Wp(C)/25822/2010 Of M/S.chandragiri Construction Company v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.T.RAVIKUMAR THURSDAY, THE 9TH SEPTEMBER 2010 / 18TH BHADRA 1932 WP(C).No. 25822 of 2010(C) ----------------------------------------- PETITIONER(S): ---------------------- M/S.CHANDRAGIRI CONSTRUCTION COMPANY, 3/402-A, KARAT ROAD, WEST NADAKKAVU, CALICUT-673011, REPRESENTED BY ITS MANAGING PARTNER SRI.T.B.KUNHIMAHI HAJI. BY ADV. SRI.ANIL D. NAIR SMT.NIVEDITA A.KAMATH RESPONDENT(S): ------------------------- 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-I, KOZHIKODE. 2. THE CENTRAL BOARD OF DIRECT TAXES, NEW DELHI. R1 BY MR. JOSE JOSEPH, STANDING COUNSEL, FOR INCOME TAX. R2 BY STANDING COUNSEL MR. JOSE JOSEPH THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 09/09/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.T.RAVIKUMAR, J.----------------------------------- W.P.(C) .NO. 25822 OF 2010---------------------------------- Dated this the 9[th] day of September, 2010. JUDGMENT The petitioner is a partnership firm and firm is an assesseebefore the first respondent under the Income Tax Act, 1961. Asper Ext.P1 notice under Section 221 (1) of Income Tax Act, 1961the first respondent raised a demand for an amount ofRs.3,59,33,420/-. The nature of demand has been specificallystated therein. Pursuant to the receipt of Ext.P1 notice,petitioner has submitted Ext.P2 requesting the first respondent tokeep in abeyance all steps to recover the said amount till theappeals preferred are disposed of. On receipt of Ext.P2 the firstrespondent issued Ext.P3 dated 26.7.2010 which reads thus:-. “You are hereby informed that stay cannot begranted and you are required to pay 50% of demand in5 instalments by 16.8.2010, 16.9.2010, 16.10.2010,16.11.2010 & 16.12.2010 and if so the balance will bestayed till disposal of appeal. Non adherence to thisscheme will result in enforcement of demand bycoercive measures. Your reply regarding acceptance ofthe scheme of instalment granted should be received inthis office by 11.8.2010.” 2. As is obvious from Ext.P3, the petitioner was required thereunder to submit reply in case of acceptance of thescheme of the instalments offered as per Ext.P3. However, thepetitioner preferred to submit another representation viz., Ext.P4 re-iterating his stand taken in Ext.P2. Pursuant to its receipt thefirst respondent has issued Ext.P5 and P6 notices under Section226 (3) of the Income Tax Act, 1961. Subsequently, the petitionerhas submitted Ext.P7 before the first respondent and Ext.P8 beforethe Commissioner. As per Ext.P8 the first respondent was requstedto rectify the assessments in the manner set out therein and also toadjust the amount of Rs.66,14,950/- refundable to the firm towardsthe tax and penalty demands besides withdrawing the attachmentof the Bank account. Ext.P8 virtually, carries the same claims andcontentions made as per Ext.P7. This writ petition has been filedcontending that in view of the issuance of Ext.P5 its entireoperations have come to a stand still and challenging Exts.P5 andP6 and also to grant stay of all further proceedings initiated as perExt.P5 and P6. The contention of the petitioner is that therespondents should not have resorted to garnishee proceedingsespecially after offering scheme of instalments by Ext.P3. In thatcontext it is further contended that till 16.8.2010, the date fixedfor remittance of the first instalment the petitioner could not havebeen regarded as a defaulter and, therefore the action on the partof the first respondent in issuing Exts.P5 and P6, both dated W.P.(C) .NO. 25822 OF 2010 W.P.(C) .NO. 25822 OF 2010 6.8.2010, before the expiry of the date fixed for effecting firstinstalment, is bad in law and liable to be interfered with. As noticedhereinbefore, the petitioner has yet another contention. Accordingto the petitioner an amount of Rs.66,14,950/- is refundable to thepetitioner firm and the said amount is sufficient to clear the firsttwo instalments. Therefore, it is contended that only in case offailure to effect the 3[rd] instalment within the date fixed for thatpurpose viz., 16.10.2010 the petitioner firm should have beentreated as a defaulter and as such, Ext.P5 and P6 are unsustainable.It is raising such contentions that the petitioner assails the saidnotices and the consequential action in freezing the accounts. 3. The standing counsel for Income Tax submits that thepetitioner should have approached the appellate authority with theprayer for staying the implementation of the orders of recovery oftax and penalty demanded as per Ext.P1 in case of any grievance.The petitioner did not choose to avail the appellate remedy or toremit the amount demanded. Despite the same the assessingauthority as per Ext.P3 has offered a scheme of instalments to thepetitioner for paying 50% of the amount covered as per Ext.P1. Itis further contended that though the petitioner was required to W.P.(C) .NO. 25822 OF 2010 communicate the authority regarding the acceptance of thescheme by 11.8.2010 he did not accept the same. 4. I think without considering the merits of the rivalcontentions this Writ Petition has to be disposed of based on thefollowing ground. Evidently, the respondents were to wait till11.8.2010 going by Ext.P1. However, Ext.P5 and P6 notices underSection 226(3) of the Income Tax Act, 1961 are dated 6.8.2010.The learned counsel for Income Tax submitted though Ext.P5 andP6 are dated 6.8.2010 they were actually despatched from office ofthe first respondent only after 11.8.2010. That apart, the claim ofthe petitioner relating the refundable amount if ultimately upheld bythe authorities one has to describe the present action as hasty inthe light of Ext.P3. I think in view of the facts thus obtained in thiscase a re-scheduling of the dates fixed for remittance as per Ext.P3without altering other conditions of the scheme, is called for.Accordingly, this Writ Petition is disposed of on the following lines:- Evidently, the first respondent had offered the petitioner anopportunity to effect payment of 50 % of the amount demanded asper Ext.P1 in 5 instalments starting from 16.8.2010 and ending on16.12.2010. The petitioner shall remit the first of the 5 instalments on or before 16.9.2010 and then continue to make payment of thebalance instalments respectively on 13.10.2010, 13.11.2010,13.12.2010 and 13.1.2011. In case the petitioner effects paymentas re-scheduled by this order, it should be deemed as substantialcompliance with the order in Ext.P3. In case the petitioner paysthe first instalment on or before 16.9.2010 the petitioner will alsobe at liberty to approach the appellate authority to move for stayof recovery pursuant to Ext.P1 in respect of the balance amount, inaccordance with law. In such eventuality further action will besubject to the orders by the appellate authority. In thecircumstances Exts.P5 and P6 are quashed. However, it will beopen to the first respondent to initiate steps for enforcement of thedemand by coercive measures in case petitioner fail to effectpayment as ordered above. mns C.T.RAVIKUMAR, JUDGE.