2006 (3) TMI 109 - HC - Income Tax

Legality of a notice of demand and an order of attachment which was issued by the respondents for recovery of the outstanding income-tax dues from the petitioner - competence of the Assessing Officer to reduce the period for payment of the outstanding dues - whenever the competent authority invokes its powers of reducing the period stipulated under section 220 it must take care not only to pass a proper order but also to support the same by cogent reasons - It is premature for us at this stage to say anything about any order that the respondent may pass in future. So also the question whether the correction of the calculation form attached to the demand notice would itself result in the demand notice becoming ineffective to call for a fresh demand notice need not be determined in these proceedings

Summary

Issues:
Challenge to legality of notice of demand and order of attachment for recovery of income-tax dues.

Analysis:
The judgment of the court addressed the legality of a notice of demand and an order of attachment issued by the respondents for the recovery of outstanding income-tax dues from the petitioner. The respondents had already recovered the entire tax amount due from the petitioner through an attachment order. The petition became infructuous once the demands were satisfied, and the petitioner had appealed the assessment order before the appellate authority. The assessment for the year 2004-05 was completed against the petitioner, and various rectifications were sought to correct the demanded amount. An attachment order was issued, and the outstanding amount was recovered from the petitioner. The petitioner's grievance included not receiving a demand notice post the rectifications and the reduction of the payment period from 30 to 15 days without proper justification.

The petitioner argued that the rectifications did not affect the validity of the original demand notice and that the reduction in the payment period lacked proper reasoning. The Joint Commissioner of Income-tax had recorded reasons for reducing the period, which was contested by the petitioner. However, the court did not delve into the merits of these contentions as the appellate authority had upheld the assessment order, holding the petitioner liable to pay income tax. The petitioner was also concerned about the hasty approach of the Income-tax Department in making recoveries, potentially causing prejudice.

The legal position regarding the Assessing Officer's competence to reduce the payment period was outlined in section 220 of the Income-tax Act. The court emphasized that any reduction in the payment period must be supported by valid reasons recorded in writing. It was stated that the assessing authority must pass a proper order with cogent reasons when reducing the stipulated payment period. The court refrained from making further observations on future orders by the respondents or the impact of correction in the calculation form on the demand notice. The judgment concluded by disposing of the writ petition, leaving the parties to bear their own costs.