BIDAR NIRMITI KENDRA V. PRINCIPAL COMMISSIONER OF INCOME TAX AND ORS

WP/201260/2018

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The case involves Bidar Nirmiti Kendra, a state government agency, challenging the recovery of tax assessed by the Income Tax Officer, Bidar, for several assessment years. The petitioner argued that the recovery was made prematurely, without allowing the statutory time for filing an appeal against the assessment order. The court examined whether the Income Tax Officer was entitled to recover the entire assessed tax immediately after the Commissioner of Income Tax (Appeals) confirmed the assessment, without waiting for the appeal period. The court found that the recovery was indeed premature and excessive, leading to the order for refunding the excess amount recovered.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 755087 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 07-08-2018
• Assessment Year: misc
• Other Referred Cases: UTI Mutual Fund vs. Income Tax Officer, Oracle India Pvt. Ltd. vs. Union of India, Director of Income Tax (Exemption) vs. Income Tax Appellate Tribunal and Maharashtra Housing and Area Development Authority, Mahindra and Mahindra Ltd. vs. Union of India, Ocean Driving Centre Ltd. vs. Union of India, Givaudan India Pvt. Ltd. vs. Union of India, Flipkart India Private Limited vs. Assistant Commissioner of Income Tax, Jagdish Gandabhai Shah vs. Principal Commissioner of Income Tax, Shri Saibaba Sansthan Trust (Shirdi) vs. Union of India, Tata Teleservices (Maharashtra Limited) vs. Ministry of Finance, Department of Revenue, Greater Mohali Area Development Authority vs. DCIT, Authorized Officer, State Bank of Travancore vs. Mathew K.C., Commissioner of Income Tax vs. Chhabil Dass Agarwal, Ram and Shyam Company vs. State of Haryana, Press release of the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AMEET DESHAPNDE; R K GANURE
• Assessee Lawyers: LAKSHMI MENON
• Keywords: Appeal against assessment; Assessment years; Income tax recovery; High Handed Recovery; Excessive Amount Recovery
• Section: 147; 148; 250; 264; 143; 253; 248; 225

