2019 (3) TMI 590 - HC - Income Tax

Stay petition - violation of principle of natural justice - HELD THAT - In the present case, even before the Petitioner could request Assessing Officer and, thereafter, the Principal Commissioner for hearing pending appeal, the Assessing Officer, apparently in consultation with the Principal Commissioner, has taken a view that, entire tax must be deposited. This would be wholly in violation of principle of natural justice. If the authorities were of the opinion that, the normal rule of stay upon depositing 20% of disputed tax demand, was not applicable in the present case, least that they had to do was to hear the Petitioner before taking final decision. The Petitioner shall apply to the Principal Commissioner of Income Tax for stay, pending appeal latest by 15th March, 2019.

Summary

Issues:
Challenge to garnishee notice and tax demand deposit order under Income Tax Act, 1961.

Analysis:
The petitioner challenged the garnishee notice and deposit order issued by the Respondents under Section 226(3) of the Income Tax Act, 1961. The petitioner's return of income for the Assessment Year 2016-17 resulted in a tax demand of ?10,35,03,417. The Assessing Officer initiated coercive recovery measures before the appeal period was over, attaching the petitioner's bank account. The petitioner requested the release of the account by offering to deposit 20% of the disputed tax demand, which was rejected by the Assessing Officer. The petitioner expressed willingness to deposit 20% of the tax demand and requested a stay on further recoveries pending appeal. The Department argued that the Assessing Officer was justified in demanding the entire tax amount based on a CBDT Circular. The Court noted that the authorities violated the principle of natural justice by not allowing the petitioner to be heard before demanding the entire tax amount.

The Court directed the petitioner to apply for a stay with the Principal Commissioner of Income Tax by a specified date and deposit ?30 lakhs with the Department to cover 20% of the tax demand. The Principal Commissioner was instructed to decide on the stay application after hearing the petitioner's representative. Until the stay application was decided, no further recoveries were permitted. The petitioner's bank account was to be released immediately. Failure to comply with the conditions would allow the Department to proceed with further recoveries. The petition was disposed of in accordance with these directions.