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TMI Blog2005 (7) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 156 of the Act has been quashed, and there is no other notice of demand, as a consequence, the petitioner is entitled for the return of the entire amount which has been arbitrarily recovered. - As the petitioner is engaged in banking activities, the petitioner is also entitied for compensation of loss of Interest which it had to pay - - - - - Dated:- 26-7-2005 - Judge(s) : R. K. AGRAWAL., RAJES KUMAR. JUDGMENT The judgment of the court was delivered by R.K. Agrawal J.- By means of the present writ petition filed under article 226 of the Constitution of India, the petitioner, Farrukhabad Gramin Bank, through its chairman, Sri S.R. Potdar, seeks the following relief: "A. Issue a writ, order or direction in the nature of certiorari quashing the notice dated April 5, 2005 (collecting) marked as annexure 6 to the writ petition, issued by respondent No. 1 under section 226(3) of the Act. B. Issue a writ, order or direction in the nature of mandamus directing the Additional Commissioner of Income-tax, Range II, Farrukhabad (respondent No. 1) to refund the amount of Rs. 94,14,605.70 to the petitioner with interest. (i) Issue a writ, order or direction the nature Of mand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling upon the petitioner to pay a sum of Rs. 1,28,32,270 was also issued. In the said notice, the petitioner was required to deposit the aforesaid amount within one day of the service of the notice. Immediately on receipt of the assessment order and the notice of demand, the petitioner moved an application on March 30, 2005, before the Commissioner of Income-tax, Aligarh, purporting to be under section 220(6)/(3) of the Act for stay of demand which was rejected by the Additional Commissioner of Income-tax, respondent No. 1, on the same day by assigning the following reasons: "In this context, it is to inform you that no stay is granted since the facts and 'law' are different from the cases cited as precedent. Hence, your application for stay of demand is rejected." A period of 30 days is provided for filing an appeal before the Commissioner of Income-tax (Appeals). The petitioner immediately filed an appeal before the Commissioner of Income-tax (Appeals), Ghaziabad, on April 4, 2005, i.e., within 5 days of the passing of the assessment order. In the memo of appeal, the petitioner had challenged the assessment order specifically on the ground that it is entitled to exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly served upon the petitioner. The proviso to section 220 of the Act empowers the assessing authority to reduce the time from 30 days after seeking approval of the Joint Commissioner and as respondent No. 1 himself is the authority provided therein, he had reduced the period to one day in the interest of the Revenue. Certain directions issued by the Ministry of Finance for recovering the amount from the assessees has also been referred to. According to the affidavit, the interest of the petitioner is duly secured by virtue of the provisions of section 244A of the Act and it is not in any manner adversely affected by the recovery proceeding initiated on the basis of the demand. The plea of seeking parallel remedy was also raised on the ground that the petitioner had already availed of the alternative remedy by way of filing an appeal before the appellate authority. It has also been stated in the said affidavit that respondent No. 1 has recorded reasons while reducing the period as mentioned in the notice of demand and being the authority thereafter pursuing the same as provided under the Act, also approved the same and there is no infirmity or irregularity in issuing the demand no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated February 10, 1983 and the Central Board of Direct Taxes Circular No. 319 dated January 11, 1982. It has also been stated in the rejoinder affidavit that as held by the apex court in the case of CIT v. Karnataka State Co-operative Apex Bank [2001] 251 ITR 194, the income of the petitioner is exempt under section 80P(2)(a)(i) of the Act and, therefore, respondent No. 1, had acted illegally and arbitrarily in reducing the period of 30 days to one day for the deposit of the amount of tax assessed by him just to deprive the petitioner from seeking appropriate remedy from the higher authorities. It has further been stated that the action under section 226 of the Act has been taken in a hasty manner without serving any notice on the petitioner which was served only on April 11, 2005, whereas a huge sum of Rs. 94,14,606.70 had been recovered/realised from the petitioner-bank's account with the State Bank of India, Farrukhabad and Fetehgar branches, on April 7, 2005. As the counter affidavit and rejoinder affidavit have been exchanged between the parties, with the consent of learned counsel for the parties, the writ petition has been heard and is being disposed of finally at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application filed by the petitioner before the Additional Commissioner, respondent No. 1, on April 5, 2005, purporting to be under sub-section (6) of section 220 of the Act was still pending and no orders have been passed thereon. In the meantime, to pre-empt the petitioner from seeking interim relief from the Commissioner of Income-tax (Appeals) before whom it had filed an appeal along with an application for grant of stay on April 4, 2005, garnishee proceedings under section 226(3) of the Act were initiated on April 6, 2005 and on April 7, 2005, without even serving the notice upon the petitioner, a huge sum of Rs. 94,14,606.70 has been recovered from the petitioner's two bank accounts with the State Bank of India, Farrukhabad and Fatehgarh branches. The recovery of this amount has been made in a most arbitrary and hasty manner, throwing all norms and procedure to the wind. He, thus, submitted that the petitioner is entitled for a direction to respondent No. 1 to forthwith return the amount of Rs. 94,14,606.70 along with interest. In support of his various pleas, he has relied upon the