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M.D. INFRA DEVELOPERS Versus DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 AND 3

2016 (5) TMI 927 - GUJARAT HIGH COURT

Recovery proceedings - attachment of the bank account - applications made by the petitioner under section 220(6) - Held that:- Application under sub-section (6) of section 220 of the Act was made by the petitioner on 04.05.2015. The Assessing Officer not only did not pass any order thereon, but even though he was not inclined to entertain the application, he did not even deem it fit to inform the petitioner about the same. It is for the first time, in the affidavit-in-reply filed in these procee .....

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ccounts as well as 114 flats of the petitioner. In the opinion of this court, during the pendency of the stay application, which had been filed almost immediately after the period stipulated in the notice under section 156 of the Act had expired, there was no warrant for the respondents to resort to drastic measures of making coercive recovery without first taking the decision on the application under section 220(6) of the Act. The action of the respondents in attaching the bank accounts and fla .....

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re this court that he shall regularly make payment to the Tax Recovery Officer as stipulated hereinabove as well as to the effect that he will cooperate in the early disposal of the appeal, failing which the stay order will be cancelled. Upon the petitioner filing such undertaking before this court, the respondents shall forthwith lift all attachments made on (i) all properties belonging to the petitioner, particularly on 114 flats and the land belonging to the petitioner and (ii) Bank Account N .....

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a, learned Senior Standing Counsel waives service of notice of rule on behalf of the respondents. 2. Having regard to the controversy involved in the present petition which lies in a very narrow compass, the matter was taken up for final hearing. 3. This petition under Article 226 of the Constitution of India has been filed seeking the following substantive reliefs: 7. In the premises aforesaid, the petitioner prays that :- [A] this Hon ble Court be pleased to call for and look into the records .....

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by the Commissioner of Income Tax (Appeals). [C] this Hon ble Court be pleased to ask the Tax Recovery officer to lift all attachments done on (i) all properties belonging to the petitioner, particularly on 114 flats and the land belonging to the petitioner and (ii) Bank Account No.05332560003644 of the petitioner with HDFC Bank Ltd., Varachha, Surat. 4. The petitioner, a partnership firm, started construction of Om Township Project in the assessment year 2011-12. It is the case of the petitione .....

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sioner of Income Tax (Appeals) - 4, Surat. It is the case of the petitioner that high-pitched assessments have been made on the petitioner which are highly contentious and hence, the petitioner has a good case to succeed in all the appeals. As a result of the above assessments, the Assessing Officer raised total demand of ₹ 22,94,74,880/-. The notices of demand under section 156 of the Act came to be issued and served upon the petitioner. The petitioner, through its Chartered Accountants, .....

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f Vikrambhai Punjabhai Palkhiwala v. S. M. Ajbanj, (1990) 182 ITR 413, and requested to keep the demand in abeyance and not to treat the petitioner as an assessee in default as visualized under section 220(6) of the Act. However, despite the pendency of the above application before the Assessing Officer, the second respondent Tax Recovery Officer issued a notice of demand dated 21.05.2015 under rule 2 of the Second Schedule of the Act, calling upon the petitioner to pay the demand of ₹ 22, .....

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e balance and recovered ₹ 17,050=87 (being total credit balance). The said account was also attached under section 222 of the Act. The petitioner received a copy of such notice on 11.08.2015. The second respondent also issued a notice dated 11.08.2015 to the petitioner prohibiting and restraining the petitioner from transferring 114 flats belonging to it. 4.1 The petitioner, therefore, addressed an application dated 14.09.2015 to the Principal Commissioner of Income Tax, Surat, the third r .....

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stating that the attachment on the bank accounts and the residential flats shall be considered on furnishing bank guarantee of the total demand of ₹ 22,94,74,880/- and that in case the petitioner fails to make such payment, he may be treated as an assessee in default. Being aggrieved, the petitioner has filed the present petition. 5. Mr. J. P. Shah, learned advocate for the petitioner, submitted that the petitioner had made an application under section 220(6) of the Act to the Assessing Of .....

