2012 (4) TMI 191 - HC - Income Tax

Exception granted in proviso of Section 220(1) period of less than 30 days granted for deposit of demand of Rs 36.56 crores assessee contended no detriment to the interests of the Revenue since ACIT has already levied a provisional attachment u/s 281B on assesse s investment in mutual funds of Rs 36.54 crores Held that - Proviso to Section 220(1) which empowers the AO to demand payment within a period lesser than 30 days with the prior approval of the JCIT cannot be exercised casually and without due application of mind. In present case, since Revenue is adequately protected by the attachment levied u/s 281B, there would have been no basis for forming a reason to believe that if the period of 30 days was to be observed u/s 220(1), that would be detrimental to the Revenue. The detriment to the Revenue must be akin to a situation where the demand of the Revenue is liable to be defeated by an abuse of process by the Assessee. Therefore, order of A.O. was not justified and was contrary to law. Petition is disposed off by directing continuation of provisional attachment u/s 281 B until disposal of appeal before CIT(Appeals). No coercive steps will be taken for recovery of demand pending the appeal Decided in favor of assessee

Summary

Issues:
1. Rejection of application for stay under Section 220(6) by the first Respondent.
2. Challenge to the rejection of the application for stay under Article 226 of the Constitution.
3. Interpretation of Section 220(1) regarding the period for payment of demand.
4. Assessment of whether the interests of the Revenue would be detrimentally affected by allowing the full period of 30 days for payment under Section 220(1).

Analysis:

1. The Petitioner filed an application for stay under Section 220(6) on 12 March 2012, which was rejected by the first Respondent citing non-compliance with guidelines. The Petitioner argued that the demand for immediate payment within a week was unjustified, especially when the normal period under Section 220(1) is 30 days. The Commissioner of Income Tax dismissed the application for stay, stating lack of evidence from the Petitioner to substantiate the claim.

2. The Petitioner challenged the rejection of the application for stay under Article 226 of the Constitution. During the hearing, the Revenue's counsel mentioned a provisional attachment on mutual funds worth Rs.36.54 Crores, ensuring the Revenue's interests were protected. The court noted that the rejection of the application for immediate payment was unjustified and contrary to law.

3. Section 220(1) stipulates the period for payment of demand, allowing for a 30-day period unless the Assessing Officer, with the Joint Commissioner's approval, believes a shorter period is necessary to protect the Revenue's interests. The court emphasized that this power to reduce the payment period should not be exercised casually, requiring a genuine belief of detriment to the Revenue and proper documentation of reasons for approval.

4. In this case, a provisional attachment had already been made on the mutual funds, adequately protecting the Revenue's interests. The court found no justification for the Assessing Officer's demand for immediate payment by the Petitioner. The court ruled that the Revenue was sufficiently protected by the existing attachment, directing it to remain in force until the appeal process was completed, and no coercive recovery steps should be taken against the Petitioner during this period.

Overall, the court disposed of the petition, maintaining the attachment on the mutual funds to safeguard the Revenue's interests and allowing the Petitioner time to pursue legal remedies against the final order of the Commissioner of Income Tax (Appeals).