following decisions: (i) Smt. Achamma Kuriakose v. State of Kerala [1988] 171 ITR 494 (K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovery of huge amount of tax and for reducing the period from 30 days to only one day in the notice of demand. Thus, the present petition is maintainable. Taking up the preliminary objection regarding the maintainability of the writ petition, raised by learned standing counsel for the respondents, we find that in the case of Dunlop India Ltd. [1985] 154 ITR 172, the apex court has held that article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as, for instance, where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it, that recourse may be had to article 226 of the Constitution. But then the court must have good and sufficient reason to bypass the alternative remedy provided by the statute. Surely matters involving the Revenue where statutory remedies are available are not such matters. However, it has further held that where gross violations of the law and injustices are perpetrated or are about to be perpetra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been conferred by section 254 on the Appellate Tribunal with widest possible amplitude must carry with them by necessary implication all powers and duties incidental and necessary to make the exercise of those powers fully effective. In the case of Empire Industries Ltd. [1986] 162 ITR 846, the apex court has held that every Bench hearing a matter on the facts and circumstances of each case should have the right to grant interim orders on such terms as it considers fit and proper and if it had granted interim order at one stage, it should have the right to vary or alter such interim orders. In the case of Tata Cellular, AIR 1996 SC 11, the apex court has held that the principles of judicial review would apply to the exercise of contractual power by the Government bodies in order to prevent arbitrariness or favouritism. The apex court has stated the principle relating to the scope of the judicial review of the administrative decision in paragraph 113 of the report as follows: "113. The principles deducible from the above are: (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition is maintainable and if in the background of the facts placed before us we are to shut our doors, it would indeed result in a gross failure and miscarriage of justice. Now coming to the merits in the case, we find that under section 2(7A) of the Act the words "Assessing Officer" have been defined. It reads as follows: "(7A) 'Assessing Officer' means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;" In view of the aforementioned definition, the Joint Commissioner is also included in the words "Assessing Officer". Section 2(28C) of the Act defines the words "Joint Commissioner" as follows: "(28C) 'Joint Commissioner' means a person appointed to be a Joint Commissioner of Income-tax or an Addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, sub-section (1) of section 220 of the Act along with the proviso, is reproduced below: "220.(1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice: Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to the Revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand." From a reading of the aforesaid provisions, it is seen that the following conditions have to be fulfilled before the full period of 30 days can be reduced by the assessing authority: (i) the Assessing Officer should have reasons to believe that it will be detrimental to the Revenue if the full period of 30 days is allowed; and (ii) the previous approval of the Joint Commissioner is to be taken. From a conjoint reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as it does not address itself on the preliminary aspect that it is detrimental to the Revenue if the full period of 30 days is allowed to the assessee. Thus, the grounds for reducing the period of 30 days to one day are wholly irrelevant and, therefore, the action of respondent No. 1 in reducing the period to one day cannot be sustained and is liable to be set aside. In the case of Smt. Achamma Kuriakose [1988] 171 ITR 494, the Kerala High Court has held that sub-section (1) of section 40 allows a discretion to the assessing authority to fix the time for payment of the tax assessed. Once the liability is fixed by the order of assessment, it is a matter of discretion for the assessing authority to fix a time within which the liability is to be discharged by payment of the tax assessed. It is not an uncanalised power of treating the assessee as in default to enable the assessing authority to initiate penal proceedings against the assessee. If in any particular case the discretion is not exercised in a judicial manner, it is open to the higher authorities under the Act or in appropriate cases to the High Court to interfere and set aside such orders of the assessing authority pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 226(3) of the Act before the recovery was made from its accounts with the State Bank of India, Farrukhabad and Fatehgarh branches. The notice was served upon the petitioner only on April 11, 2005, whereas the amount has been realised/recovered by way of attachment of the two bank accounts on April 7, 2005. The entire action of respondent No. 1 appears to have been taken in a hasty and most arbitrary manner just to pre-empt and foreclose the option available to the petitioner to approach the higher authority for grant of interim relief. It is to be remembered that our country is governed by the rule of law and nobody how high so ever he is, can be permitted to act arbitrarily. As held by the apex court in the case of Dunlop India Ltd. [1985] 154 ITR 172, where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the court to intervene and give appropriate interim relief. The action of respondent No. 1 has, in fact, shaken a citizen's faith in the impartiality of public administration. Thus, the notice of demand dated March 29, 2005, reducing the period from 30 days to one day, cannot be sustained and is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X
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