Wp/29209/2011 Of Smt. G. Madhuri Kiran v. The Income Tax Officer

THE HON’BLE SRI JUSTICE V.V.S.RAOAND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION NO.29209 OF 2011 DATED 2ND NOVEMBER, 2011 BETWEEN Smt.G.Madhuri Kiran…Petitioner And The Commercial Tax Officer,Ward 6(3), I.T.Towers,A.C.Guards, Hyderabad and others. …Respondents THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE SANJAY KUMARWRIT PETITION NO.29209 OF 2011 ORDER: (Per SK,J) The Income Tax Officer (ITO), Ward-6(3), Hyderabad, exercisingpowers under Section 271(1)(c) of the Income Tax Act, 1961 (forbrevity, ‘the Act’) levied a penalty on the petitioner, an individualassessee, by order dated 23.12.2010. Notice of Demand underSection 156 of the Act was issued by the Assessing Officer on thesame day calling upon the petitioner to pay the penalty amount within30 days. The penalty levied was to the tune of Rs.66,17,573/- andpertained to the Assessment Year 2005-06. It was the case of theRevenue that the petitioner had furnished inaccurate particulars andconcealed her long-term capital gains, thereby attracting the provisionsof Section 271(1)(c) of the Act. Aggrieved by the levy of penalty, the petitioner preferred anappeal under Section 246A(1)(j) of the Act to the Commissioner ofIncome Tax (Appeals)-IV, Hyderabad. Simultaneously, she addressedletter dated 31.01.2011 to the Assessing Officer, the ITO, Ward-6(3),Hyderabad, to keep the collection of penalty in abeyance till herappeal was decided. However, the Assessing Officer by hiscommunication dated 15.07.2011 informed the petitioner that theapplication filed before the Commissioner of Income Tax-III,Hyderabad, for stay was rejected under the letter of the ITO(Headquarters) in F.No.128/CIT-III/Hyd/Stay/2011-12 dated12.07.2011. He therefore called upon her to pay the entire amountimmediately with interest failing which coercive recovery proceedings were threatened. Perusal of the ITO (Headquarters) letter dated 12.07.2011reflects that the petitioner was requested thereunder to approach theAssessing Officer to whom necessary instructions had been given withregard to her stay application. Thereupon, the petitioner submitted a representation to theChief Commissioner of Income Tax-III, Hyderabad, to direct theAssessing Officer to keep the collection of the penalty amount inabeyance. By order dated 12.09.2011, the Chief Commissioner ofIncome Tax-III, Hyderabad, opined that the levy of penalty was justifiedand that he did not find any merits to interfere with the decision of theCommissioner of Income Tax-III, Hyderabad, on the stay application.The petitioner assails the order dated 12.09.2011 in the present writpetition. The aforestated facts indicate that the petitioner’s appeal againstthe levy of penalty is yet to be decided on merits. At this stage, onlycollection of the penalty amount pending the appeal is in issue. As the Notice of Demand under Section 156 of the Act in respectof this amount had already been issued by the Assessing Officer, thepetitioner made an application to him on 31.01.2011 to keep thecollection of the penalty in abeyance till her appeal was decided. Thisapplication invoked the powers of the Assessing Officer under Section220(6) of the Act, which reads as under: “When tax payable and when assessee deemed in default. 220. ……… The aforestated facts indicate that the petitioner’s appeal againstthe levy of penalty is yet to be decided on merits. At this stage, onlycollection of the penalty amount pending the appeal is in issue. As the Notice of Demand under Section 156 of the Act in respectof this amount had already been issued by the Assessing Officer, thepetitioner made an application to him on 31.01.2011 to keep thecollection of the penalty in abeyance till her appeal was decided. Thisapplication invoked the powers of the Assessing Officer under Section220(6) of the Act, which reads as under: “When tax payable and when assessee deemed in default. 220. ……… (6) Where an assessee has presented an appeal underSection 246 or Section 246A the Assessing Officermay, in his discretion and subject to such conditionsas he may think fit to impose in the circumstances ofthe case, treat the assessee as not being in default inrespect of the amount in dispute in the appeal, eventhough the time for payment has expired, as long assuch appeal remains undisposed of.Section 246 or Section 246A the Assessing Officermay, in his discretion and subject to such conditionsas he may think fit to impose in the circumstances ofthe case, treat the assessee as not being in default inrespect of the amount in dispute in the appeal, eventhough the time for payment has expired, as long assuch appeal remains undisposed of.