Wp/235/2013 Of Muniwar Abad Charitable Trust And Anr v. Deputy Director Of Income Tax Exemption I (1) And 3 Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.236 OF 2013WITHWRIT PETITION NO.235 OF 2013 Muniwar-Abad Charitable Trust & Anr.V/s.Deputy Director of Income Tax & Ors. ...Petitioners ...Respondents Mr.Percy Pardiwalla, Senior Counsel with Mr.B.V. Jhaveri for the Petitioners. Mr.Vimal Gupta, Senior Counsel with Ms.Padma Divakar for the Respondents. CORAM : S.J. VAZIFDAR & A.K. MENON, JJ. DATE : 14TH MARCH, 2014. P.C. :- 1.Rule in both the writ petitions. Both the writ petitions are heard finally at the admission stage. 2.It is agreed that the facts and issues in both the writ petitions are similar. They are therefore, disposed of by this common judgment. Writ Petition No.235 of 2013 pertains to the assessment year 2004-2005. Writ Petition No.236 of 2013 pertains to the assessment year 2005-2006. We will for convenience, refer to the facts in Writ Petition No.235 of 2013 pertaining to the AY 2004-2005. 3.The petitioners filed their returns for the relevant assessment years. The Assessing Officer accepted the petitioners’ contention based on the fact that it is a public charitable trust and assessed its income as 'nil' by an assessment order dated 30.11.2006. The AO commenced reassessment proceedings by issuing a notice dated 20.03.2011 under section 148. The AO assessed the petitioners’ income and raised a demand of Rs.5,05,94,474/- for the AY 2004-2005 which was corrected to Rs.3,37,60,188/- on the petitioners’ application under section 154. The AO assessed the petitioners’ income and raised a demand of Rs.7,07,22,700/- for the AY 2005-2006 which was corrected to Rs.4,71,77,373/-. 4.The petitioners made an application for stay of recovery before the AO i.e. respondent No.1 and before respondent No.3 i.e. C.I.T. The AO by an order dated 20.12.2012, merely called upon the petitioners to pay the dues. In fact the order erroneously required the petitioners to pay the original amounts and not the amounts as rectified. This order however, was without hearing the petitioners and without even considering the application for stay. In other words, the application for stay has still not been decided by the AO. 5.By a letter dated 27.03.2012, the petitioners also made a wp236-13c detailed application for stay before the C.I.T. The application has admittedly not been decided as yet. It is important to note another fact. The C.I.T. (Appeals) – respondent No.3, during the hearing of the appeal on 13.07.2012 directed respondent No.1 to furnish a remand report. It appears that respondent No.1 has still not furnished the remand report on account whereof, the appeal has not been decided. 6.The petitioners find themselves in a peculiar situation. Their applications for stay have not been heard either by the AO or the C.I.T. Even their appeal has remained part heard for almost two years on account of respondent No.1 having failed to furnish the remand report, demanded by respondent No.3. Despite the same, respondent No.1 has demanded the payment of the tax dues. 7.The petitioners cannot be penalized in this manner. In the circumstances, respondent No.3 is directed to decide the petitioners’ application for stay as expeditiously as possible. It is clarified that even the issue of maintainability of an application for stay before the C.I.T. (Appeals) is kept open. In the event of respondent No.3 coming to the conclusion that he has no power to entertain the application for stay, the petitioners shall be at liberty to either pursue the application for stay before respondent No.1 or to challenge the order, including by filing a writ petition. Needless to add that the wp236-13c petitioners will be at liberty to challenge any order that may be passed by the AO or the C.I.T. (Appeals) even on merits. 7.The petitioners cannot be penalized in this manner. In the circumstances, respondent No.3 is directed to decide the petitioners’ application for stay as expeditiously as possible. It is clarified that even the issue of maintainability of an application for stay before the C.I.T. (Appeals) is kept open. In the event of respondent No.3 coming to the conclusion that he has no power to entertain the application for stay, the petitioners shall be at liberty to either pursue the application for stay before respondent No.1 or to challenge the order, including by filing a writ petition. Needless to add that the wp236-13c petitioners will be at liberty to challenge any order that may be passed by the AO or the C.I.T. (Appeals) even on merits. Till the application for stay is decided by respondent No.3 and for a period of four weeks after the service of the order upon the petitioners, no coercive steps shall be taken pursuant to the order dated 20.12.2012. It will be open to the C.I.T. (Appeals) to decide the petitioners’ appeals instead of deciding the application for stay. In that event no coercive steps shall be taken till the decision in the appeals. There shall be no order as to cost. (A.K. MENON, J.) (S.J. VAZIFDAR, J.)