TMI Blog2017 (4) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be termed as illegal, merely because the recovery was made on the same day of issuance of notice, especially when the liability of the petitioners exists. On the other hand, it only exhibits the over enthusiastic act of the first respondent to see that a target goal is achieved on that day, being the end of the financial year. Apart from the above, it is an admitted fact that the impugned proceedings are already lifted on the same day after recovery and as such those proceedings are not in force as on today. Petitioners are not entitled to seek for refund of the amount recovered at this stage, as a matter of right, since neither Section 237 nor Section 240 of the Act would come to their rescue as on date. Admittedly the amount recovered is the amount due as per the assessment order confirmed in appeal. On the date of recovery or even thereafter till this date, there is no legal impediment for the first respondent to collect such due. When that being the factual position, I do not understand as to how the petitioners are justified in seeking for refund unless they satisfy that their claim would come under the purview of either section 237 or section 240. As already pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 20,56,03,930/- respectively, thus totaling a sum of ₹ 34,63,21,380/-. Challenging such orders of assessment, the petitioner preferred appeals before the First Appellate Authority and paid 15% of demand each in respect of the Assessment Years 2009-2010 and 2010-11. In respect of the Assessment Years 2013-14, the petitioner paid 25% of the demand, while preferring the appeal before the First Appellate Authority. Thus, the total sum paid by the petitioner at the time of filing the first appeal in respect of all the three assessment years comes to ₹ 7,25,08,598/-, as against the total demand of ₹ 34,63,21,380/-. The First Appellate Authority by an order dated 24.03.2017, which was served on the petitioner on 30.03.2017, dismissed all the appeals. The petitioner filed a rectification application under section 154 before the Appellate Authority on 31.03.2017 and such application is still pending. However, the first respondent issued the impugned proceedings on the very same date i.e., 31.03.2017 and recovered a sum of ₹ 34,63,21,380/- from the second respondent Bank on the very same day. The action of the first respondent in recovering such sum without even a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure, the Assessing Officer is responsible for the collection of tax. The Assessing Officer was indeed directed by the higher authorities to collect the demand immediately. An e-mail was sent to the petitioner/assessee on 30.03.2017, requesting them to pay the balance demand. If the Assessee fails to pay the demand, they shall be deemed in default. In case of default to pay tax, the Assessing Officer is mandated to recover the tax by one or more of the method provided under Section 226 of the Income Tax Act. Accordingly, the impugned attachment proceedings were issued and a sum of ₹ 34,63,21,380/- was received by way of demand draft from the second respondent, which was duly acknowledged by the first respondent. The tax under demand got crystallized with the serving of the original notice under section 156 of the Income Tax Act along with the assessment order. Therefore, its liability/obligation arose and continued to exist from that day onwards. The petitioner is definitely entitled to seek remedy by way of filing appeal before the Income Tax Appellate Tribunal. However, only the quantified demand crystallized by way of confirmation of order by the Appellate Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand in respect of the Assessment Years 2009-10 and 2010-11, while preferring the appeal before the First Appellate Authority. Likewise, the petitioner paid 25% of the demand in respect of the Assessment Year 2013-14, while preferring the appeal before the First Appellate Authority. Therefore, the amount alleged to be due, as referred to in the impugned notice itself, is factually erroneous, since the petitioner has admittedly paid ₹ 7,25,08,598/- out of the total demand of ₹ 34,63,21,380/-. Consequently, recovering the entire sum of ₹ 34,63,21,380/- in pursuant to the issuance of the impugned notice, is also an arbitrary exercise of power. The petitioner has filed the appeals before the Income Tax Appellate Tribunal on 31.03.2017 itself. However, the first respondent, without even waiting for the Tribunal to consider the request of the petitioner for stay and to pass an order therein, has taken the entire amount due on 31.03.2017 itself. Therefore, the first respondent has to return the money pending final order to be passed in the appeal before the Tribunal. The petitioner is willing to give bank guarantee for entire sum of ₹ 34,63,21,380/-. 10. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, the first respondent, without even waiting for one day, passed the impugned order and recovered the money. It is nothing but an arbitrary and unreasonable action. In this connection, the following decisions are relied on: a) Unreported decision in W.P.No.15373 of 2014 dated 13.06.2014; b) 2007(295) ITR 42 (Bombay), Mahindra Mahindra Ltd vs. Assessing Officer; c) (2014) 43 Taxmann.com 146(Bombay), Director of Income Tax (Exemptions) vs ITAT; The petitioner has already filed appeals before the Appellate Tribunal. 12. Mr.M.Swaminathan, learned counsel appearing for the first respondent in W.P.No.7990 of 2017 submitted as follows: The petitioner, while filing the first appeal before the Commissioners appeal, has not paid even 15% of the tax demand. They have also not filed any stay petition before the First Appellate Authority. The appeals were dismissed. Therefore, the amount of tax assessed by the Assessing Officer has become due and liable to be paid by the petitioner from the day one of the assessment. There is no legal impediment for the first respondent to recover such amount due, since Section 220(1A) and 226(3) of the Income Tax Act empower the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. There is no dispute to the fact that proviso to sub clause 2(A) of Section 254 of the said Act, empowers the Appellate Tribunal to consider the application for stay. There is no dispute to the fact that in both these cases, the appeal time has not expired on the date of issuance of the impugned proceedings. However, the fact remains that both the petitioners have filed their respective appeals immediately before the Income Tax Appellate Tribunal. 18. Under the above stated facts and circumstances, now, this Court has to consider as to whether the impugned proceedings followed by recovery of the money are made in accordance with law and whether such action requires any interference by this court by invoking its extraordinary and discretionary jurisdiction under Article 226 of the Constitution of India. 19. In order to answer such question, the scope and ambit of the relevant provisions under the Income Tax Act are required to be noted first, as hereunder. Chapter XVII of the Income Tax Act, 1961, deals with the common heading of Collection and Recovery of Tax , out of which, sub heading 'D' deals with Collection and Recovery . Under the above sub heading, Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually in default. 