“CR”
The petitioner is aggrieved with the recovery steps initiated while the appeal and the application for stay filed for the relevant assessment year were pending. Admittedly, proceedings were initiated under Section 226 of the Income Tax Act, 1961 (for short 'the Act') and a major portion of the amounts demanded for the assessment year was withdrawn from the account maintained by the petitioner with the 4th respondent Bank.
2. The relevant assessment year is 2012-13 for which an assessment order was passed as evidenced by Ext.P1 dated 13.03.2014. The petitioner filed an appeal, Ext.P2, dated 24.04.2014 and also moved a stay application dated 02.06.2014 (Ext.P3). In addition to this, the petitioner moved an application under Section 220 before the Assessing Officer, being Ext.P4 dated 29.04.2014. The 1st respondent rejected the same by a cursory order, Ext.P5, dated 27.11.2013. The garnishee proceedings under Section 226 of the Act were initiated on 26.05.2014 and the amounts withdrawn from the account maintained in the 4th respondent Bank.
3. Oftener than ever, the extra-ordinary power under Article 226 of the Constitution of India is invoked by the assessees, against whom recovery steps are initiated, even during the period allowed by the statute to prefer an appeal; as also when applications for stay are pending before the Appellate Authority. This Court is also frequently confronted with applications for stay being mechanically disposed of without even prima facie consideration of the case put forth by the assessees in the appeal.
4. Herein, stay application filed before the Appellate Authority was not disposed of as yet, and the petitioner assessee was before the Assessing Officer itself as permissible under Section 220 of the Income Tax Act. Ext.P5 is the order under Section 220, which does not disclose any reason or even a consideration of the relevant circumstances put forward by the petitioner. There is also no extenuating circumstance stated which would effectively defeat the recovery, if delay is caused and the recovery is kept in abeyance till the Appellate Authority considers the stay application. In this context, relevant is the decision of the Division Bench of the Bombay High Court in KEC International Ltd. v. B.R.Balakrishnan ( [2001] 251 ITR 158 (Bom)) wherein some broad parameters were laid down for regulating the consideration of stay applications, whether it be in a statutory appeal or under Section 220 (6). This Court is of the opinion that the same is apposite and should be followed by the respondent authorities, and they are extracted hereunder:
“(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 the 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 measure 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.
5. The power under Section 226 of the Act is also one to be invoked with circumspection and caution and cannot be at the will and caprice of the authority. This Court in Rajan Nair v. ITO ([1987] 165 ITR 650 (Ker.)) observed thus:
“In exercising his power, the Income-tax Officer should not act as a mere tax gatherer but as a quasi-judicial authority vested with the power of mitigating hardships to the assessee”.
6. A Division Bench of the Bombay High Court followed the afore stated sagacious observations of the learned single Judge of this Court and laid down the following guidelines in the matter of effecting recovery.
1. No recovery of tax should be made pending
(a). expiry of the time limit for filing an appeal;
(b). disposal of a stay application, if any moved by the assessee and for a reasonable period thereafter to enable the assessee to move a higher forum, if so advised. Coercive steps may, however, be adopted where the authority has reason to believe that the assessee may defeat the demand in which case brief reasons may be indicated.
2. The stay application, if any, moved by the assessee should be disposed of after hearing the assessee and bearing in mind the guidelines in 'KEC International'(supra);
3. If the Assessing Officer has taken a view contrary to what has been held in the preceding previous years without there being a material change in facts or law, that is a relevant consideration in deciding the application for stay
4. When a bank account has been attached, before withdrawing the amount, reasonable prior notice should be furnished to the assessee to enable the assessee to make a representation or seek recourse to a remedy in law;
5. In exercising the powers of stay, the Income Tax Officer should not act as a mere tax gatherer but as a quasi- judicial authority vested with the public duty of protecting the interests of the Revenue while at the same time balancing the need to mitigate the hardship to the assessee. Though the Assessing Officer has made an assessment, he must objectively decide the application for stay considering that an appeal lies against his order: the matter must be considered from all its facets, balancing the interest of the assessee with the protection of the Revenue.”
These guidelines laid down by the Bombay High Court are binding on the revenue authorities, especially the authorities under the Income Tax Act who exercise jurisdiction all over the country. They are reiterated for the guidance of the authorities now operating within the State.
7. Coming back to the above writ petition, as was noticed, Ext.P5 does not at all contain any reason for rejection of the stay applications. It sets out no expedient reason why immediate recovery should be resorted to. The petitioner assessee is a running institution and there is no threat of it deliberately thwarting recovery and thus causing prejudice. However, garnishee proceedings were initiated and notice was issued to the assessee under Section 226(3)(iii) of the Act and a major portion of the demand has now been recovered from the assessee. In such circumstances, the recovery steps initiated is definitely capricious. But however, the assessee had remedies, which they did not avail of and no violation of statutory compliance is discernible. Hence, taking into account the fact that appeal is pending before the first Appellate Authority; considering the fact that a major portion of the demand has now been satisfied, there shall be no further recovery steps initiated till the appeal is disposed of. Definitely Ext.P6 garnishee order ought to be lifted, and this Court does so, allowing the petitioner to operate their account.
Writ petition disposed of. Parties are left to bear their costs.
Sd/-
K.VINOD CHANDRAN,
Judge
Mrcs //True Copy// P.A. To Judge