2019 (6) TMI 148 - HC - Income Tax

Stay of demand - refund of ₹ 76,56,400/- for the AY 2015- 16 has been adjusted towards the demand - assessee requested to refund the amount in excess of 15% of the demand adjusted and also prayed to stay the remaining demand of 85% till the disposal of the appeal - coercive steps towards recovery of the disputed tax - HELD THAT - Respondent No.1 has proceeded to issue the recovery notice during the pendency of the stay applications pending before the respondent No.2, when an appeal is preferred before the Commissioner of Income Tax Appeals against the Assessment order for the year 2013-14. Instruction No.1914 dated 02.12.1993 of the Board would make it clear that the stay petition filed with the Assessing Officer must be disposed of within two weeks of the filing of petition by the taxpayer.. The assessee must be intimated of the decision without delay. In terms of Clause 4 of the Office Memorandum F.NO.404/72/93-ITCC dated 29.02.2016, in order to streamline the process of grant of stay and standardize the quantum of lump sum payment required to be made by the assessee as a pre-condition for stay of demand disputed before CIT A , the following modified guidelines are being issued in partial modification of Instruction No.1914 Office Memorandum dated 31.07.2017 where the outstanding demand is disputed before the CIT A , the assessing officer shall grant stay of demand till disposal of first appeal on payment of 20% of the disputed demand The action of respondent No.1 in initiating the recovery notice is obviously contrary to the aforesaid Instructions and the Office Memorandum issued by the Board. Hence, the same cannot be held to be justifiable which necessarily calls for interference by this Court. This Court deems it appropriate to quash the recovery notice at Annexure-A and to direct the respondent No.2 to dispose of the stay application filed by the petitioner on 09.05.2016 and 04.02.2017 vide Annexures-B and E respectively to the writ petition. - The recovery notice dated 20.11.2018 is quashed

Summary

Issues:
Challenge to recovery notice dated 20.11.2018 seeking direction to not take coercive steps, disposal of stay petitions, refund of excess pre-deposit, treatment as 'assessee in default', interference by the Court.

Analysis:
The petitioner, a charitable trust, challenged a recovery notice issued by respondent No.1 seeking directions to refrain from coercive recovery steps for disputed tax specified in a demand notice. The petitioner filed a return of income for the assessment year 2013-14, claiming exemption under Section 11 of the Income Tax Act, 1961. The second respondent scrutinized the case, issued notices, and passed an assessment order making additions, leading to a demand notice. The petitioner appealed to the Commissioner of Income Tax and applied for stay of demand till appeal disposal. Respondent No.2 adjusted a refund towards the demand, and the petitioner requested a refund of the excess amount. Despite pending stay applications, respondent No.1 issued a recovery notice, prompting the petitioner's challenge before the Court.

The petitioner argued that the recovery notice was contrary to CBDT instructions and should not be treated as 'assessee in default' due to pending stay applications. The Revenue's counsel acknowledged the contradiction with Instructions No.1914 but attempted to justify the actions. The Court noted that the recovery notice was issued during pending stay applications and an ongoing appeal. Referring to Instruction No.1914 and Office Memorandum, the Court emphasized the need for timely disposal of stay petitions and standardized guidelines for pre-condition payments for stay of demand disputed before CIT[A]. The Court found respondent No.1's actions contrary to the instructions, warranting interference.

Consequently, the Court quashed the recovery notice and directed respondent No.2 to reconsider the stay applications filed by the petitioner, providing an opportunity for a hearing and passing appropriate orders promptly. The Court allowed the writ petition to the extent indicated, leaving all rights and contentions of the parties open.