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nk account of the petitioner without giving reasonable notice of his intention to do so and in fact, while the notice was given to the petitioner on 11.08.2015, the account was attached on 06.08.2015. It was submitted that in view of the attachment of the petitioner s bank account as well as 114 flats, the petitioner is experiencing acute scarcity of working capital and is not in a position to carry out its day-to-day activities. Referring to the order dated 06.11.2015 passed by the Principal Co .....

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02.12.2013 issued by the Central Board of Direct Taxes, to point out that the same instructs the departmental authority to grant stay where the assessment is unreasonably high-pitched. Referring to the assessment orders it was pointed out that very high pitched assessments had been made in the case of the petitioner, which would squarely fall within the ambit of above instruction whereby the departmental authority is required to grant stay. It was, accordingly, urged that the petition deserves c .....

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ice Server. The Notice Server has submitted his report dated 31.03.2015 to the ACIT, Central Circle-2, Surat, wherein, he has reported that Shri Bhagirath Baldha, partner of the petitioner firm had refused to receive the assessment orders and asked him to deliver the orders on the next day. It was submitted that under the provisions of the Act, refusal to receive notice/letters on the part of the assessee is considered as a deemed service and therefore, the assessment orders are deemed to have b .....

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this case, the application for keeping the demand in abeyance was received by the office of the Deputy Commissioner of Income Tax, Central Circle-2, Surat, on 05.05.2015, that is, after the expiry of the period mentioned in the notice of demand. It was submitted that as per the office procedure, the applications for stay of demand or grant of installments, received after the expiry of the due date, cannot be entertained under section 220(3) of the Act in the absence of an application for extens .....

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to the petitioner seeking reasons for non-compliance. However, the petitioner did not respond to such notices, thereby, compelling the Tax Recovery Officer to attach its bank account by issuing the notice under section 226(3) of the Act. It was submitted that since despite the attachment of the bank accounts, the petitioner failed to attend the office of the Tax Recovery Officer, to safeguard the interest of revenue, the Tax Recovery Officer was forced to attach the immovable properties of the .....

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nsonance with the guidelines issued by the Board, there is no warrant for interference by this court. 7. The facts as emerging from the record reveals that the assessment orders came to be passed in the case of the petitioner for assessment years 2011-12, 2012-13 and 2013- 14 under section 153A of the Act on 31.03.2015. According to the respondents, such orders came to be served upon the petitioner on the same day. The notice of demand under section 156 of the Act came to be issued to the petiti .....

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nd. The notice of demand is dated 31.03.2015 and in terms of the said notice, the amount was required to be paid within a period of thirty days from the date of receipt of such notice. Thus, the period of thirty days from the date of the notice would expire on 02.05.2015. The petitioner filed stay applications under section 220(6) of the Act on 04.05.2015. The Assessing Officer, however, refused to entertain such applications and on the other hand, took steps to make coercive recovery under sect .....

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reads as under: [5] This Instruction No.1914 F.No.404/72/93 ITCC dated 2-12-1993 has been issued by the CBDT in supersession of all its earlier circulars in this regard. Considering the facts and circumstances of the case and evidences gathered, the income determined by the Assessing Officer appears to be quite reasonable and justifiable. Further, from Instruction No.1914, it is very clear that mere filing an appeal against the assessment order will not be a sufficient reason to stay the recover .....

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umstances, balance 50% of outstanding demand will be stayed till the disposal of first appeal. Failure, if any on your part to pay 50% of arrear demand on or before 31st March 2016 will be considered as lack of interest on your part to avail benefit of stay of 50% of demand and entire demand will be collectible through suitable measures as per Income tax law. Further, your request to lift the attachment placed on the bank accounts and business assets (residential flats) can be considered subject .....

