2000 (7) TMI 919 - AT - Income Tax

Summary

Issues Involved:
1. Coercive action by the Assessing Officer u/s 226(3).
2. Tribunal's power to direct refund of tax recovered.
3. Commissioner of Income-tax's power to grant stay of disputed demand.
4. Requirement for the Commissioner to provide a hearing and a speaking order.

Issue-wise Comprehensive Details:

1. Coercive Action by the Assessing Officer u/s 226(3):
The Tribunal found that the Assessing Officer resorted to coercive action under section 226(3) for the recovery of Rs. 19,43,000 from the Standard Chartered Bank even before the expiry of the three days' time allowed by him. This action was deemed "highly improper and contrary to various decisions of the Tribunal and High Courts." The Tribunal emphasized that coercive action for the recovery of disputed demand should not be taken when an application for stay of recovery is pending before any authority, referencing the Bombay High Court's decision in Mahindra and Mahindra Ltd. v. Union of India [1992] 59 ELT 505.

2. Tribunal's Power to Direct Refund of Tax Recovered:
The Tribunal held that it has the power to direct the refund of tax recovered without following the process of law. This was supported by the Supreme Court's decision in ITO v. M. K. Mohammed Kunhi [1969] 71 ITR 815, which established that the Tribunal has the power to grant stay of recovery and all other powers to make the power effective. The Tribunal directed the Assessing Officer to refund the sum of Rs. 19,43,000 to the assessee within fifteen days, considering the Assessing Officer's action as "highly improper, unwarranted and bad in law."

3. Commissioner of Income-tax's Power to Grant Stay of Disputed Demand:
The Tribunal recognized that the Commissioner of Income-tax, in his administrative capacity, has the power to grant stay of the disputed demand when the appeal is pending in the Tribunal. This practice is beneficial to the interests of the Revenue as it allows the Department to gather necessary data and protect its interests. The Tribunal insisted that the assessee should approach the Commissioner for stay of recovery before the Tribunal considers the application for stay.

4. Requirement for the Commissioner to Provide a Hearing and a Speaking Order:
The Tribunal held that the Commissioner of Income-tax is required to pass a speaking order and give reasons for the exercise of his discretion in the matter of stay application. This is supported by the decisions of various High Courts, including the Kerala High Court in Mohammed Abdul Sattar Sait v. CBDT [1979] 120 ITR 653 and the Delhi High Court in Bharat Nidhi Ltd. v. Union of India [1973] 92 ITR 1. Additionally, the Tribunal held that an order passed by the Commissioner without giving an opportunity of being heard is unreasonable and bad in law.

Conclusion:
The Tribunal allowed the assessee's application, stayed the recovery of Rs. 19,43,000 till the disposal of the appeal, and directed the Registry to fix the appeal for hearing on October 11, 2000. The Tribunal emphasized its duty to protect taxpayers from undue harassment and ensure that public trust and confidence in the rule of law are maintained.