2018 (4) TMI 524 - HC - Income Tax

Stay application - AO said that application for stay would only be considered after the 20% of the penalty imposed by the order dated 16th March, 2018 is paid by the petitioner - Assessing Officer attached the petitioner s bank account with HDFC Bank Ltd. - reasons which lead the Revenue to restrict the notice period under Section 156 - Held that - As amount of ₹ 9.88 lakhs which was withdrawn from the attached HDFC bank account have been deposited by the Assessing Officer in the attached bank account on 31st March, 2018 following consent order is passed i) The impugned order dated 26th March, 2018 passed by respondent no.1 rejecting the petitioner s stay application is set aside; (ii) The Assessing Officer shall in accordance with the decision of this Court in Firoz Tin Factory (2012 (4) TMI 191 - BOMBAY HIGH COURT ) provide the reasons which lead the Revenue to restrict the notice period under Section 156 of the Act to only 7 days instead of the normal 30 days period; (iii) The Assessing Officer will pass a fresh order on the petitioner s stay application after hearing the petitioner in accordance with law and particularly in accordance with the decisions of this Court in KEC International Ltd. (2001 (3) TMI 32 - BOMBAY High Court) and UTI Mutual Funds (2012 (3) TMI 333 - BOMBAY HIGH COURT); (iv) Mr. Mistri, learned Senior Counsel appearing on behalf of the petitioner states that attachment of the Bank Accounts makes it impossible for it to carry on its business. Therefore, on instructions of Ms. Shweta Rau, partner of the petitioner firm states that an amount of ₹ 9,88,068/which is the amount which has been attached will be available in the bank account till such time as the petitioner s stay application is disposed of by the Assessing Officer in accordance with law and for a period of two weeks thereafter. Statement accepted; (v) Needless to state that in case the order of the Assessing Officer on the petitioner s stay application is adverse to the petitioner, then for a period of two weeks thereafter no coercive proceedings for recovery will be adopted by the Revenue. This is enable the petitioner to take such steps as it is advised in law.

Summary

Issues:
Challenge to order under Section 220(6) of Income Tax Act for stay of penalty imposition.

Analysis:
The petitioner challenged the order dated 26th March, 2018, passed by the Assessing Officer under Section 220(6) of the Income Tax Act, 1961, rejecting the petitioner's application for stay of the penalty imposed on 16th March, 2018. The petitioner sought a stay of the penalty of ?1.88 crores until the disposal of its appeal before the Commissioner of Income Tax (Appeals) as the normal 30-day period to file an appeal had been reduced to 7 days in the notice under Section 156 of the Act. The Assessing Officer rejected the stay application without considering it, stating that it would only be considered after 20% of the penalty was paid by the petitioner.

The petitioner's bank account was attached by the Assessing Officer on 26th March, 2018, under Section 226 of the Act. The petitioner filed a petition challenging the rejection of the stay application. Despite attempts to serve the petition, the Assessing Officer withdrew ?9.88 lakhs from the petitioner's account before the petition could be heard. The court directed the revenue to deposit the withdrawn amount back into the petitioner's account, citing a previous court order.

During the hearing, the court pointed out that the impugned order was contrary to previous court decisions regarding the disposal of stay applications under Section 220(6) of the Act. The court emphasized that while the Revenue can reduce the notice period under Section 156 of the Act, the reasons for such reduction should be communicated to the petitioner. Ultimately, a consent order was passed setting aside the order rejecting the stay application, directing the Assessing Officer to provide reasons for the reduced notice period, and requiring a fresh decision on the stay application in accordance with the law and previous court decisions.

The petitioner agreed to keep the attached amount in the bank account until the stay application was decided and for an additional two weeks thereafter. It was also agreed that no coercive recovery proceedings would be initiated by the Revenue for two weeks if the Assessing Officer's decision on the stay application was adverse to the petitioner. The petition was disposed of accordingly with no order as to costs.