Assessees In The Appeal v. B.r.balakrishnan ( [2001]251 Itr 158 (Bom))Wherein Some Broadparameter

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN TUESDAY, THE 10TH DAY OF JUNE 2014/20TH JYAISHTA, 1936 WP(C).No. 14560 of 2014 (T) ---------------------------- PETITIONER(S): -------------------------- MOTHER INDIA EDUCATIONAL AND CULTURAL CHARITABLE TRUST, THUMPODE, KALLARA, THIRUVANANTHAPURAM DISTRICT PIN 695 608, REPRESENTED BY ITS SECRETARY DR.RAVEENDRAN NAIR. BY ADV. SRI.M.R.RAJESH RESPONDENT(S): ---------------------------- 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, 4TH FLOOR, ANNEXE AAYKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM 695 003. CENTRAL CIRCLE 1, 4TH FLOOR, ANNEXE AAYKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM 695 003. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) III KERA BHAVAN, 6TH FLOOR, SRVHS ROAD COCHIN 682 016. COCHIN 682 016. 3. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1, 4TH FLOOR, ANNEXE AAYKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM 695 003. CENTRAL CIRCLE 1, 4TH FLOOR, ANNEXE AAYKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM 695 003. 4. THE BRANCH MANAGER FEDERAL BANK LTD, KALLARA BRANCH, KALLARA THIRUVANANTHAPURAM 695 608. THIRUVANANTHAPURAM 695 608. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSIONON 10-06-2014, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: WP(C).No. 14560 of 2014 (T) ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS ------------------------------------- EXHIBIT P1. TRUE COPY OF THE ASSESSMENT ORDER DATED 30.03.14 FORTHE AY 2012-13 ISSUED BY THE IST RESPONDENT. EXHIBIT P2. TRUE COPY OF THE MEMORANDUM OF APPEAL DATED 24.04.14FOR THE AY 2012-13 SUBMITTED BEFORE THE SECOND RESPONDENT. EXHIBIT P3. TRUE COPY OF THE STAY PETITION DATED 02.06.14 FOR THE AY2012-13. EXHIBIT P4. A TRUE COPY OF THE APPLICATION U/SEC. 220 DATED 29.04.14FOR THE AY 2012-13 SUBMITTED BEFORE THE FIRST RESPONDENT. EXHIBIT P5. A TRUE COPY OF THE ORDER NO.AADTM0575D/CTRL.CIR.-1/TVM/13-14 U/SEC.220 ISSUED BY THE FIRST RESPONDENT. EXHIBIT P6. A TRUE COPY OF THE PROCEEDINGS/NOTICEU/SEC226(3) OFTHE INCOME TAX ACT NO. AADTM0575D/CTRL.CIR.-1/TVM/14-15 ISSUED BYTHE 3RD RESPONDENT TO THE 4TH RESPONDENT BANK. EXHIBIT P7. A TRUE COPY OF THE JUDGMENT DATED 21.05.14 IN WPC12787/2014 OF THIS HONOURABLE COURT. //True Copy// P.A. To Judge K.VINOD CHANDRAN, J - - - - - - - - - - - - - - - - - - - - W.P.(C).No. 14560 of 2014 - - - - - - - - - - - - - - - - Dated 10[th] June, 2014- - - - - - - - - - - - - - - - - - - - - - - - JUDGMENT “CR” The petitioner is aggrieved with therecovery steps initiated while the appeal andthe application for stay filed for the relevantassessment year were pending. Admittedly,proceedings were initiated under Section 226 ofthe Income Tax Act, 1961 (for short 'the Act')and a major portion of the amounts demanded forthe assessment year was withdrawn from theaccount maintained by the petitioner with the 4[th]respondent Bank. 2. The relevant assessment year is 2012-13for which an assessment order was passed asevidenced by Ext.P1 dated 13.03.2014. Thepetitioner filed an appeal, Ext.P2, dated24.04.2014 and also moved a stay applicationdated 02.06.2014 (Ext.P3). In addition to this, the petitioner moved an application underSection 220 before the Assessing Officer, beingExt.P4 dated 29.04.2014. The 1[st] respondentrejected the same by a cursory order, Ext.P5,dated 27.11.2013. The garnishee proceedingsunder Section 226 of the Act were initiated on26.05.2014 and the amounts withdrawn from theaccount maintained in the 4[th] respondent Bank. 2. The relevant assessment year is 2012-13for which an assessment order was passed asevidenced by Ext.P1 dated 13.03.2014. Thepetitioner filed an appeal, Ext.P2, dated24.04.2014 and also moved a stay applicationdated 02.06.2014 (Ext.P3). In addition to this, the petitioner moved an application underSection 220 before the Assessing Officer, beingExt.P4 dated 29.04.2014. The 1[st] respondentrejected the same by a cursory order, Ext.P5,dated 27.11.2013. The