2017 (10) TMI 1099 - HC - Income Tax

Lifting of the attachment of one of the three bank accounts of the Petitioner that have been frozen to recover the disputed amount - Held that - This Court is of the view that of the three bank accounts of the Petitioner that remain frozen, the Petitioner should be allowed to operate at least one. It is pointed out by Mr. Syali, the learned Senior Counsel appearing for the Petitioner, that the only account where the Petitioner has a cash credit facility is its Account No. 01812100000354 with Kotak Mahindra Bank Limited, Sector 18 Branch, Noida. It is accordingly directed that the Petitioner will be forthwith permitted to operate the Account No. 01812100000354 with Kotak Mahindra Bank Limited, Sector 18 Branch, Noida without prejudice to the rights and contentions of the Revenue and subject to further orders that may be passed in the present petition. The Assistant Commissioner of Income Tax, Central Circle (8) will forthwith issue written instructions to the Manager of Kotak Mahindra Bank Limited, Sector 18 Branch, Noida to permit the Petitioner to operate Account No. 01812100000354 .

Issues:
1. Application for lifting the attachment of a frozen bank account to recover a disputed tax amount for Assessment Year 2013-14.
2. Petitioner's association with a flagship company that approached the Income Tax Settlement Commission (ITSC) and deposited tax amount.
3. Petitioner's additional deposits towards tax demands for Assessment Years 2013-14 and 2014-15.
4. Interpretation of Circular dated 31st July 2017 of the Central Board of Direct Taxes (CBDT) regarding payment percentage of tax demand.
5. Decision on allowing the Petitioner to operate at least one of the frozen bank accounts.
6. Identification of the specific bank account for the Petitioner to operate.
7. Directions for the Assistant Commissioner of Income Tax to issue written instructions to the bank for allowing account operation.

Analysis:
1. The Petitioner sought the lifting of attachment on one of the three frozen bank accounts to recover a disputed tax amount for Assessment Year 2013-14. The Petitioner emphasized the necessity to unfreeze an account to continue its day-to-day business operations.

2. The Petitioner, a part of a group with a flagship company that approached the ITSC, highlighted that the flagship company deposited the tax amount sought from the Petitioner. The outcome of the ITSC proceedings would determine the recovery source for the tax amount.

3. Apart from the deposits made towards the tax demand for Assessment Year 2013-14, the Petitioner also paid a sum for Assessment Year 2014-15, despite a nil tax demand. The Revenue had already recovered a portion through attaching bank accounts, leaving a specific outstanding amount.

4. The Revenue cited a CBDT Circular specifying a 20% payment requirement of the tax demand. The Court noted the existing amount with the Revenue almost meeting the 20% threshold, influencing the decision to allow the Petitioner to operate one bank account.

5. Considering the circumstances, the Court decided to permit the Petitioner to operate one of the frozen bank accounts to facilitate business operations.

6. The specific bank account identified for operation was the one with a cash credit facility at Kotak Mahindra Bank Limited, Sector 18 Branch, Noida.

7. Directives were issued for the Assistant Commissioner of Income Tax to provide written instructions to the bank to allow the Petitioner to operate the identified account promptly, ensuring compliance with the Court's decision.

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