2013 (1) TMI 256 - HC - Income Tax

Penalty u/s 271(1)(c) - demand notice while appeal against penalty pending consideration - Held that - Once the appeal is preferred against the order passed under section 271(1)(c) and the petitioner has filed application for stay of the payment, the least that is expected is to hear the applicant and decide the application on merits. Without allowing the petitioner to avail such a chance, the recovery notice trying to recover the amount by coercive method, may not be appropriate. Thus CIT(A) directed to decide the application for stay within one month from today with no coercive steps taken for recovery of the amount of tax at least after a period of one week after the decision.

Summary

Issues:
1. Delay in deciding application for stay of demand.
2. Coercive recovery notice issued before deciding stay application.

Analysis:
1. The petitioner, a public sector undertaking, filed a writ petition stating that an appeal against quantum assessment is pending before the Income Tax Appellate Tribunal, and an appeal against the penalty order under section 271(1)(c) of the Income Tax Act is pending before the Commissioner of Income Tax (Appeals). The petitioner also applied for a stay of demand, which remains undecided. Despite no decision on the stay application, a demand notice was issued for payment within 30 days. The court noted that the tax amount had already been recovered by the Income-Tax authorities. The court emphasized that when an appeal is filed against a penalty order and a stay application is made, the applicant should be heard, and the application should be decided on its merits before resorting to coercive recovery methods.

2. The court directed the Commissioner of Income Tax (Appeals) to decide on the application for stay within one month and ordered that no coercive steps for recovery of the tax amount should be taken for at least one week after the decision. By ensuring a timely decision on the stay application and prohibiting coercive recovery measures before a reasonable period post-decision, the court aimed to uphold the principles of natural justice and fairness in tax recovery proceedings. The writ petition was disposed of in accordance with these directions.