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TMI Blog2013 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... e budgetary deficit could be a reason for holding reasonable belief that permitting the full period of 30 days for payment of tax would be detrimental to the cause of the Revenue. It is not such a situation where interest of Revenue is likely to be affected on account of any act of assessee - the past performance all through out of the petitioner-assessee was not such which would give rise to any apprehension in the mind of the Revenue so as not to allow the entire period. On the contrary, the very letter of the Assessing Officer is self-evident that the "rich cash flow enjoyed by the assessee" would help him meeting the target of budget deficit and thus it can be concluded that the belief had neither any relevant or valid reasons and it also does not have any direct nexus to the conclusion of reduction of period. Both the authorities have acted without truly grasping the essence of use of this provision. Resultantly, the action of invocation of the discretionary powers under Section 220(1) of the Act shall have to fail. Recovery u/s 226 - Other modes of recovery - Held that:- While issuing notice to the bank under Section 226(3) of the Act for making payment, a notice has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry period of 30 days from the date of service of notice as prescribed under Section 220 of the Act. 1.4 The petitioner preferred an appeal along with a stay application before the Commissioner of Income Tax (Appeals) against such order passed by the respondent. However, in the meantime, the respondent recovered a sum of Rs. 1, 39,70,275/- from the bank account of the petitioner on March 28,2013. The notice under Section 226(3) of the Act and the letter substantiating such payment by the bank to the respondent is brought on record. 1.5 Aggrieved by such act of reduction of time period from 30 days to seven days and recovery of huge sum of Rs.1,39,00,000/- (rounded off), present petition under Section 226 of the Constitution of India is preferred seeking the following reliefs : "7a. quash and set aside the impugned notice dated 13.03.2013 at 'Annexure-A' to this petition; b. pending the admission, hearing and final disposal of this petition, to direct the respondent to refund the total amount recovered in respect of the impugned demand notice for Rs. 1,41,07,755/-; c. Provide for cost of this petition; d. Pass any other order( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [2000] 246 ITR 188, favours the petitioner. 3. Per contra, the learned advocate Shri Parikh appearing for the Revenue has urged that it is the discretion of the Assessing Officer to reduce the period prescribed under the Act. He has urged that the petitioner has already preferred an appeal against the demand notice issued under Section 156 of the Act and, therefore, when an effective alternative remedy has already been resorted to, the writ' jurisdiction may not be invoked. It is further urged that for the assessment year 2010-11 all issues raised by the petitioner had been aptly dealt with and while framing the assessment, Assessing Officer determined and computed total income of the petitioner to the tune of Rs. 3,36,06,368/-, as the exemption under Section 11(1)(a) of the Act was not granted since the petitioner has not carried any research activity. Against such order, the petitioner preferred Special Civil Application No. 9237 of 2012, which is pending before this Court. It is further argued on the line of affidavit-in-reply filed by the respondent Assessing Officer that the statutory discretion in accordance with law has been exercised for reduction of period to prote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice to the provisions contained in sub-section (2), on an application made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case. (4) If the amount is not paid within the time limited under sub-section(1) or extended under sub-section(3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default." 7. Under this provision, not only the discretion is given to the Assessing Officer to reduce the statutory period of 30 days by specifying the said period in the notice of demand itself, however, on an application made by the assessee, the Assessing Officer also has a discretion to extend the time for payment or allow the payment by instalment in the given facts and circumstances. And, only on the occasion of non-payment of such demand within the period prescribed in demand notice under sub-section (1) or as extended under sub-section (3) of this provision (Section 220) that the assessee is considered in default. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, with the previous approval of the Joint Commissioner, that the sums specified in the notice of demand shall be paid within a period of less than 30 days. The proviso to Sub-section (1) of Section 220 is in the nature of an exception to the general requirement under the substantive part that an amount which is required to be paid in pursuance of a notice of demand has to be paid within 30 days of the service of notice. The exception which has been carved out by Parliament comes into operation if the Assessing Officer has reason to believe that it would be detrimental to the interests of the Revenue if a full period of 30 days is allowed. This exception has been structured by a further requirement of the previous approval of the Joint Commissioner. The exercise of the power to reduce the period under the proviso to Sub-section (1) cannot be exercised casually and without due application of mind. The question as to whether it would be detrimental to the interests of the Revenue to allow the full period of 30 days has to be addressed. The Assessing Officer must, in the first instance, have reason to believe that the interests of the Revenue would be detrimentally affected by allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady contended before the Commissioner (Appeals) with regard to continuity of exemption, the Court held that the Director of Income-tax ought to have granted complete stay of demand. 