2023 (4) TMI 1215 - HC - Income Tax

Stay of demand - demand order demanding the payment of 20% of the disputed tax, interest and penalty immediately and to produce proof of payment - As submitted stay petition filed was rejected without even permitting the petitioner to make his submissions on the stay petition - HELD THAT - Petitioner being an NRI was shuttling between India and Malaysia, he was not in a position to take immediate steps to challenge this demand. The respondent had, therefore, initiated garnishee proceedings and attached the Bank accounts of the petitioner with the Indian Bank and ICICI Bank . Admittedly, the appeal challenging the assessment is still pending disposal and in the earlier writ petitions 2022 (12) TMI 1400 - MADRAS HIGH COURT , 2022 (12) TMI 1401 - MADRAS HIGH COURT this Court had quashed the demand and directed the respondent to reconsider and pass speaking orders. It is also seen that the entire amounts demanded, namely 20% of the disputed tax, interest and penalty has been withdrawn by the respondent from the bank accounts of the petitioner. This Court feels that the interest of justice would be met, if the respondent is directed to dispose of the statutory appeal filed by the petitioner under Section 246(A) of the Act and further since 20% of the disputed tax, interest and penalty has been recovered by the respondent from the banks, in which the petitioner had accounts, a direction is issued to the appellate authority to dispose of the appeal within a period of 12 weeks from the date of receipt of a copy of this order. Till then, there shall be a stay in respect of the remaining 80% of the demand and the attachment in respect thereto is raised.

Summary

Issues involved:
The judgment involves challenging a demand order issued by the respondent, quashing the order, and directing the return of withdrawn sums. The issues include non-inclusion of NRE receipts and interest in tax returns, imposition of tax liability, interest, and penalty, initiation of garnishee proceedings, attachment of bank accounts, and subsequent legal challenges.

Non-inclusion of NRE receipts and interest:
The petitioner, a Non-Resident Indian, failed to include NRE receipts and interest in tax returns for assessment years 2014-2018 due to oversight. Despite being exempted under Section 10 of the Income Tax Act, the amounts were omitted. The revised return for 2017-2018 was accepted late, and for 2018-2019, the capital account reflected a total sum of Rs.10,81,65,290. The petitioner's NRI status and business activities in Malaysia and India were highlighted.

Imposition of tax liability, interest, and penalty:
The respondent issued notices under Section 142(1) of the Act during the COVID-19 pandemic, leading to difficulties in responding. Subsequently, an assessment order was passed imposing a significant tax liability and interest. A penalty order was also issued under Section 272A(1)(d) of the Act. The petitioner filed a statutory appeal against these orders, seeking relief from the tax burden imposed arbitrarily.

Initiation of garnishee proceedings and attachment of bank accounts:
Due to the petitioner's inability to immediately challenge the demand, the respondent initiated garnishee proceedings and attached bank accounts with Indian Bank and ICICI Bank. The petitioner filed writ petitions challenging the demand and attachment orders, leading to the quashing of the demand order and directions for reconsideration and speaking orders.

Court's Decision:
The Court directed the respondent to dispose of the statutory appeal filed by the petitioner and to reconsider the tax, interest, and penalty demands. A stay was granted for the remaining 80% of the demand, and the attachment related to it was lifted. The appellate authority was instructed to resolve the appeal within 12 weeks. The writ petition was disposed of without costs, and connected Miscellaneous Petitions were closed.