2013 (1) TMI 648 - HC - Income Tax

Challenge to the letter regarding payment of arrears of tax and interest accrued. - Expenditure on replacement of machinery in the spinning mills - AO passed orders treating the expenditure incurred as capital expenditure and allowed depreciation thereon - notice of demand for the balance tax payable including interest u/s 234-B, 234-C - Held that - Plea of the petitioner that the demand of interest u/s 234-B and 234-C is not sustainable in law,as the assessment order does not include the demand of interest u/s 234-B and 234-C, it is an issue which has to be raised by the petitioner in the appeals said to have been filed challenging the orders of assessment. At this stage, this Court is not inclined to go into the veracity of the legal plea taken, since what has been challenged before this Court is not the fine assessment orders, but only a letter demanding the payment of arrears of tax and interest accrued. Therefore, the Court is not inclined to go into the merits of the contentions raised, as the substantial issue challenging the assessment orders is admittedly pending before the appellate forum. Thus when appeal on substantial plea is pending, the writ petition raising certain legal pleas based on a letter is totally untenable and misconceived. What the petitioner failed to achieve directly is trying to achieve indirectly. The petitioner s attempt before this Court lacks bona fide and the writ petition is filed raising irrelevant legal plea only to delay the payment of tax and interest. The writ petition, therefore, lacks bona fide and amounts to abuse of process of Court. No case is made out to approach this Court under Article 226 of the Constitution - writ petition filed with mala fide intention with an object of delaying recovery of tax is condemned - against assessee.

Issues Involved:
1. Legality of the demand for arrears of tax and interest.
2. Validity of the assessment orders and the inclusion of interest under Sections 234-B and 234-C of the Income Tax Act.
3. Admissibility of the writ petition in light of pending appeals.
4. Application of judicial precedents regarding the specificity of interest demands in assessment orders.
5. Relevance of Board's Circular No.530 dated 6.3.89.

Issue-wise Detailed Analysis:

1. Legality of the demand for arrears of tax and interest:
The petitioner challenged the letter dated 15.10.2012 issued by the Assistant Commissioner of Income Tax demanding payment of Rs. 2286.72 lakhs in arrears. The petitioner argued that the demand was unsustainable as the assessment orders did not reflect the interest portion now demanded. The court noted that the petitioner had preferred appeals before the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) and that no stay had been granted. The court held that the writ petition challenging the demand letter was not maintainable as the petitioner had availed the statutory remedy and should seek relief in the appellate forum.

2. Validity of the assessment orders and the inclusion of interest under Sections 234-B and 234-C of the Income Tax Act:
The petitioner contended that the assessment orders did not include the demand for interest under Sections 234-B and 234-C. The respondent countered that the assessment orders for the years 2005-06 and 2006-07 included interest demands, as evidenced by the annexures to the assessment orders. The court agreed with the respondent, stating that the annexures form part of the assessment orders and that the petitioner should raise this issue in the pending appeals rather than in the writ petition.

3. Admissibility of the writ petition in light of pending appeals:
The court emphasized that the petitioner had already filed appeals challenging the assessment orders and that the writ petition was not the appropriate forum to address the issues raised. The court stated that the petitioner should work out its remedy in the appellate forum, including seeking interlocutory orders against the tax and interest demands. The court found the writ petition to be an attempt to delay the payment of arrears and an abuse of the process of the court.

4. Application of judicial precedents regarding the specificity of interest demands in assessment orders:
The petitioner relied on decisions from the Allahabad High Court and Uttarakhand High Court, which held that interest demands must be specific and clear in the assessment orders. The court distinguished these cases, noting that the present case involved a letter demanding arrears rather than a direct challenge to the assessment orders. The court stated that the substantial issue of interest demands was pending before the appellate forum, and the petitioner's reliance on these decisions was misplaced.

5. Relevance of Board's Circular No.530 dated 6.3.89:
The petitioner argued that the Board's Circular No.530 had not been followed. The court noted that the circular pertains to the exercise of discretion under Section 220(6) by the assessing officer and that the petitioner had not demonstrated that any application was pending before the assessing officer on this plea. The court found this argument irrelevant to the case and intended to confuse the court to obtain an interim order.

Conclusion:
The court dismissed the writ petition, finding no merit in the petitioner's arguments. The court emphasized that the petitioner should pursue its remedies in the appellate forum and that the writ petition was an attempt to delay the payment of arrears. The court also dismissed the accompanying miscellaneous petition and refrained from imposing costs on the petitioner.

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