M/S.pavai Varam Educational Trust v. The Assistant Commissioner Of Income Tax, Central Circle, Salem – 636 007

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 15.03.2019 CORAM M/s.Pavai Varam Educational Trust,No.64-C Rotary Nagar,Rasipuram – 637 408PAN No.AAATP6024D ... PetitionerVs. 1.The Assistant Commissioner of Income Tax, Central Circle, Salem – 636 007. 2.The Commissioner of Income Tax (Appeals) -19, 121, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034. 3.The Manager, Corporation Bank, No.14, Paramathy Road, Namakkal – 637 001. ... Respondents PRAYER: Writ Petition filed under Article 226 of theConstitution of India, praying for a Writ of CertiorarifiedMandamus to call for the records of the 1[st] respondent inPAN No.AAATP6024D and quash the Impugned Notice u/s.226(3)No.NIL dated 07.03.2019 and direct the 1[st] respondent torelease the attachment of the 13 bank accounts with the 3[rd]Respondent and consequential injunction from recovery ofthe tax pending disposal of the appeal and stay petitionfiled before the 2[nd] respondent in ITA NO.128/18-19. For Petitioner : Ms.Pushya Sitaraman, Senior Counsel for Ms.G.Vardini Karthik,For Respondents: Mr.A.P.Srinivas, Senior Standing Counsel ORDER Mr.A.P.Srinivas, learned Senior Standing Counseltakes notice for the respondents. 2. By consent expressed by both Ms.PushyaSitaraman, learned Senior Counsel for Ms.G.Vardini Karthik,learned Counsel for the petitioner and Mr.A.P.Srinivas,learned Senior Standing Counsel for the respondents, thisWrit Petition is disposed of finally at the stage ofadmission. 3. The challenge in this Writ Petition is to theorder of the 1[st] respondent dated 07.03.2019 and consequentcoercive recovery proceedings by the Income Tax Departmentby attachment of eleven (11) bank accounts held by thepetitioner group of Institutions as well as all FixedDeposits maintained by the Institutions in the CorporationBank, Paramathy Road, Namakkal. The coercive recovery isconsequent upon a demand of a sum of Rs.32,59,94,019/-arising from order of assessment for Assessment Year 2017-18. 4. The petitioner has challenged the aforesaid orderof assessment by way of first appeal before theCommissioner of Income Tax (Appeals) (in short 'CIT (A)')on 22.01.2019. Inter alia, the petitioner has specificallyraised grounds in regard to the addition of a sum ofRs.15,00,00,000/- that had been declared by the petitionerbefore the Director of Income Tax under and in terms of thePrime Minister Garib Kalyan Yojana Scheme (PMGKY) Scheme.This addition according to the petitioner, amounts todouble taxation. In all, the petitioner, contends thatassessment is high pitched and flawed, both on facts andin law. 5. Be that as it may, the petitioner has also filed anapplication for stay of demand before the CIT (A) on22.01.2019. The stay petition is, admittedly, pending ason date. 6. In the meanwhile, the assessing authority, arrayedas the first respondent, has issued a letter dated12.02.2019 to the petitioner stating as follows: 'Sub: Collection of tax demand- inthe case of M/s.Pavai Varam EducationalTrust – Ay 2017-18. The order u/s.143(3) of I.T.Actfor the AY 2017-18 was passed on29.12.2018 and the demand amounting toRs.32,59,94,019/- was raised. Theassessment order u/s.143(3) and thedemand notice u/s.156 of I.T. Act wasserved on the assessee on 31.12.2018. The assessee has filed the appealbefore the Principal Commissioner ofIncome tax (Appeals)-18, Chennai on12.01.2019 against the order u/s.143(3)dated 29.12.2018 for the AY 2017-18. 6. In the meanwhile, the assessing authority, arrayedas the first respondent, has issued a letter dated12.02.2019 to the petitioner stating as follows: 'Sub: Collection of tax demand- inthe case of M/s.Pavai Varam EducationalTrust – Ay 2017-18. The order u/s.143(3) of I.T.Actfor the AY 2017-18 was passed on29.12.2018 and the demand amounting toRs.32,59,94,019/- was raised. Theassessment order u/s.143(3) and thedemand notice u/s.156 of I.T. Act wasserved on the assessee on 31.12.2018. The assessee has filed the appealbefore the Principal Commissioner ofIncome tax (Appeals)-18, Chennai on12.01.2019 against the order u/s.143(3)dated 29.12.2018 for the AY 2017-18. 