………” Once the Assessing Officer exercised his discretion under theabove provision, an assessee who would otherwise be an ‘assessee deemed in default’ would escape the stigma of such status and theconsequential coercive measures attached thereto and would, ineffect, enjoy a stay in respect of the collection of the disputed amountpending disposal of the appeal. In so far as the present case is concerned, it is clear that theAssessing Officer, the ITO, Ward-6(3), Hyderabad, did not himselfexercise powers under this provision. His communication dated15.07.2011 manifests that the petitioner’s stay application dated31.01.2011 was dealt with by the Commissioner of Income Tax-III,Hyderabad, and for reasons which remained undisclosed in thecorrespondence dated 15.07.2011 and 12.07.2011, the petitioner’sstay application was rejected. The petitioner’s further entreaty to theChief Commissioner of Income Tax-III, Hyderabad, to interfere in thematter met with failure as is evident from the impugned order dated12.09.2011. Surprisingly, the Chief Commissioner of Income Tax-III,Hyderabad, went to the extent of holding that the levy of penalty wasjustified as a reason for not interfering with the decision of theCommissioner of Income Tax-III, Hyderabad, on the petitioner’s stayapplication! Section 250 of the Act deals with the procedure to be followedin appeals arising under Section 246A of the Act. Thereunder, eventhe Commissioner (Appeals), the appellate authority, is notempowered to grant stay of collection of the disputed amount pendingthe appeal. Once Notice of Demand under Section 156 of the Act isissued in respect of such disputed amount, it is only the AssessingOfficer who is entitled to exercise discretion under Section 220(6) ofthe Act for keeping in abeyance the collection of such disputed amountpending disposal of the appeal. Involvement of the officers of the rankof Commissioners is not envisaged at this stage under the scheme ofthe Act. It was therefore for the Assessing Officer in this case – the ITO,Ward-6(3), Hyderabad, to independently apply his mind and exercisediscretion as to whether it was a fit case for staying the collection of thedisputed penalty amount pending the disposal of the petitioner’sappeal. Demonstrably and admittedly, this exercise was not undertaken and the Commissioner of Income-III, Hyderabad, appearsto have issued instructions to the Assessing Officer as to how to dealwith the petitioner’s stay application. This constitutes a clear case ofabdication of the discretion statutorily conferred on him by theAssessing Officer. Rejection of the petitioner’s stay application underthe communications dated 15.07.2011 and 12.07.2011 being contraryto the statutory scheme, involvement of the Chief Commissioner ofIncome Tax-III, Hyderabad, further compounded the matter. Under theimpugned order dated 12.09.2011, the Chief Commissioner practicallydecided the petitioner’s appeal itself by holding that the levy of penaltywas justified. Significantly, the petitioner’s appeal was not pendingbefore the Chief Commissioner for him to have expressed such anopinion. Having knelled the death of the petitioner’s very appeal, theChief Commissioner fatuously observed that he did not find merits tointerfere with the decision of the Commissioner on the petitioner’s stayapplication! Conceived in an atmosphere bereft of legal authority, the ordersof the Commissioner and the Chief Commissioner of Income Tax uponthe petitioner’s stay application do not have any legal consequence.As the Assessing Officer, the ITO, Ward-6(3), Hyderabad, failed toexercise the powers specifically conferred on him under Section220(6) of the Act, we are of the opinion that it would be fit and proper togive him an opportunity to do so at least at this stage. The Writ Petition is accordingly dismissed leaving it open to thepetitioner to apply to the Assessing Officer, the ITO, Ward-6(3),Hyderabad, under Section 220(6) of the Act and if such application ismade, the same shall be dealt with by the said officer in accordancewith law and in the light of the observations made hereinabove. In thecircumstances, there shall be no order as to costs. ______________ V.V.S.RAO, J. 2 NOVEMBER, 2011.VGSR ____________________ SANJAY KUMAR, J.