2020 (4) TMI 548 - HC - Income Tax

Recovery proceedings - Stay of demand - payment insisted for granting stay - HELD THAT - As decided in KODUR SERVICE CO-OPERATIVE BANK LIMITED 2019 (7) TMI 374 - KERALA HIGH COURT insistence for payment of a portion of the amount demanded, as a condition for granting stay, need not be insisted in the case at hand and hence the Division Bench has ordered that it is for the appellate authority to take a decision on the statutory appeal at the earliest and that until final decision is rendered by the appellate authority in the statutory appeal, coercive steps for recovery and collection of the impugned tax is to be kept in abeyance in the light of the dictum laid down by the Full Bench of this Court in Mavilayi Service Co-operative Bank Ltd.'s case 2019 (3) TMI 1580 - KERALA HIGH COURT . Taking note of the said orders issued by the abovesaid Division Bench of this Court, it is ordered that the 1st appellate authority shall ensure final disposal of Ext.P-2 appeal after affording reasonable opportunity of being heard to the petitioner without much delay and within a reasonable time limit that may be fixed appropriately by the said appellate authority. However, in the interest of justice it is ordered that until final orders are passed disposing of Ext.P-2 appeal, all coercive steps for the enforcement of the assessment order impugned in the abovesaid appeal shall be kept in abeyance.

Summary

Issues:
1. Disallowance of claim under Sec. 80P(4) of the Income Tax Act
2. Coercive steps for recovery of disputed amounts during appeal
3. Insistence on part payment for granting stay pending appeal

Analysis:
1. The petitioner society filed a Writ Petition (Civil) claiming the benefit under Sec. 80P(4) of the Income Tax Act for the period 2017-2018. The assessing authority disallowed the claim, demanding tax of ?29,14,317. The petitioner appealed this decision, with coercive steps initiated for recovery during the appeal process.

2. The petitioner's counsel argued that a Full Bench judgment had addressed the liability of banks like the petitioner cooperative bank to pay income tax. Referring to the Full Bench decision, it was contended that the appellate authority could only remand the matter for fresh inquiry. The insistence on payment pending appeal was deemed prejudicial to the cooperative society, citing potential hardships.

3. The Standing Counsel for the Income Tax Department contended that the appellate authority's discretion regarding part payment for granting stay should not be interfered with. However, a Division Bench had previously ruled that in similar cases, the insistence on payment need not be upheld. The Division Bench ordered that coercive steps for recovery should be kept in abeyance until the final decision on the appeal, in line with the Full Bench dictum.

4. Considering the Division Bench's ruling, the High Court ordered the 1st appellate authority to promptly dispose of the appeal and afford the petitioner a reasonable opportunity to be heard. Until the final decision on the appeal, all coercive steps for enforcing the assessment order were to be suspended in the interest of justice. The Writ Petition (Civil) was finally disposed of with these observations and directions.