Wp/2154/2013 Of Bombay Gowrakshak Mandali v. The Income Tax Officert (Exemption-1(1) And5 Ors

kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO.2290 OF 2013 …Bombay Gowrakshak Mandali...Petitioner v/s.The Income-tax Officer (Exemption)-I(1)and ors....Respondents… Mr.J.D.Mistri, Senior Advocate with Mr.Niraj Sheth i/b Jitendra Singh for the petitioner.Mr.Vimal Gupte, Senior Advocate with Mr.Padma Divekar for respondents. ... CORAM: DATE : MOHIT S. SHAH, C.J. & M.S.SANKLECHA, J.13 SEPTEMBER 2013 P.C.: At the request of the counsel for the parties this petition is being disposed of at the stage of admission. 2.In this petition under Article 226 of the Constitution, the petitioner challenges the order dated 4 June 2013 (Exh.J) passed by the Income Tax Officer (Exemptions)-I-1 and the order dated 19 August 2013 (Exh.L) passed by the Addl.Director of Income Tax (Exemptions) Range-I, Mumbai, declining to grant the petitioner any stay against coercive recovery and the garnishee notices dated 5 September 2013 (Exh.N & O) issued by the Income Tax Officer (Exemption)- I (1), Mumbai. kambli 3. The petitioner is a society registered under the Societies Registration Act, 1860 and as a Trust under the Bombay Public Trust Act, 1950 and also registered under section 12A of the Income Tax Act, 1961. 4.In view of the order that we propose to pass, it is not necessary to set out all the facts in detail, but suffice to state that aggrieved by the assessment order dated 28 March 2013, the petitioner-trust has already filed an appeal before the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. 5.Consequent to the impugned orders dated 4 June 2013 and 19 August 2013, the Assessing Officer i.e. Income Tax Officer (Exemptions)-I-1 on 5 September 2013 issued Garnishee notices to ICICI Bank and HDFC Bank attaching the petitioner's bank accounts and fixed deposits with them on the ground that sum of Rs.14,84,53,300 for the assessment year 2010-11 is due from the petitioner. 6.Learned counsel for the petitioner states that at present a sum of Rs.34 lacs approximately with fixed deposit of another Rs.40 lacs are lying in the account with HDFC Bank and and a sum of Rs.32 lacs with another sum of Rs.1.50 crores in fixed deposit are lying with the ICICI Bank. 7.Learned counsel for the petitioner submits that the petitioner has already filed an appeal before the Commissioner of Income Tax (Appeals) and the petitioner has a strong prima facie case, however, on account of impugned orders of attachment and garnishee notices, the petitioner is not able to carry on its day to day activities. kambli 8.Learned counsel for the petitioner further submitted that the Income Tax Officer (Exemptions)-1(1) and the Addl.Director of Income Tax (Exemptions) have while disposing of the appeals for stay have not applied the principles laid down by this Court in KEC International Ltd. v/s. B.R.Balkrishnan (2001) 251 ITR 158. 9.On the other hand, learned counsel for the revenue has opposed the writ petition and submitted that when two authorities i.e. Income Tax Officer (Exemptions) and the Addl.Director of Income Tax (Exemptions) have considered the petitioner's stay application and have applied their minds, no case is made out for interference by this Court in its writ jurisdiction. 10.We have considered the rival submissions. 11.In KEC International Ltd. (supra), Division Bench of this Court has laid down following principles to be followed while deciding application for stay under the Act:- “(a) While considering the stay application, the authority concerned will at least briefly set out the case of the assessee. 9.On the other hand, learned counsel for the revenue has opposed the writ petition and submitted that when two authorities i.e. Income Tax Officer (Exemptions) and the Addl.Director of Income Tax (Exemptions) have considered the petitioner's stay application and have applied their minds, no case is made out for interference by this Court in its writ jurisdiction. 10.We have considered the rival submissions. 