2019 (5) TMI 695 - HC - Income Tax

Stay of demand - Attachment orders - Application for stay filed by the petitioner was pending before the CIT (A), an authority superior to the assessing officer and requested him to keep the collection of demand in abeyance till the disposal of the said application - HELD THAT - The impugned recovery action is premature, apart from being mechanical and without any application of mind. The petitioner has approached the CIT(A), an authority empowered to consider and adjudicate upon the request for stay, (see Paulsons Litho Works vs Income-Tax Officer And Others 1993 (11) TMI 50 - MADRAS HIGH COURT as early as on 22.01.2019, which is within thirty (30) days from the date of order of assessment. This fact has also been brought to the notice of the respondents. It was thus, incumbent upon the respondent to have awaited adjudication by the CIT (A) upon the request for stay made by the petitioner. The impugned order is set aside and the assessing authority is directed to lift attachments in the bank forthwith. It is brought to my notice by the learned standing counsel that a sum of ₹ 16,00,000/- (approx) has been appropriated from the accounts. The same shall be retained by the department and adjusted against the disputed demands.

Summary

Issues:
Challenge to order of assessment and coercive recovery proceedings by Income Tax Department.

Analysis:
The Writ Petition challenges the order of the 1st respondent dated 07.03.2019 and the consequent coercive recovery proceedings by the Income Tax Department, involving the attachment of eleven bank accounts and Fixed Deposits of the petitioner group of Institutions due to a demand of ?32,59,94,019/- arising from the assessment for Assessment Year 2017-18.

The petitioner had appealed the assessment order before the Commissioner of Income Tax (Appeals) (CIT (A)) on 22.01.2019, specifically contesting the addition of ?15,00,00,000/- declared under the Prime Minister Garib Kalyan Yojana Scheme, claiming it amounted to double taxation. The petitioner argued that the assessment was high-pitched and flawed on both factual and legal grounds.

Moreover, the petitioner had filed a stay application before the CIT (A) on 22.01.2019, which was pending at the time of the coercive recovery proceedings initiated by the assessing authority. Despite the pending stay application, the assessing authority issued a letter demanding payment of 20% of the total tax demand, leading to the attachment of bank accounts and Fixed Deposits.

The High Court found the recovery action premature and lacking proper consideration, as the petitioner had approached the CIT (A) within thirty days of the assessment order, as required by law. The Court directed the assessing authority to lift the attachments in the bank immediately and noted that a sum of approximately ?16,00,000/- had already been appropriated from the accounts, to be retained by the department and adjusted against the disputed demands.

Consequently, the Court disposed of the Writ Petition by instructing the petitioner to appear before the CIT (A) on a specified date for a hearing, with the CIT (A) required to decide on the stay application within two weeks from the hearing date. The Court ordered that the status quo regarding recovery be maintained until the specified date.

In conclusion, the Court set aside the impugned order, emphasizing the importance of awaiting the CIT (A)'s decision on the stay application before initiating coercive recovery actions, and provided clear directives for further proceedings in the matter.