2018 (3) TMI 1087 - HC - Income Tax

Stay of demand - Penalty u/s 271(1)(c) - Held that - Referring to Office Memorandum dated 31.07.2017 in which it has been stated that where the outstanding demand was disputed before the Appellate Authority the assessing officer shall grant stay of demand till the disposal of the first appeal on payment of 20% of the disputed demand. In this case a simple arithmetic calculation would show that more than 20% of the disputed demand has already been recovered and adjusted by the Department. In view of the same the impugned notices shall be kept in abeyance and it shall abide by the outcome of the appeals filed by the petitioner herein.

Summary

Issues:
1. Validity of penalty orders under Section 271(1)(C) of the Income Tax Act, 1961 for assessment years 2009-2010 to 2014-2015.
2. Pending appeals before the Appellate Authority and stay application.
3. Recovery proceedings and freezing of petitioner's bank accounts.
4. Impugned notice under Section 226(3) of the Income Tax Act, 1961.
5. Compliance with Office Memorandum dated 31.07.2017 regarding stay of demand.

Analysis:
The judgment by the High Court of Madras, delivered by Justice G. R. Swaminathan, addressed multiple issues concerning the petitioner's tax matters. Firstly, the petitioner faced penalty orders under Section 271(1)(C) of the Income Tax Act, 1961 for several assessment years. Subsequently, the petitioner appealed these orders before the Appellate Authority, with pending appeals and a stay application. During this process, recovery proceedings were initiated, resulting in the recovery of a substantial amount from the petitioner's bank account, which remained frozen due to an impugned notice under Section 226(3) of the Income Tax Act, 1961.

The petitioner's counsel highlighted an Office Memorandum dated 31.07.2017, emphasizing that when the outstanding demand is disputed before the Appellate Authority, the assessing officer should grant a stay of demand until the first appeal's disposal upon payment of 20% of the disputed demand. In this case, more than 20% of the disputed demand had already been recovered and adjusted by the Department. Therefore, the Court directed to keep the impugned notices in abeyance, awaiting the outcome of the appeals filed by the petitioner.

Ultimately, the High Court allowed the Writ Petition, with no costs imposed, and closed the related application. The judgment provided clarity on the application of the Office Memorandum in cases of disputed demands and the necessity to abide by the appeal process before enforcing recovery actions, ensuring fairness and due process in tax matters.