2018 (9) TMI 355 - HC - Income Tax

Recovery of tax - whether the third respondent Assessment Officer was entitled to recover the entire tax which was assessed by him immediately after the order passed by him is confirmed by the Commissioner of Income Tax (Appeals) without waiting for appeal period which is statutorily provided under the Act as contemplated in Section 253 (3) of the said Act? - Held that - In this proceedings the learned counsel appearing for the respondent Nos.1 to 3 tried to substantiate the act of the third respondent in relying upon Section 225 of the Act and other relevant provisions which are coming under Chapter 17(d) in support of the action of third respondent Income Tax officer in recovery of the tax assessed. This Court is of the opinion that the respondents have miserably failed to substantiate the illegal act committed by the third respondent in high handedly recovering the assessed amount. Despite the fact that statutorily he is prevented from doing so which is fortified by several judgments of various High Courts and Hon ble Apex Court. Pathetic incompetence of the officer either in understanding the legal provisions which is borne out from the book or in understanding the judgment, which governs the law with reference to the manner of recovery. The conduct of third respondent is nothing but causing harassment to assessee. In that view of the matter this Court finds the amount of ₹ 15,82,41,007/- which is recovered by third respondent is in excess of his right in the fact situation, also in the light of the judgment referred to supra as could be seen from Annexure-A, the same is ordered to be refunded within one week from the date of receipt of copy of this order.

Summary

Issues:
Challenge to recovery of tax assessed by the Income Tax Officer for multiple assessment years exceeding permissible limit without waiting for appeal period as provided under the Income Tax Act.

Analysis:
The petitioner, an Agency of the State Government, challenged the order of the Income Tax Officer for recovering tax assessed for various assessment years without waiting for the appeal period. The petitioner argued that the recovery exceeded the permissible limit and hindered its day-to-day functioning. The dispute revolved around whether the Assessment Officer was entitled to recover the tax immediately after confirmation by the Commissioner of Income Tax (Appeals) without waiting for the appeal period as per the Act.

The petitioner cited a Division Bench judgment of the Bombay High Court in UTI Mutual Fund vs. Income Tax Officer, emphasizing that no recovery should be made pending the expiry of the appeal time limit or disposal of a stay application. The judgment highlighted the need for a fair assessment of the application for stay and reasonable notice before withdrawing amounts from a bank account. The Court noted that the Income Tax Officer must balance the interests of the Revenue and the assessee, acting as a quasi-judicial authority.

The petitioner relied on various judgments to support its contention that the Recovery Officer acted beyond the Act's provisions by high-handedly recovering an excess amount. The Court found the respondents failed to justify the Recovery Officer's actions and ordered the refunded amount to be returned within a week, subject to a specific recovery amount. The Court warned of contempt proceedings if the refund was not made, emphasizing the Recovery Officer's incompetence and harassment caused to the assessee.

In conclusion, the Court held that the Recovery Officer had exceeded his rights by recovering an excessive amount and ordered a refund. The judgment underscored the importance of following statutory provisions and ensuring a fair balance between the interests of the Revenue and the assessee.