the petitioner.