2020 (2) TMI 1290 - HC - Income Tax

Stay of demand on the recovery - HELD THAT - According to us, the ITO, was required to consider the petitioner's application dated 22.01.2020 which is in fact, an application seeking for stay on the recovery of the entire demanded amount before issuing the impugned notice dated 12.02.2020. On this short ground, we are inclined to defer the execution of the impugned notice dated 12.02.2020. This is more so because Mr. Panandiker, the learned counsel for the petitioner on instructions, makes a statement that despite the impugned notice dated 12.02.2020 as yet, his bankers, have not remitted this amount to the Income Tax Department. If the petitioner's bankers have till date, not acted on the impugned notice dated 12.02.2020, then, they need not act upon the same until they receive further orders from the ITO. The ITO, to hear the petitioner assessee and dispose of the application dated 22.01.2020 seeking, in effect, a stay on the recoveries as expeditiously as possible and in any case within a period of six weeks from today. Until the petitioner's application dated 22.01.2020 is disposed of, the ITO to not insist upon compliance with the impugned notice dated 12.02.2020. The petitioner assessee to appear before the ITO on 04.03.2020 at 10.30 a.m. and file an authenticated copy of this order. Further, the petitioner, to cooperate with the ITO in the matter of disposal of the application or the request in the application dated 22.01.2020. The petitioner is also authorized to communicate the authenticated copy of this order to the Ratnakar bank Ltd., so that, the bank, need not act upon the impugned notice dated 12.02.2020 until it receives further orders from the ITO in this regard.

Summary

Issues: Challenge to notice issued by Income Tax Officer to remit a specific amount by petitioner's bank towards income tax payment pending appeal.

Analysis:
1. Challenge to Notice: The petitioner challenged the notice dated 12.02.2020 issued by the Income Tax Officer (ITO) to the petitioner's bank, demanding payment of ?33,42,040 as income tax dues. The petitioner had already filed an appeal against the assessment order forming the basis of the demand. The ITO had communicated that 20% of the demanded amount, approximately ?13,37,462, could stay the recovery pending appeal. The petitioner requested adjustment of this amount from the expected tax refunds of ?23,66,633. The petitioner argued that the notice was unjustified as the application for adjustment was pending before the ITO.

2. Contentions: The Standing Counsel for the respondent argued that since the amount was due and payable without any stay granted, the notice was valid. However, the court noted that the petitioner had not refused to pay the 20% demanded amount but sought adjustment from anticipated tax refunds. The court emphasized that the ITO should have considered the petitioner's application seeking a stay before issuing the notice.

3. Decision: The court decided to defer the execution of the notice dated 12.02.2020. It directed the ITO to hear the petitioner and dispose of the application seeking a stay within six weeks. Until the application is resolved, the ITO was instructed not to enforce compliance with the notice. The petitioner was asked to appear before the ITO and provide a copy of the court order. Additionally, the petitioner was authorized to inform the bank not to act on the notice until further instructions from the ITO.

4. Disposition: The rule was disposed of with no costs imposed, and all parties were instructed to act based on an authenticated copy of the court order. The judgment focused on the procedural fairness and the need for the ITO to consider the petitioner's request for stay before enforcing the payment notice, ensuring a balanced approach in tax recovery proceedings.