2020 (6) TMI 412 - HC - Income Tax

Application for stay - HELD THAT - Petitioner was not advised properly in seeking stay of the demand by submitting an application Ext.P3 dated 18th of March 2020 as it is post the issuance of garnishee notice dated 6th of March 2020. In fact, an application for stay or simple prayer for stay along with the pending appeal ought to have been preferred before the 2nd respondent. Be that as it may, the petitioner has undertaken to file the application for stay and as there is lock down owing to the COVID 19, pandemic, grant three weeks time to the petitioner to file the application for stay before the 2nd respondent. In case such application is filed, the 2nd respondent would decide the application for stay within one month thereafter, after affording an opportunity of hearing to the parties and in accordance with law. Till such time, notice Ext.P5 dated 6th of March 2020 is ordered to be kept in abeyance. It is made clear that the interim stay is till the disposal of the interim application and not beyond.

Issues:
1. Assessment of income tax return for the assessment year 2017-18.
2. Rejection of return and estimation of income by the assessing officer.
3. Demand raised by the assessing officer.
4. Notice served under Section 142(1) of the Income Tax Act.
5. Appeal preferred by the petitioner before the Commissioner of Income Tax (Appeals).
6. Invocation of Section 226 of the Income Tax Act regarding demand stay.
7. Issuance of garnishee notice due to non-deposit by the petitioner.
8. Arguments presented by the counsels representing the petitioner and the Income Tax Department.
9. Proper advice to the petitioner regarding seeking stay of the demand.
10. Granting time to the petitioner for filing a stay application.
11. Decision on keeping the garnishee notice in abeyance until the stay application is filed and decided.

The judgment pertains to the assessment of an income tax return for the assessment year 2017-18, where the assessing officer rejected the return and estimated the income of the petitioner at ?37,84,262, raising a demand of ?47,35,787. Subsequently, a notice under Section 142(1) of the Income Tax Act was served on the petitioner. The petitioner then appealed the assessment order before the Commissioner of Income Tax (Appeals). The assessing officer invoked Section 226 of the Income Tax Act concerning the stay of demand due to the petitioner not depositing any amount, leading to the issuance of a garnishee notice.

During the proceedings, the petitioner's counsel argued that the petitioner should have been advised to file a stay application in the pending appeal instead of under Section 226, especially after the garnishee notice was issued. On the other hand, the counsel representing the Income Tax Department contended that the garnishee notice was necessary due to the petitioner's failure to file the return or provide an explanation regarding the deposit, emphasizing the government's need to recover revenue.

After hearing the arguments, the court observed that the petitioner was not properly advised regarding seeking a stay of demand, as an application for stay should have been filed before the appellate authority along with the pending appeal. The court granted the petitioner three weeks to file the application for stay due to the COVID-19 pandemic lockdown. It was decided that the assessing officer would decide on the application for stay within one month after its filing, following a hearing and in compliance with the law. Until then, the garnishee notice issued on March 6, 2020, was ordered to be kept in abeyance, with the interim stay effective until the disposal of the application and not beyond.

In conclusion, the writ petition was disposed of based on the court's decision to grant time to the petitioner to file a stay application and the subsequent directions regarding the stay of the demand and the garnishee notice.

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