JUDGMENT K.L. Sharma, J.
1. This is a writ petition under Article 226 of the Constitution of India for a writ of certiorari quashing the order dated July 7, 1995, passed by the Commissioner of Income-tax (Appeals), Muzaffarnagar, whereby the stay application filed by the petitioner in the appeal against recovery proceedings has been rejected. A writ of mandamus has also been sought for restraining the respondents from recovering the amount of income-tax for the assessment year 1992-93 from the petitioner and for a direction to the Commissioner of Income-tax (Appeals) for disposal of the appeal forthwith.
2. I have heard Sri Rakesh Kumar Agarwal learned counsel for the petitioner and Sri Rakesh Ranjan Agarwal for the opposite party and perused the material brought on record.
3. The petitioner has filed a first appeal before the Commissioner of Income-tax (Appeals) at Muzaffarnagar, in respect of the assessment year 1992-93, whereby the income-tax liability of Rs. 31,41,142 was determined but before the disposal of the appeal, the assessing authority has initiated recovery proceedings for the said amount. The stay application against recovery proceedings filed by the appellant-petitioner before the Commissioner of Income-tax (Appeals), Muzaffarnagar, has been rejected. The appeal has, however, not yet been listed for hearing.
4. Learned counsel for the petitioner has invited attention to the material which was produced before the Commissioner of Income-tax (Appeals) stating the grounds and details of financial hardship faced by the appellant. The Commissioner of Income-tax (Appeals) while disposing of the stay application, has found the requisite details and material wanting. This statement is not correct. Even if it is so, the Commissioner could have given an opportunity to the petitioner to produce the wanting details and requisite information. However, it has not been done. During the pendency of the appeal, it is really a case of great hardship to the appellant, if the assessed liability of income-tax of Rs. 33,04,450 is sought to be recovered. Learned counsel for the petitioner has invited attention to the circular of the Central Board of Direct Taxes bearing No. 334 (F. No. 400/3/81-ITCO) (sic) dated 3-4-1982, which reads as follows :
"1. One of the points that came up for consideration in the 8th meeting of the Informal Consultative Committee was that income-tax assessments were arbitrarily pitched at high figures and that the collection of disputed demands as a result thereof was also not stayed in spite of the specific provision in the matter in Section 220(6).
2. The then Deputy Prime Minister had observed as under :
". . . . where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapse on the part of the assessee.
3. The Board desires that the above observations may be brought to the notice of all the Income-tax Officers working under you and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/Commissioner of Income-tax."
5. This circular is also in consonance with the spirit of the provisions contained in Sub-section (6) of Section 220 of the Income-tax Act.
6. According to learned counsel for the petitioner, this circular of the Central Board of Direct Taxes becomes applicable to the facts of the present case, as mentioned in paragraph 2 of the writ petition. The petitioner had submitted a return of income declaring total income of Rs. 11,710. The Deputy Commissioner of Income-tax, Special Range, Ghaziabad, did not accept the return and enhanced the income by making several additions and determined the tax at Rs. 33,04,450, i.e., more than several times of the return. In such a situation, the appellant cannot be treated to be in default and recovery proceedings before the disposal of the appeal will have to be kept in abeyance. The circular of the Board has desired the Recovery Officers to keep such recoveries in abeyance until disposal of the appeal by the appellate authority. This circular of the Central Board of Direct Taxes was also brought to the notice through an affidavit, the appellant before the Commissioner (Appeals) at Muzaffarnagar, but no reference in the impugned order of rejection of the stay has been made. Moreover, it is opposed to the principles of good conscience and fair play that the disputed amount of tax is sought to be recovered even though the appeal is pending. It adds to the hardship of the appellant in such circumstances, in which he is unable to deposit the amount during recovery proceedings. Therefore, it is highly desirable in the interest of justice that if the assessing authority or the appellate authority are not in a mood to stay recovery proceedings, even contrary to the circular of the Central Board of Direct Taxes, then they must dispose of the appeal without further delay and without taking any coercive action against the petitioner. For the purposes of disposal of this writ petition, it would be sufficient to say that in case the appeal is expeditiously disposed of, the recovery proceedings should not be pursued till disposal of the appeal.
7. Learned standing counsel for the Department of Income-tax vehemently submitted that in case the recovery proceedings are directed to be kept in abeyance the appellant must be directed to furnish adequate security to cover up the amount of income-tax likely to be imposed as a result of the disposal of the appeal. The necessary facts relating to the financial constraints of the appellant have already been alluded to hereinabove. Therefore, there cannot be a question of directing him to deposit any cash security or bank guarantee. As regards the other form of security, I find the capital assets comprising land, building, plant and machinery installed at the factory of the appellant are sufficient to cover the likely amount of income-tax if any, payable by the appellant.
8. Therefore, in my opinion, there is no need for calling any security from the petitioner-appellant. If the appeal is disposed of within a period of four months, it will not make any material difference whether the security is furnished or not.
9. Consequently, this writ petition is hereby finally disposed of with the direction that the Commissioner of Income-tax (Appeals) at Muzaffarnagar, shall hear and dispose of the appeal after giving full opportunity to the appellant within a period of four months from the date of receipt of a certified copy of this judgment and until disposal of the appeal, the recovery proceedings for the disputed amount of tax shall remain in abeyance.