2014 (9) TMI 86 - HC - Income Tax

Stay application Recovery of tax and interest Petition to be moved to appellate authority - Held that - To balance the equation and safeguard the interest of the petitioners and the Revenue, assessee is permitted to move the appellate authority for stay of the demand notice, and to enable the petitioners to avail such benefit, till then proceedings pursuant to order and the demand notices needs to be stayed stay granted.

Summary

Issues:
Co-operative societies seeking writ for direction/stay of tax recovery and interest under Income Tax Act, challenge approval to reduce time under Section 220(1).

Analysis:
The petitioners, co-operative societies, filed a joint writ action seeking relief from tax liability and interest as per demand notices issued by the assessing officer under Section 156 of the Income Tax Act, 1961. They also contested the approval granted to reduce the time under Section 220(1) of the Act. The primary issue raised was the jurisdiction of the assessing officer to initiate proceedings against the petitioners for non-deduction of tax at source on interest payments to members under Section 194A of the Act. The petitioners claimed exemption as a banking institution under the Banking Regulation Act, 1949. They argued that the assessing officer's actions were unjustified and had filed objections which were not considered properly.

During the proceedings, the petitioners sought a stay on the assessment order and demand notices pending the appeal before the Commissioner of Income Tax (Appeals). The Department contended that since the appeals were pending, the petitioners should seek relief through the appellate authority rather than approaching the court. However, the petitioners maintained that their approach to the court was based on challenging the jurisdiction of the assessing officer and the curtailment of the statutory period for response.

In the judgment, the court balanced the interests of both parties by allowing the petitioners to move the appellate authority for a stay on the demand notices. The court directed the Commissioner of Income Tax (Appeals) to expedite the disposal of the appeals within three months. Until then, a stay was ordered on the recovery proceedings related to the demand notices. The court emphasized the need to safeguard the petitioners' rights while ensuring the Revenue's interests were also protected. The standing counsel was given a deadline to file a memo of appearance within three weeks.

In conclusion, the court granted the petitioners the opportunity to seek relief through the appellate authority, ordered the speedy disposal of appeals, and stayed the recovery proceedings pending the outcome of the appeals. The judgment aimed to provide a fair resolution to the dispute while upholding the principles of justice and procedural fairness.