12. The Division Bench of this Court in the case of Gujarat State Energy Generation Ltd. (supra) was considering the case where a notice was challenged on the ground that in terms of Section 220(1) of the Act though the assessee was entitled to a period of 30 days, the notice granted period of fortnight. In absence of any recorded reasons to believe that granting of full period of 30 days would be detrimental to the Revenue and in absence of previous approval of the Joint Commissioner for curtailing such a period, the petition was allowed. On both the grounds i.e. (i) absence of any sufficient reasons to believe that granting full period of 30 days was detrimental to Revenue and (ii) as no prior approval, of the Joint Commissioner in writing was obtained, the essential requirements were not found to have been fully complied with. The Division Bench while upholding the petition held thus : "In the present case, we have serious doubt if the reasons recorded by the Assessing Officer, though not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, it was of the opinion that the belief of the Assessing Officer must have a direct nexus to the conclusion that payment of tax would be detrimental to the Revenue and any suspicion in that respect is not the reason to believe. In absence of any material before the Assessing Officer to believe that the demand would become irrecoverable or that it would be detrimental to the Revenue to allow the full period of 30 days, the order of reduction of period for payment of tax demand was set aside. It would be profitable to quote the relevant part of the decision as under : "After passing an order of assessment in accordance with the provisions of the Act, the Assessing Officer is obliged to raise a demand in terms of section 156 of the Income-tax Act, 1961. Normally, the assessee would be granted a period of thirty days to discharge his liability of tax. The proviso to section 220(1) vests a special power in the Assessing Officer to reduce such period. The proviso to section 220(1) is an exception to the rule and is not a rule in itself. No canon of statutory construction is more firmly established than that the statute must be read as a whole. The section must be read with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer to reduce such period. Two conditions are required to be fulfilled before the Assessing Officer resorts to this exception of statutory period of 30 days. Firstly, he must have a reason to believe that the grant of full period of 30 days to the assessee for payment of tax would be detrimental to the interest of the Revenue and secondly, prior permission of the Joint Commissioner requires to be obtained before such reduction in the period is made. Corollary to this issue is that the formation of the belief must be based on sufficient cause and grounds and the same must have connection with the conclusion that such availment of full period would be deleterious to the interest of the Revenue. The words "reason to believe" must have the same flavour as one finds in the case of exercise of powers by a reasonable man acting in good faith, with objectivity and neutrality based on material on record or exhibited in the order itself. 15. Coming to the facts of the instant case, the question would be whether both the conditions are duly satisfied in the case of the petitioner-assessee when the Assessing Officer chose to exercise its discretion in curtailing the full peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al for reducing the period of 30 days in the demand Notice u/s.156 to 7 days." 17. The very reasonings are contrary to the very object of introducing proviso for giving discretion to the Assessing Officer. They clearly and unequivocally indicate that the Assessing Officer has completely misread the provision and his belief is neither of a reasonable man nor at all based on the rational connection with the conclusion of reduction of the period on account of the same being detrimental to the Revenue. It is the budget deficit which is the very basis for making such a formation of belief. Another reason given is that the assessee has a rich cash flow and if the period of 30 days is reduced, the budget deficit would be met with and the target set by the Department would be achieved in such circumstances. This is nothing but irrational use of powers conferred by the statute upon the Assessing Officer. It is incomprehensible as to how such belief could be said to be reasonable and could have a nexus to the conclusion that the reduction would have detrimental effect to the Revenue. It is nowhere appearing from the communication that the worrisome past record and the poor performance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtaining permission of the superior officer is to ensure that the powers are not exercised arbitrarily and there is a safeguard of higher officer applying its mind independently to the issue in question when such belief is communicated by the Assessing Officer. The curtailment of the statutory period of 30 days would surely cause inconvenience to the assessee which also restricts the period of challenge of assessee before exercise of such powers by the Assessing Officer, the previous approval of the Joint Commissioner has been made mandatory by law. This being "an important safeguard", as held in the case of Gujarat State Energy Generation Ltd. (supra), we are of the firm opinion that the reasons recorded by the Assessing Officer cannot be held to be with due application of mind, much less reasonably sufficient for the curtailment of the full period so as to constitute the ground 'detrimental to the Revenue'. By no stretch of imagination, it can be said that non-meeting of the budgetary deficit could be a reason for holding reasonable belief that permitting the full period of 30 days for payment of tax would be detrimental to the cause of the Revenue. It is not such a situation wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been withdrawn from the bank. It is also denied that the notice issued under Section 226 of the Act to the assessee was after the sum of Rs. 1,39,70,275/- had been withdrawn from the bank on exercise of powers under Section 226 of the Act. 23. As noted above while discussing the legal aspects, while issuing notice to the bank under Section 226(3) of the Act for making payment, a notice has also to be given to the assessee which in this case is on the very day when the notice was issued to the bank. No opportunity had been given to the assessee for meeting with such a notice issued to the Bank. The sizeable amount of Rs. 1,39,00,000/- (rounded off) has been withdrawn and deposited in the account of Revenue on the very same day. Notice was an illusory and empty formality. This arbitrary exercise of withdrawal of amount from bank also requires interference. Moreover, when the very action of the Assessing Officer is held to be contrary to the provisions of the law, petitioner's not resorting to Note (3) of the demand notice under Section 156 of the Act or his having resorted to an alternative remedy, is no bar to the Court exercising writ jurisdiction. Therefore, on none of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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