2021 (7) TMI 1058 - HC - Income Tax

Recovery proceedings - attachment orders - stay petition - as submitted petitioner deposited 20% of tax dues earlier, the property would not have been attached - HELD THAT - Petitioner has been before appellate authority against the assessment order, disputing tax liability for AY 2010-11 and that there has been stay to demand under order passed by respondent No. 2 on 20% of amount of demand been deposited as required. The attachment order has been issued before the stay order and it is being contended that the respondent No. 1 has no authority and power to lift attachment unless 100% of the amount is collected and/or till finalization of dispute before appellate forum. This appears to be a reason which is coming in the way of banks / concerned authority from releasing property from attachment. The position emerges that there is no dispute on that petitioner has fulfilled the condition of deposit of 20% of amount for staying the effect and operation of order of demand. In the given circumstances, it would be proper that the attached property under order dated 25.11.2019 be released from attachment and as such, we allow the petition in terms of prayer clause (b).

Summary

Issues:
Petitioner's request to lift attachment over property under order dated 25.11.2019 and to give effect to order granting stay to recovery proceedings.

Analysis:
The petitioner filed its income tax return for AY 2010-11, which led to an assessment order making an addition to the returned income, requiring the petitioner to pay a significant amount as tax. The petitioner appealed the assessment order before the Commissioner of Income Tax (Appeals) and sought a stay of demand, which was initially rejected. The petitioner made partial payments towards the disputed tax amount while requesting to keep the demand in abeyance. Despite making payments and fulfilling the condition of depositing 20% of the tax dues, garnishee notices were issued, attaching the petitioner's bank account and property. The tax recovery officer demanded further payments and details of the petitioner's assets, leading to financial hardship for the petitioner.

The petitioner continued to make payments, deposited substantial sums, and requested the respondents to lift the attachment as a significant portion of the outstanding demand had been paid. Despite subsequent payments and a stay granted on the tax demand for AY 2010-11 subject to certain conditions, the attachment over the property persisted. The petitioner repeatedly requested the tax recovery officer and the Principal Commissioner to lift the attachment, emphasizing that the attachment was unnecessary and unreasonable after fulfilling the conditions for the stay order.

The petitioner argued that the attachment, which preceded the stay order, was redundant and should be lifted as it contradicted the purpose of the stay. Reference was made to section 281 of the Income Tax Act, highlighting that there was adequate security for revenue without the need for continued attachment over the property. On the other hand, the revenue's counsel contended that the property would not have been attached if the petitioner had deposited 20% of the tax dues earlier. It was argued that the tax recovery officer lacked the authority to lift the attachment unless 100% of the demand was collected or until the dispute was finalized before the Appellate Forum.

The Court observed that the petitioner had fulfilled the condition of depositing 20% of the demand amount for staying the effect of the demand order. It was noted that the attachment order preceded the stay order, and there was no provision empowering the tax recovery officer to lift the attachment until the entire demand was collected or the dispute was resolved before the Appellate Forum. Consequently, the Court ruled in favor of the petitioner, directing the release of the attached property from the attachment order dated 25.11.2019.