6. As per the provisions ofsection 220(6) of Income Tax Act and asper the modified CBDT guidelines inF.No.404/72/93-ITCC dated 31.07.2017,th 20% on the total tax demandamounting to Rs.6,51,98,804/- should bepaid. In this regard, you arerequested to pay the amount ofRs6,51,98,804/- (20% on total taxdemand) on or before 15.02.2019 and toproduce the necessary evidences to theundersigned. Failing which, thecoercive steps will be initiated tocollect the tax arrears demand.’ 7. The aforesaid communication has been issued by thefirst respondent even during the pendency of theapplication for stay before the CIT (A). The petitionerimmediately brought to the notice of the first respondent,the fact that the application for stay filed by thepetitioner was pending before the CIT (A), an authoritysuperior to the assessing officer and requested him to keepthe collection of demand in abeyance till the disposal ofthe said application. The request of the petitioner is asfollows: https://hcservices.ecourts.gov.in/hcservices/ assessee hs been asked to pay a sum ofRs.6,51,98,804/- (20% on the total taxdemand). 2.In respect of the demand ofRs.32,59,94,019/- for the aboveassessment year the assessee has fileda stay petition dated 21.01.2019 withCIT(A) – 19. Cennai on 22.01.2019. Acopy of the above stay petition wasalso filed with your goodselves on29.01.2019. 3.In view of the pendency of theabove stay petition it is requestedthe collection of the above demand maybe stayed till the disposal of theabove petition. ‘ 8. It is in the aforesaid circumstances that theassessing authority has issued the impugned orders ofattachment dated 07.03.2019 to the Manager Corporation Bankattaching all eleven (11) Bank accounts as well as FixedDeposits held by petitioner in the third respondent Bank. 9. I am of the view that the impugned recovery actionis premature, apart from being mechanical and without anyapplication of mind. The petitioner has approached theCIT(A), an authority empowered to consider and adjudicateupon the request for stay, (see Paulsons Litho Works vsIncome-Tax Officer And Others [208 ITR 676]) as early as on22.01.2019, which is within thirty (30) days from the dateof order of assessment. This fact has also been brought tothe notice of the respondents. It was thus, incumbent uponthe respondent to have awaited adjudication by the CIT (A)upon the request for stay made by the petitioner. 10. In the light of the discussion as aforesaid, theimpugned order is set aside and the assessing authority isdirected to lift attachments in the bank forthwith. It isbrought to my notice by the learned standing counsel that asum of Rs.16,00,000/- (approx) has been appropriated fromthe accounts. The same shall be retained by the departmentand adjusted against the disputed demands. 11. The Writ Petition is disposed in the followingterms: i) The petitioner will appear before the Commissionerof Income Tax (Appeals), the 2[nd] respondent herein, on25.03.2019 at 10.30 a.m. 10. In the light of the discussion as aforesaid, theimpugned order is set aside and the assessing authority isdirected to lift attachments in the bank forthwith. It isbrought to my notice by the learned standing counsel that asum of Rs.16,00,000/- (approx) has been appropriated fromthe accounts. The same shall be retained by the departmentand adjusted against the disputed demands. 11. The Writ Petition is disposed in the followingterms: i) The petitioner will appear before the Commissionerof Income Tax (Appeals), the 2[nd] respondent herein, on25.03.2019 at 10.30 a.m. ii) After hearing the petitioner, the Commissioner ofIncome Tax (Appeals) shall pass appropriate orders upon theapplication for stay bearing in mind existence of a primafacie case, financial stringency and the balance ofconvenience in the matter, within a period of two (2) weeksfrom the date of conclusion of the personal hearing i.e. onor before 08.04.2019. iii) Status quo, as on today, shall be maintained till08.04.2019 with regard to recovery. Miscellaneous Petition is closed with no order as to costs. Sd/- Assistant Registrar(CS iii) //True Copy// Sub Assistant Registrar rkpTo: 1.The Assistant Commissioner of Income Tax, Central Circle, Salem – 636 007.2.The Commissioner of Income Tax (Appeals) -19, 121, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034. +1cc to Mr.A.P.Srinivas, Advocate SR.No. 84907+1cc to Ms.G.Vardini Karthik , Advocate SR.No. 24846 WP. No.7681 of 2019andWMP. No.8312 of 2019A.SK(20/03/2019)