garnishee proceedingsunder Section 226 of the Act were initiated on26.05.2014 and the amounts withdrawn from theaccount maintained in the 4[th] respondent Bank. 3. Oftener than ever, the extra-ordinarypower under Article 226 of the Constitution ofIndia is invoked by the assessees, against whomrecovery steps are initiated, even during theperiod allowed by the statute to prefer anappeal; as also when applications for stay arepending before the Appellate Authority. ThisCourt is also frequently confronted withapplications for stay being mechanicallydisposed of without evenprima facieconsideration of the case put forth by the assessees in the appeal. 4. Herein, stay application filed before theAppellate Authority was not disposed of as yet,and the petitioner assessee was before theAssessing Officer itself as permissible underSection 220 of the Income Tax Act. Ext.P5 is theorder under Section 220, which does not discloseany reason or even a consideration of therelevant circumstances put forward by thepetitioner. There is also no extenuatingcircumstance stated which would effectivelydefeat the recovery, if delay is caused and therecovery is kept in abeyance till the AppellateAuthority considers the stay application. Inthis context, relevant is the decision of theDivision Bench of the Bombay High Court in KECInternational Ltd. v. B.R.Balakrishnan ( [2001]251 ITR 158 (Bom))wherein some broadparameters were laid down for regulating the consideration of stay applications, whether itbe in a statutory appeal or under Section 220(6). This Court is of the opinion that the sameis apposite and should be followed by therespondent authorities, and they are extractedhereunder: “(a). While considering the stayapplication, the authority concernedwill at least briefly set out the caseof the assessee. (b). In cases where the assessed incomeunder the impugned order far exceeds thereturned income, the authority willconsider whether the assessee has madeout a case for unconditional stay, ifnot whether looking to the questionsinvolved in appeal, a part of the amountshould be ordered to be deposited forwhich purpose, some short prima faciereasons could be given by the authorityin its order. (c). In cases where the assessee reliesuponfinancialdifficulties,the authority concerned can briefly indicatewhether the assessee is financiallysound and viable to deposit the amountif the authority wants the assessee toso deposit. (d). The authority concerned will alsoexamine whether the time to prefer anappeal has expired. Generally, coercivemeasure may not be adopted during theperiod provided by the statute to go inappeal. However, if the authorityconcerned comes to the conclusion thatthe assessee is likely to defeat thedemand, it may take recourse to coerciveaction for which brief reasons may beindicated in the order. (e). We clarify that if the authorityconcerned complies with the aboveparameters while passing orders on thestay application, then the authoritieson the administrative side of theDepartment like respondent No.2 hereinneed not once again give reasoned order. 5. The power under Section 226 of the Act isalso one to be invoked with circumspection and WP(C).14560/14 caution and cannot be at the will and capriceof the authority. This Court in Rajan Nair v.ITO ([1987] 165 ITR 650 (Ker.))observed thus: (e). We clarify that if the authorityconcerned complies with the aboveparameters while passing orders on thestay application, then the authoritieson the administrative side of theDepartment like respondent No.2 hereinneed not once again give reasoned order. 5. The power under Section 226 of the Act isalso one to be invoked with circumspection and WP(C).14560/14 caution and cannot be at the will and capriceof the authority. This Court in Rajan Nair v.ITO ([1987] 165 ITR 650 (Ker.))observed thus: “In exercising his power, the Income-taxOfficer should not act as a mere taxgatherer but as a quasi-judicialauthority vested with the power ofmitigating hardships to the assessee”. 