2005 (10) TMI 73 - HC - Income Tax

Applications seeking stay of recovery of demand were dismissed notices were issued under section 226(3) whereby various bank accounts of the petitioner have been attached. - illegally attaching the bank accounts of the petitioner - we would like to record our total dissatisfaction regarding the manner in which the authorities below have proceeded to enforce the demand totally ignoring the parameters laid down by this court in the case of KEC International Ltd. v. B.R. Balakrishnan, while disposing of the stay applications. Moreover, attaching the bank accounts of the petitioner even before communicating the order passed on the stay application is totally high-handed. We hope that the Revenue shall ensure that in future such instances do not occur again. Otherwise, the court will have no option but to take appropriate action in accordance with law.

Summary

Issues:
Challenge to orders dismissing stay applications for recovery of demand for assessment year 2002-03; Challenge to attachment of bank accounts by Income-tax Department; Legal sustainability of orders rejecting stay applications; Enforcement of demand by Revenue.

Analysis:
The petition challenged the orders dated August 11, 2005, and September 19, 2005, dismissing the applications for stay of recovery of demand for the assessment year 2002-03. The assessment order made additions leading to a demand of Rs. 77 crores against the petitioner. The petitioner's appeal against this order was pending before the Commissioner of Income-tax (Appeals) since April 2005. The petitioner contended that the Revenue's action of attaching bank accounts before serving the order was illegal. The petitioner argued that the orders rejecting the stay applications were unsustainable, citing a precedent case. The Revenue argued that once the liability is determined, the assessee must pay, and without financial difficulty, the orders cannot be faulted.

The dispute over expenses disallowance dated back to the assessment year 1999-2000, with demands raised for subsequent years. Appeals for these years were pending before the Income-tax Appellate Tribunal. The court noted that demands for earlier years were stayed subject to certain payments and conditions. Considering the stay orders in previous years and pending appeals, the court opined that the demand should be stayed until the appeal's disposal. The court outlined specific payment schedules for the petitioner to stay the recovery of demand for the assessment year 2002-03.

The court quashed the impugned orders and directed the Revenue to lift the attachment on the petitioner's bank accounts. Expressing dissatisfaction with how the authorities handled the matter, the court emphasized adherence to legal parameters and criticized the high-handed approach of attaching bank accounts before communicating the stay application decision. The court warned against such actions in the future, indicating potential consequences if repeated. The petition was disposed of with no order as to costs.