11.In KEC International Ltd. (supra), Division Bench of this Court has laid down following principles to be followed while deciding application for stay under the Act:- “(a) While considering the stay application, the authority concerned will at least briefly set out the case of the assessee. (b) In cases where the assessed income under the impugned order far exceeds returned income, the authority will consider whether the assessee has made out a case for unconditional stay. If not, whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order. (c) In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. (d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order. (e) We clarify that if the authority concerned complies with the above parameters while passing orders on the stay application, then the authorities on the administrative side of the Department like respondent No. 2 herein need not once again give reasoned order.” 12.Having gone through the impugned orders dated 4 June 2013 of the Income Tax Officer (Exemptions) and 19 August 2013 of the Addl.Director of Income Tax (Exemptions), we find that these orders have ignored the directions contained in KEC International Ltd. (supra), besides being cryptic and deserve to be set aside. We accordingly set aside both orders. We are, however, not inclined to remit the matter to the same authorities, because the petitioner has already filed an appeal before the Commissioner of Income Tax (Appeals) and therefore it would be in the fitness of things, if the petitioner is directed to file a stay application before the CIT (Appeals), who should hear and decide the stay application as expeditiously as possible and preferably within three months from the date of filing of the stay application. We also make it clear that in case the CIT (Appeals) while hearing the stay application is of the view that the appeal itself may be taken up for final disposal, it will be open to the CIT (Appeals) to adopt such a course. kambli 5wp(l)-2290-13 13.The next question is what interim arrangement is to be made during the pendency of the application before the CIT (Appeals). 14.Having regard to the alleged tax liability of the petitioner and the amounts lying in the different bank accounts and in fixed deposits, we are of the view that interest of justice would be served if the following arrangement is made during the pendency of the stay application before the CIT (Appeals):- (i)The petitioner shall not withdraw or encash fixed deposit of Rs.1.50 crore approximately lying with ICICI Bank and another deposit of Rs.40 lacs approximately lying with HDFC Bank. kambli 5wp(l)-2290-13 13.The next question is what interim arrangement is to be made during the pendency of the application before the CIT (Appeals). 14.Having regard to the alleged tax liability of the petitioner and the amounts lying in the different bank accounts and in fixed deposits, we are of the view that interest of justice would be served if the following arrangement is made during the pendency of the stay application before the CIT (Appeals):- (i)The petitioner shall not withdraw or encash fixed deposit of Rs.1.50 crore approximately lying with ICICI Bank and another deposit of Rs.40 lacs approximately lying with HDFC Bank. (ii)The petitioner shall also not withdraw any amount from the petitioner's account with HDFC , but it will be open to the petitioner to convert the amount lying in the saving/current account into fixed deposit. However, the petitioner will be at liberty operate the petitioner's account with ICICI Bank, where presently Rs.32 lacs approximately are lying, as stated by the learned counsel for the petitioner, under instructions. (iii)It is clarified that this order for interim arrangement is passed, without prejudice to rights and contentions of parties, in the appeal pending before the CIT (Appeals). 15.terms. (iv)In view of the above interim arrangement, as a part of interim order, impugned garnishee notices dated 5 September 2013 (Exh.N & O) shall remain stayed during the pendency of the stay application before the CIT (Appeals). (v)No recovery shall be made during pendency of the said application before the CIT (Appeals) and for a period of three weeks, in case the order of CIT (Appeals) is adverse to the petitioner. (vi)Having seen the provisions of section 226(3)(x) of the Income Tax Act,1961, it is clarified that non-compliance by the HDFC Bank and ICICI Bank with garnishee notices dated 5 September 2013 (at Exh.N & O) on account of operation of this order, shall not be treated as a default on part of HDFC Bank or ICICI Bank. (vii)In case, CIT (Appeals) passes orders on the stay application and/or in appeal for the assessment year 2010-11, it will also be open to the CIT (Appeals) to issue consequential directions to the Income Tax Department. Writ petition is , accordingly, disposed of in the above CHIEF JUSTICE (M.S.SANKLECHA, J.)