6. A Division Bench of the Bombay High Courtfollowed the afore stated sagacious observationsof the learned single Judge of this Court andlaid down the following guidelines in the matterof effecting recovery. 1. No recovery of tax should be madepending (a). expiry of the time limit for filingan appeal; (b). disposal of a stay application, ifany moved by the assessee and for areasonable period thereafter to enable the assessee to move a higher forum, ifso advised. Coercive steps may, however,be adopted where the authority hasreason to believe that the assessee maydefeat the demand in which case briefreasons may be indicated. 2.The stay application, if any, movedby the assessee should be disposed ofafter hearing the assessee and bearingin mind the guidelines in'KECInternational'(supra); 3.If the Assessing Officer has takena view contrary to what has been held inthe preceding previous years withoutthere being a material change in factsor law, that is a relevant considerationin deciding the application for stay 4.When a bank account has beenattached, before withdrawing the amount,reasonable prior notice should befurnished to the assessee to enable theassessee to make a representation orseek recourse to a remedy in law; 5.In exercising the powers of stay,the Income Tax Officer should not act as WP(C).14560/14 a mere tax gatherer but as a quasi-judicial authority vested with thepublic duty of protecting the interestsof the Revenue while at the same timebalancing the need to mitigate thehardship to the assessee. Though theAssessingOfficerhasmadeanassessment, he must objectively decidethe application for stay consideringthat an appeal lies against his order:the matter must be considered from allits facets, balancing the interest ofthe assessee with the protection of theRevenue.”judicial authority vested with thepublic duty of protecting the interestsof the Revenue while at the same timebalancing the need to mitigate thehardship to the assessee. Though theAssessingOfficerhasmadeanassessment, he must objectively decidethe application for stay consideringthat an appeal lies against his order:the matter must be considered from allits facets, balancing the interest ofthe assessee with the protection of theRevenue.” These guidelines laid down by the Bombay HighCourt are binding on the revenue authorities,especially the authorities under the Income TaxAct who exercise jurisdiction all over thecountry. They are reiterated for the guidance ofthe authorities now operating within the State. 7. Coming back to the above writ petition,as was noticed, Ext.P5 does not at all contain WP(C).14560/14 These guidelines laid down by the Bombay HighCourt are binding on the revenue authorities,especially the authorities under the Income TaxAct who exercise jurisdiction all over thecountry. They are reiterated for the guidance ofthe authorities now operating within the State. 7. Coming back to the above writ petition,as was noticed, Ext.P5 does not at all contain WP(C).14560/14 any reason for rejection of the stayapplications. It sets out no expedient reasonwhy immediate recovery should be resorted to.The petitioner assessee is a running institutionand there is no threat of it deliberatelythwarting recovery and thus causing prejudice.However, garnishee proceedings were initiatedand notice was issued to the assessee underSection 226(3)(iii) of the Act and a majorportion of the demand has now been recoveredfrom the assessee. In such circumstances, therecovery stepsinitiatedis definitelycapricious. But however, the assessee hadremedies, which they did not avail of and noviolationofstatutorycomplianceisdiscernible. Hence, taking into account the factthat appeal is pending before the firstAppellate Authority; considering the fact that amajor portion of the demand has now beensatisfied, there shall be no further recovery steps initiated till the appeal is disposed of.Definitely Ext.P6 garnishee order ought to belifted, and this Court does so, allowing thepetitioner to operate their account. Writ petition disposed of. Parties are leftto bear their costs. Sd/- K.VINOD CHANDRAN, Judge Mrcs //True Copy// P.A. To Judge