2024 (10) TMI 1414 - HC - Income Tax

Recovery proceedings - Suo motu revision u/s 263 - Tribunal directed to make inquiries as directed by the Principal Commissioner of Income Tax regarding the correctness of the valuation report of the accountant - petitioner s primary contention is that the directions of the Tribunal were not carried out in the order of assessment passed on remand; nor were the directions issued in the order u/s 263 complied with. HELD THAT - We are of the opinion that the recovery should await the disposal of the appeal especially since the demand raised is based on an assessment order, which was passed prior to the Tribunal s order. As submitted that 20% of the amounts have already been recovered and hence, there would be no recovery carried out based on the assessment order at Annexure-3. The appeal filed as submitted by petitioner. It is submitted by the learned counsel for the petitioner that amounts were recovered from the cash credit account and this created huge liability on the petitioner especially since the interest would run on the debit made. The petitioner, hence, seeks refund of the amounts already attached and recovered from the petitioner s account. The petitioner also relies on judgment at Annexure-9 of another Division Bench of this Court. Annexure-9 decision was in a batch of three writ petitions where attachment of the bank accounts of the assesses were made, when the assessment orders which created the demand were challenged in appeal after depositing 20% of the disputed tax amount under the Value Added Tax Act. Identical to the case herein, the attachment order was made of a cash credit account, which is a credit facility offered to the customer by the bank subject to a limit; which even if not overdrawn to the limit, would still not have any money belonging to the assessee as distinguished from a credit balance in a current account. But therein the demand was not met, which was met in the present case; which detains us from directing a refund. We make it clear that if the assessment is set aside, the assessee would be entitled to the refund along with interest payable as per the statute or that paid by the assessee in the cash credit account; whichever is higher and if not, the assessee would be saved from the interest on the amount recovered in the intervening period. There is no requirement to direct the assessee to be refunded the 20% already recovered. There shall be no further recovery based on the impugned assessment till the appeal is disposed of

Summary

Issues:
1. Compliance with directions of the Tribunal and Principal Commissioner regarding valuation report of shares.
2. Challenge to assessment order under Section 143 of the Income Tax Act, 1961.
3. Non-compliance with directions of the Tribunal in the order of assessment passed on remand.
4. Appeal filed in the National Faceless Appeal Center.
5. Refund of amounts recovered from the petitioner's account.
6. Interpretation of judgment at Annexure-9 regarding attachment of bank accounts.
7. Entitlement to refund if the assessment is set aside.

Analysis:

The judgment addresses the issue of compliance with directions given by the Tribunal and the Principal Commissioner regarding the valuation report of shares. The appellant challenged the assessment order passed under Section 143 of the Income Tax Act, 1961, which led to a revision under Section 263. The Commissioner found that the valuation of shares was not in accordance with the law, resulting in the cancellation of the assessment order. The Tribunal directed the Assessing Officer to frame the assessment de novo by making fresh inquiries and verification regarding the accuracy of information provided by the company for the valuation of shares using the Discounted Cash Flow method.

Regarding the non-compliance with the Tribunal's directions in the order of assessment passed on remand, the petitioner contended that the directions were not followed. The judgment highlights the necessity of following the Tribunal's directions and complying with the orders under Section 263 of the Income Tax Act to ensure a fair and lawful assessment process.

The judgment also discusses the appeal filed in the National Faceless Appeal Center, emphasizing the procedural steps to be followed, including obtaining a report from the Assessing Officer in line with the Tribunal's order and allowing the appellant to file objections before final adjudication.

Furthermore, the issue of refund of amounts already recovered from the petitioner's account is addressed. The petitioner sought a refund due to the recovery made from the cash credit account, creating a significant liability. The judgment references a previous Division Bench decision (Annexure-9) regarding attachment of bank accounts and the conditions under which a refund may be granted.

In conclusion, the judgment clarifies that if the assessment is set aside, the assessee would be entitled to a refund along with interest payable as per the statute or paid by the assessee in the cash credit account. The court decides that there is no requirement to refund the 20% already recovered, and no further recovery should be made based on the impugned assessment until the appeal is disposed of. The writ petition is disposed of with these observations, without commenting on the merits of the assessment made.