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section (3) thereof provides that without prejudice to the provisions contained in sub-section (2), on an application made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allow payment by installments, subject to such conditions as he may think fit to impose in the circumstances of the case. Thus, sub-section (3) of section 220 of the Act can be invoked in a case where an assessee has accepted the order passed by t .....

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his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired as long as such appeal remains undisposed of. On a conjoint reading of sub-sections (3) and (6) of section 220 of the Act, it appears that while subsection (3) thereof stipulates the period within which an application under such provision is required .....

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says that the Assessing Officer may, in his discretion, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired. Therefore, the stand taken by the Assessing Officer for not deciding the application of the petitioner, viz. that the time limit for making an application under sub-section (3) had expired, does not appear to be in consonance with the provisions of sub-section (6) of section 220 of the Act. 9. As can b .....

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circular No.1914 dated 02.02.1993 of the Board and has observed that, On going through the grounds raised by you for keeping demand in abeyance, it appears that no such valid grounds have been put forth to consider your stay application favorably. However, considering the request of the petitioner, the Principal Commissioner of Income Tax has directed it to pay 50% of the outstanding demand in equal monthly installments on or before 31st March, 2016 subject to which the demand of the outstanding .....

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ing the attachment on the properties of the petitioner. 10. At this juncture, reference may be made to Instruction No.1914 dated 02.02.1993 of the Board. Paragraph 2(A)(i)(d) thereof provides that it shall be the responsibility of the Assessing Officers and the Tax Recovery Officer to collect every demand that has been raised, except the following: Demand stayed in accordance with paras B & C below. Paragraph (B) provides for stay petitions and says that stay petitions filed with the Assessi .....

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notice. In the opinion of this court, if for any reason, the Assessing Officer is not entertaining the application, even then, within a period of two weeks of the filing of the stay application, he should intimate the assessee about such decision. It is incumbent on the Assessing Officer to take a decision on the application under section 220(6) of the Act one way or the other, and it is not permissible for him to sit tight over the application and proceed further to make coercive recoveries wi .....

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ng from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; (d) reserve the right to review the order passed after expiry of reasonable period, say upto 6 months, or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; (e) reserve a right to adjust refunds arising, if any, against the demand. Thus, even according .....

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ing stay is incongruous inasmuch as if the entire amount is recovered there is no purpose of granting stay. Sub-section (6) of section 220 of the Act vests in the Assessing Officer the discretion to treat the assessee as not being in default in respect of the amount in dispute even though time for payment has expired as long as such appeal remains undisposed of subject to such conditions as he may think fit to impose. Clause (iv) of paragraph (C) of the said Instructions provides that since the .....

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ng Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. 12. In the facts of the present case, while the Assessing Officer has not passed any order on the applications made by the petitioner under section 220(6) of the Act, including not informing the petitioner that the application is not being entertained, the Principal Commissioner of Income Tax, in the order dated 06.11.2015, has no where considered th .....

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that is stated is that on going through the grounds raised by the assessee for keeping demand in abeyance, it appears that no such valid grounds have been put forth to consider his stay application favorably. On a plain reading of the order dated 06.11.2015, it is evident that it is a non-speaking order which does not deal with any of the submissions advanced by the assessee and also suffers from non-application of mind to the facts of the case, it being a standard order passed in such matters. .....

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petitioner on 04.05.2015. The Assessing Officer not only did not pass any order thereon, but even though he was not inclined to entertain the application, he did not even deem it fit to inform the petitioner about the same. It is for the first time, in the affidavit-in-reply filed in these proceedings that the Assessing Officer has come out with the case that the application could not be entertained as it was filed after the period stipulated in the notice under section 156 of the Act had expir .....

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ce under section 156 of the Act had expired, there was no warrant for the respondents to resort to drastic measures of making coercive recovery without first taking the decision on the application under section 220(6) of the Act. The action of the respondents in attaching the bank accounts and flats of the petitioner, therefore, cannot be sustained. 14. In the aforesaid premises, the court is of the view that the interests of justice would best be served if the fourth respondent herein - Commiss .....

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