TMI Blog2012 (3) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... ll its facets, balancing the interest of the assessee with the protection of the Revenue - Held that: the assessee in the present case has a serious issue to urge as regards the legitimacy of the demand which has been raised by the impugned notice dated 29 February 2012, including in regard to the applicability of Section 177(3) of the Income Tax Act, 1961 on which the demand has been founded - Attachment stand lifted. - WRIT PETITION LODGING NO.606 OF 2012 - - - Dated:- 14-3-2012 - DR.D.Y. CHANDRACHUD M.S.SANKLECHA, JJ. Mr.S.E.Dastur, Senior Advocate with Mr.Madhur Agarwal and Mr.Atul K. Jasani for petitioner. Mr.Suresh Kumar for respondents. ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) 1. Rule, by consent returnable forthwith. Counsel appearing for the respondents waives service. By consent the petition is taken up for final hearing. 2. The challenge in these proceedings under Article 226 of the Constitution is to a notice of demand dated 29 February 2012 issued by the Income Tax Officer 19(3)(2) calling upon the petitioner to pay an amount of Rs.9.63 crores under Section 177(3) of the Income Tax Act, 1961 and to a garnishee notice dated 12 March 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cent of the demand and to seek stay / instalments in respect of the balance in the event an appeal had been filed before the CIT (Appeals). 5. The admitted position before the Court is that no assessment has been made against the petitioner by the Assessing Officer. However, a communication dated 29 February 2012 was received by the petitioner on 7 March 2012 by which the petitioner has been called upon to make payment of an amount of Rs.9.63 crores on the ground that the petitioner is a member of the AOP (Trust) and is jointly and severally liable in respect of the demand against the AOP. The Assessing Officer has invoked the provisions of Section 177(3) and has called upon the petitioner to pay the aforesaid amount as its share of the outstanding demand for investment made by the petitioner. 6. Immediately on receipt of the demand on 7 March 2012 the petitioner moved the Assessing Officer with an application for stay. On 9 March 2012 the petitioner moved the Commissioner of Income Tax-19 seeking his intervention, apprehending that the Assessing Officer may not entertain the application for stay. The application for stay was disposed of by the Assessing Officer on 9 March 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oked the provisions of Section 161(1A). In the present case, the Trust, it has been submitted, is a representative assessee within the meaning of Section 160(1)(iv). Under sub-section (1A) of Section 161 which begins with a non obstante clause, where any income in respect of which the person mentioned in Section 160(1)(iv) is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate. On this basis it was urged that Trust having received interest from HPCL, even a single transaction can in certain situations qualify to be called a business. The Trust in turn issued PTCs to Mutual Funds including the petitioner. The Revenue, it has been urged, was justified in invoking the provisions of Section 177(3). 9. At the present stage, it would be necessary for the Court to clarify that the issue in these proceedings is confined to whether the Revenue should be permitted to enforce the demand of Rs.9.63 crores and to take coercive steps under Section 226(3) in the form of a garnishee notice which has been issued to the bankers of the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 61, is equally a matter which would require careful consideration at the appellate stage. As we have noted earlier, the submission of the petitioner is that under Section 61, all income arising to a person by virtue of a revocable transfer of assets is chargeable to income tax as the income of the transferor. Under Section 63(a)(i) a transfer is deemed to be revocable if it contains any provision for the retransfer directly or indirectly of the whole or any part of the income or assets to the transferor. The submission of the petitioner is that if at all, an assessment could have only been made in the hands of the petitioner as the transferor of a revocable trust, in which event the income would be exempt under Section 10(23D). Whether the submission should be accepted is again a matter which would have to be determined in the course of the appellate proceedings arising from the order of assessment. The petitioner has intervened before the appellate authority. In our view, the Revenue has made an unfortunate and hasty attempt to make a recovery of the demand which has been imposed on the trust pursuant to the order of assessment, against the petitioner without enabling the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority 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 measures 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. The above parameters are not exhaustive. They are only recommendatory in nature. Unfortunately these guidelines are now being breached by the Revenue. In a subsequent decision in Coca Cola India P. Ltd. Vs. Addl. CIT (2006) 285 ITR 419, another Division Bench of this Court, while deprecating the conduct of the Revenue in ignoring the parameters laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 10. In view of the aforesaid discussion, we are of the view that the assessee in the present case has a serious issue to urge as regards the legitimacy of the demand which has been raised by the impugned notice dated 29 February 2012, including in regard to the applicability of Section 177(3) of the Income Tax Act, 1961 on which the demand has been founded. The assessee has intervened in the appeal filed by the trust before the Commissioner (Appeals). We direct that pending the disposal of the appeal and for a period of six weeks thereafter, the Revenue shall not take any coercive steps against the petitioner for enforcing the demand as contained in the communication dated 29 February 2012. The Revenue shall also refrain from taking any coercive steps or from enforcing the notice issued by the Assessing Officer on 12 March 2012 under Section 226(3). The Attachment, if any, that has been levied shall stand lifted. 11. Rule is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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