2024 (2) TMI 1049 - HC - Income Tax

Rectification application - Validity of Garnishee Notices for recovery of tax - contention of the writ petitioners that the Garnishee Notices had come to be issued even though various applications for rectification were pending and the respondents having adopted coercive measures without disposing of those applications - writ petitioners had contended that while dealing with the pending rectification applications, when the petitioner had approached the Centralized Processing Center CPC it was apprised that it would have to move the jurisdictional AO. HELD THAT - We find ourselves unable to appreciate the manner in which the two rectification applications have come to be disposed of and that too after we had taken cognizance of the grievance of the writ petitioners. If the AO were of the opinion that the powers of rectification did not stand conferred, it would have been well advised to desist from making observations pertaining to the merits of the application. Similarly, the fact that an appeal has not been filed would not constitute a valid ground for refusing to consider a rectification application provided the issues that are raised fall within the ambit of Section 154 of the Act. Respondents appearing on instructions submitted that against the various demands which remain outstanding, the petitioner has chosen not to invoke the appellate remedies available and has merely moved rectification applications. He has also alluded to the petitioner having not made any deposit against the outstanding demand. We may note that the total demand as per the Garnishee Notices is stated to be INR 17,16,85,384/-.However, and notwithstanding the above, Respondents submitted that the jurisdictional AO would have no objection to considering the rectification applications afresh in case such liberty were to be accorded by the Court. As we view the order pertaining to AY 2016-17, we find that the rectification application has come to be rejected solely on the ground that no appeal had been filed by the writ petitioner against the original order of assessment. In terms of that order, the rectification applications which had been pending right from 30 April 2021, 05 October 2021 and 09 January 2024 have come to be summarily rejected. Similarly, while passing the orderpertaining to AY 2022-23, while the jurisdictional AO has on the one hand held that it has not been transferred rectification rights by the CPC, it has proceeded further to observe that the adjustments would not fall within the ambit of Section 154 of the Act. Therefore, both these orders are liable to be quashed and the matter remitted to the jurisdictional AO for considering the pending rectification applications afresh and in accordance with law. Permission to securitize 20% of the outstanding tax demand - Since Garnishee Notices already operate, we take note of the additional prayer made by the writ petitioner of it being permitted to securitize 20% of the outstanding tax demand by submitting an undertaking that it would maintain a credit balance in the aforenoted accounts to the extent of INR 3,43,37,076/- being 20% of the total outstanding demand till such time as the rectification applications are disposed of. In our considered opinion the prayer for lifting of the Garnishee Notices and for provisioning of adequate security is an issue which would merit examination and consideration by the jurisdictional AO in the first instance. We thus leave it open to the writ petitioner to move the jurisdictional AO in this regard also. The prayer for modification and lifting of the Garnishee Notices as well as for disposal of the pending rectification applications may be considered with due expedition and disposed of within a period of one week. Assessee in default and levying interest u/s 220(1) - Case of the writ petitioner was that as per the rectification order passed by the CPC a demand of INR 1,22,310/- came to be created which was duly paid by the petitioner on 13 April 2022 and thus within 30 days of the passing of the aforesaid order. It is in the aforesaid context that they question the respondent treating it as an assessee in default and levying interest u/s 220(1). In this respect, the assessee is stated to have filed a rectification application on 08 January 2024. That rectification application has come to be rejected by an order dated 12 February 2024.

Summary

Issues:
The judgment primarily deals with the challenge to Garnishee Notices and the disposal of pending rectification applications by the jurisdictional Assessing Officer.

Challenge to Garnishee Notices:
The writ petitions contested Garnishee Notices dated 31 January 2024, leading to restraints on specific bank accounts. The petitions related to Assessment Years 2016-17, 2018-19, 2020-21, and 2022-23. Additionally, two petitions sought to quash orders dated 10 February 2024 and 12 February 2024 concerning rectification applications.

Disposal of Rectification Applications:
The court noted the rejection of rectification applications for AY 2022-23 and 2016-17. The jurisdictional Assessing Officer (AO) refused rectification citing lack of conferred powers and non-filing of appeals. The court criticized the rejection based on appeal status and lack of clarity on rectification powers.

Court's Observations and Decision:
The court found fault with the rejection of rectification applications solely based on appeal status and lack of clarity on rectification powers. The orders dated 10 February 2024 and 12 February 2024 were deemed invalid, and the matter was remitted to the AO for fresh consideration. The court allowed the writ petitions in part, quashing the mentioned orders and directing the AO to reexamine the rectification applications for AYs 2016-17 and 2022-23.

Additional Directions:
The court acknowledged the existing Garnishee Notices and allowed the petitioner to securitize 20% of the outstanding tax demand by maintaining a specified credit balance. The court advised the petitioner to approach the AO for further modifications and lifting of notices. The court emphasized prompt consideration and disposal of these matters within a week.

Specific Petitions:
Regarding W.P. 1846/2024, a rectification order was challenged for treating the petitioner as an assessee in default. In W.P. 1848/2024, another rectification application was disposed of. The court left it to the petitioner to pursue available legal remedies for these specific cases.

This summary encapsulates the key issues, court observations, and directives outlined in the judgment.