20. Perusal of the above provision of law would show that any amount, otherwise than by way of advance tax, specified in a notice of demand issued under section 156, becomes payable and shall have to be paid within 30 days of the service of such notice. 21. Section 156 of the Income Tax Act, 1961, which deals with notice of demand, reads as follows: Notice of demand: 156. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable . 22. Thus, the combined reading of Section 220 (1) and Section 156 of the said Act would show that the liability to pay the demand arises on issuance of such notice and the same has to be paid within 30 days from the date of service of such notice. Perusal of Section 220 (1A) would show that such demand made through such notice shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings as the case may be. Sub Clause (1A) further contemplates that any such notice of demand s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, it shall not be necessary for the Taxing Authority to serve upon the assessee a fresh notice of demand. 24. What would be the effect on the assessee if the amount demanded under Section 156 is not paid Such question is answered under Sub Clause (2) of Section 220, which contemplates payment of simple interest for every month of non payment commencing from the day immediately following the end of 30 days and ending with the day on which the amount is paid. However, sub section (3) of Section 220 empowers the Assessing Officer to extend the time for payment or allow the payment by installments subject to such conditions, as he may think fit, based on an application made by the assessee before the expiry of due date. If the amount is not paid within the time limit, as provided under Sub Section (1) or within the extended time as provided under Sub Section (3), then the assessee shall be deemed to be in default, as contemplated under Section 220 sub Clauses (4) and (5). 25. What is the effect of an assessee, who is in default or is deemed to be in default in making the payment of tax The said question is answered under section 221 of the Income Tax Act, 1961, which read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or may subsequently hold money for or on account of the assessee to pay to the Assessing Officer or Tax Recovery Officer either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. (x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Assessing Officer or Tax Recovery Officer, he shall be deemed to be an assessee in default in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appeals, there is no necessity for issuing a fresh notice of demand under Section 156 in view of Section 220(1A) of the said Act, which contemplates that a notice of demand originally served on the Assessee shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings and any such notice of demand shall have the effect as specified in Section 3 of the Taxation Laws (Continuation Validation of Recovery Proceedings) Act, 1964. 30. Thus, it is clear that it is not necessary for issuing a fresh notice of demand every time after the disposal of the appeal or other proceedings and the original notice of demand issued under section 156 shall be deemed to be valid all through out the proceedings. Moreover, Section 3 of the Taxation Laws (Continuation Validation of Recovery Proceedings) Act, 1964, makes it abundantly clear that no such notice is to be served on the assessee, if the quantum of Government dues is not varied as a result of any order passed in any appeal or other proceedings. As already stated above, in this case, the Appellate Authority has only confirmed the order of the Assessing Authority and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment forthwith. Therefore, legally, the first respondent is not barred from seeking such payment forthwith. 33. It is contended by the first respondent that in compliance with the issuance of such notice, the second respondent has paid the disputed amount on the same day. However, in the counter affidavit filed by the second respondent, certain allegations are made against the officials of the first respondent regarding threat and pressure exerted on the second respondent by personally making their presence at the place of business of the second respondent. Such contentions, not rebutted by filing any reply by the first respondent, would only indicate that the first respondent, after issuing the notice under Section 226(3), has not even waited for a reasonable time for the second respondent to react to the notice and on the other hand, the amount was hurriedly recovered on the same day of issuance of such notice. However, it is to be noted that the second respondent is not raising any claim that the amount recovered are not the amount due to the assessee from the second respondent. In other words, the amount recovered is only from the account maintained by the assessees with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame day after recovery and as such those proceedings are not in force as on today. 35. In this case, apart from challenging the impugned proceedings, the petitioners also seek the consequential relief for refund of the amount so collected. 36. Chapter XIX of the Income Tax Act, 1961, deals with refunds wherein Section 237 contemplates as to who is the person entitled to a refund. Section 237 of the Income Tax Act, 1961, reads as follows: Refunds:- 237.If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. Perusal of the above said provision would show that only a person, who satisfies that the amount of tax paid by him for any Assessment Year exceeds the amount chargeable is entitled to a refund. 37.Section 240 of the Income Tax Act, 1961, deals with refund as a result of an order passed in appeal. Section 240 of the Act reads as follows: Refund on appeal, etc., 240.Where, as a result of any order passed in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e preferring the appeal before the First Appellate Authority. But the undisputed fact is that the said assessee has not paid any amount, while preferring the other appeal in respect of the Assessment Year 2014-15. As per the claim of the first respondent, as set out in the counter affidavit, the demand in respect of the Assessment Year 2014-15 is ₹ 21,73,55,160/- and such demand is challenged before the Appellate Authority, without even making any part payment of tax. Therefore, I do not find any justification on the part of the petitioner in W.P.No.7937 of 2017, in contending that the amount recovered is over and above the amount liable to be paid, more particularly, the impugned proceedings does not specifically refer to any Assessment Years. 40. Learned counsel for the petitioner in W.P.No.7990 of 2017 relied on unreported decision of this court made in W.P.No.15373 of 2014 dated 13.06.2014. Perusal of the said decision would show that a notice of demand issued even before the expiry of statutory period for preferring revision, was set aside. But in this case, the recovery is already made. I have also pointed out that there is no statutory bar for the first respondent t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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