2020 (4) TMI 759 - AT - Income Tax

Stay petition- recovery proceedings - lockdown due to COVID -19 - All the bank accounts of the assessee have also been subjected to attached by garnishee proceedings under section 226(3) - AO has also attached all the debtor - Out of total demand assessee applicant has already paid little more than the tax component and the balance outstanding demand represent interest and penalty only. The assessee applicant seeks vacation of garnishee proceedings initiated against the assessee - HELD THAT - We find that in view of the attachment of asessee s bank accounts and assessee s debtors, the assessee is stated to be not in a position to perform these obligations. Given this situation, we are satisfied that this situation calls for our interference. In any case, even though we refrain from commenting upon merits of the case at this stage, we find that prima facie the assessee has an arguable case in appeal. Assessee has already paid his entire tax liability, and in case the assessee is to opt for Vivad se Vishwas Scheme, he will have nothing further to pay. In these circumstances, the legitimate interests of the revenue cannot be prejudiced by our grant of stay on the remaining outstanding dues which are primarily on account of levy of interest, and consequential levies. In view of the above discussions, as also bearing in mind entirety of the case, we deem it fit and proper to grant a stay on collection/ recovery of the outstanding demands of ₹ 2,91,05,660 till the disposal of appeal or till the end of six months from the date of this order- whichever is earlier, subject to the following conditions (a) Any amount available to the assessee, as a result of this stay order and as a result of garnishee proceedings being lifted, will be first used for making payments of overdue and current wages payable to the labourer working with the assessee, and for making payment of overdue and current salaries to its employees. The amount available, after this exercise, will be used for the purpose of carrying out construction activity as necessary for providing quarantine facilities, as directed by the Collector. Any surplus amount thereafter will be used for construction activities of the business. The assessee will give an undertaking to this effect in writing. (b) The assessee will file a statement showing utilization of funds, so available to the assessee on account of the garnishee proceedings being lifted, within 15 days from the date of this order. (c) The assessee will fully cooperate in expeditious disposal of this appeal on out of turn basis, on 8th June 2020, and will not seek any adjournment. All the requisite paper books etc will be filed sufficiently in advance.

Summary

Issues:
- Urgent hearing of stay petition requested via email
- Vacation of coercive measures against recovery of outstanding demands
- Background of the assessee appellant and assessment details
- Stay petitions filed before Assessing Officer and PCIT unsuccessful
- Garnishee proceedings affecting the assessee's financial operations
- Impact on the assessee's ability to pay employees and carry out construction activities
- Intervention sought from Hon'ble Bombay High Court
- Consideration of the current COVID-19 pandemic situation
- Grant of stay on outstanding demands with specific conditions
- Directions for utilization of funds and cooperation in appeal disposal
- Fixing of appeal hearing on an expedited basis
- Suspension of garnishee orders and communication to field authorities

Detailed Analysis:

1. Urgent Hearing of Stay Petition:
The assessee applicant requested an urgent hearing of the stay petition via email, which was deemed fit and proper by the tribunal considering the reasons on record and related facts. Due to the physical office closure in Mumbai amid the lockdown, the hearing was conducted through web-based video conferencing from the respective Members' home offices.

2. Vacation of Coercive Measures:
The assessee sought vacation of coercive measures against the recovery of outstanding demands amounting to ?2,91,05,660 for interest and penalty as an assessee in default for the assessment year 2010-11. Out of the total demand of ?6,47,75,090, a significant portion had been paid, and the remaining demand represented interest and penalty. The assessee specifically requested the vacation of garnishee proceedings initiated against them.

3. Background and Assessment Details:
The assessee, a private limited company engaged in construction activities, had been granted contracts under the Prime Minister Awas Yojna. Following an assessment under section 143(3) of the Income Tax Act, 1961, additional income was assessed due to alleged bogus purchases. Despite appeals before CIT(A), certain additions were made, leading to financial constraints for the assessee, including attachment of bank accounts and debtors.

4. Impact of Garnishee Proceedings:
The garnishee proceedings had severely impacted the assessee's ability to meet obligations, including payment to laborers and employees. The attachment of bank accounts and debtors had halted the business operations, leading to a standstill in work. The assessee's plea for intervention from the Hon'ble Bombay High Court redirected them to approach the ITAT first, culminating in the stay petition before the tribunal.

5. Consideration of COVID-19 Situation:
Acknowledging the challenges posed by the COVID-19 pandemic, especially affecting the economically weaker sections, the tribunal emphasized the importance of employers taking care of their employees. Citing circulars from the Ministry of Labour and Employment, the tribunal highlighted the need for supporting laborers and employees during these challenging times.

6. Grant of Stay and Specific Conditions:
After hearing the parties and considering the facts, the tribunal granted a stay on the outstanding demands of ?2,91,05,660 till the appeal's disposal or six months from the order date, subject to specific conditions. These conditions included utilizing funds for overdue payments, cooperation in appeal disposal, and expeditious hearing scheduled for 8th June 2020.

7. Suspension of Garnishee Orders and Directions:
The tribunal suspended all garnishee orders on the assessee's bankers and debtors, declaring them no longer in force. Furthermore, the Departmental Representative was directed to convey the order to field authorities, and the Assistant Registrar ITAT was instructed to send a certified copy of the order to the parties promptly.

This comprehensive analysis outlines the key issues addressed in the ITAT Mumbai judgment, emphasizing the tribunal's considerations, decisions, and directions in the context of the assessee's stay petition and financial challenges.