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA KALABURAGI BENCH DATED THIS THE 7TH DAY OF AUGUST, 2018 BEFORE THE HON’BLE MR.JUSTICE S.N.SATYANARAYANA W.P.Nos.201260/2018 & 201288/2018 & 201300/2018 (T-IT) Between: Bidar Nirmiti Kendra Near Basaveshwara Circle, Naubad Bidar – 585 403 Represented by its Project Manager Mr. Syed Zafar Ali ... Petitioner (By Ms. Lakshmi Menon, Advocate for Sri Mr. C.K. Nandakumar, Advocate) And: 1. Principal Commissioner of Income Tax Kalaburgi – 585 101 2. Commissioner of Income Tax (Appeals) Gulbarga – 585 101 3. Income Tax Officer Ward –1, Bidar – 584 101 4. Axis Bank Limited Bidar Branch – 584 101 Represented by its Manager ... Respondents R 2 (By Sri Ameet Kumar Deshapnde, Advocate for R1 & R3; Sri R.K. Ganure, Advocate for R4 – Absent; Notice to R2 Served and unrepresented) These Writ Petitions are filed under Articles 226 and 227 of the Constitution of India praying to issue a writ of certiorari or any other writ, order or direction quashing the letter dated 28.03.2018 in No.:-F.No.PAN- AABAN0989K/226(3)/ITO-W-1/2017-18 issued to the fourth respondent by the third respondent and set aside the order of recovery (Annexure-A). Issue a writ of certiorari or any other writ, order or direction quashing the letter dated 07.04.2018 in No.:-F.No.226(3)/ITO/W- 1/BIDAR/17-18 issued to the fourth respondent by the third respondent attaching further sums from the petitioner’s bank account (Annexure-B) and etc. These petitions are coming on for Orders this day, the Court made the following:- ORDER The petitioner herein an Agency of the State Government is challenging the order of the third respondent-Income Tax Officer in recovering the tax assessed by him for the assessment years 2010-11, 3 2011-12, 2012-13, 2013-14 and 2015-16 by letter dated 28.03.2018 vide F.No. PAN-AABAN0989K/226(3)/ITO- W-1/2017-18 which is at Annexure-A and vide letter bearing F.No.226(3)/ITO/W-1/BIDAR/17-18 which is at Annexure-B in recovering a sum of Rs.16,95,48,869/- from the account of the petitioner maintained with the fourth respondent Axis Bank Limited, Bidar Branch which according to them is in excess of 20% upper limit permissible under the cases where the appeals are filed against the confirmation order of assessment passed by the Commissioner of Income Tax (Appeals) under Section 253 of the Income Tax Act in confirming the assessment order under Section 143 read with Section 147 of the Income Tax Act (Hereinafter, referred to as ‘the Act’ ). 2. Brief facts leading to these writ petitions are as under:- 4 Petitioner herein is a development agency constituted by the State Government for development of Bidar District and the same is headed by the Deputy Commissioner of Bidar as its Chairman. It is stated that the revenue generated to the said organization is assessed to income tax by the third respondent-Income Tax Officer under Section 143 Read with Section 147 of the Act. The petitioner would state that, for the assessment years 2010-11 to 2013-14 and 2015-16 two separate orders were passed on 22.02.2016 and 07.03.2016. The said order of assessment was subjected to challenge by the petitioner herein belatedly by filing a revision under Section 264 of the Act before the Commissioner of Income Tax (Appeals). The appeal came to be allowed by order dated 29.12.2016 in setting aside the assessment order passed by the third respondent and remanding the same for reassessment. The said remanded matter was taken up for assessment by the third respondent and separate order came to be 5 passed by him on 28.12.2017. The same was subject matter of appeal before the Commissioner of Income Tax (Appeals) under Section 248 of the Act, which came to be decided by order dated 19.03.2018 passed under Section 250 of the Act. The petitioner would submit that, it has taken up the said order in challenge before the Income Tax Appellate Authority by filing an appeal on 29.05.2018. 3. Their grievance is that though an order of accepting the assessment of the third respondent was passed by the second respondent Commissioner of Income Tax (Appeals) on 19.03.2018, the same was communicated to them on 27.03.2018. It is stated that an appeal is provided under the Act to challenge the correctness or otherwise of the order of the second respondent. The time stipulated for filing of the appeal is 60 days from the date of communication of the order. According to petitioner even before the same could be 6 taken up in the appeal, the confirmation order passed by the second respondent is given effect to. The respondent is said to have attached the amount standing in the account of the petitioner with fourth respondent Bank by issuing notice dated 28.03.2018. Consequently an amount of Rs.24,10,15,782/- is recovered as against 15% and 40% which are required to be recovered as against order of each assessment year in accordance with the rules governing for payment of statutory deposit to maintain the appeal. According to the petitioner the said amount would be in a range of Rs.7,64,38,411/-. Thereby indicating that the third respondent has high handedly collected an excessive amount of Rs.16,45,77,371/-. Thereby causing hurdle to day-to-day functioning of the petitioner, inasmuch, as the petitioner rendering the institution to the level of not having funds to pay the salary of its employees and to take up development activities for which the said income is generated through Government schemes. 7 4. The sum and substance of the dispute in this writ petition is whether the third respondent Assessment Officer was entitled to recover the entire tax which was assessed by him immediately after the order passed by him is confirmed by the Commissioner of Income Tax (Appeals) without waiting for appeal period which is statutorily provided under the Act as contemplated in Section 253 (3) of the said Act. According to the petitioner, under similar situation the Division Bench of Bombay in the matter of UTI Mutual Fund vs. Income Tax Officer 19(3) (2) and others reported in 2012 SCC Online Bom 390 : (2012) 345 ITR 71, held as under:- 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 8 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; 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 fats 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 9 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 a quasi judicial authority vested with the public duty of protecting the interest of the Revenue while at the same time balancing the need to mitigate 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. 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 10 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-2102 under Section 226(3). The attachment, if any, that has been levied shall stand lifted. and the said point is sought to be reiterated by relying upon several other judgments which are as under:- 1. UTI Mutual Fund v. Income Tax, (2012) 354 ITR 71. 2. Oracle India Pvt. Ltd. v. Union of India, W.P.No.21752/2013 (T-TAR), decision dated 18.06.2013. 3. The Director of Income Tax (Exemption), Mumbai v. The Income Tax Appellate Tribunal and Maharashtra Housing and Area Development Authority, W.P. (L) No.3174 of 2013, decision dated 04.02.2014. 11 4. Mahindra and Mahindra Ltd. v. Union of India, (1992) 59 ELT 505. 5. Ocean Driving Centre Ltd. v. Union of India, 2004 (3) Mh. L.J. 6. Givaudan India Pvt. Ltd. v. Union of India (2013) 292 ELT 161. 7. Flipkart India Private Limited v. The Assistant Commissioner of Income Tax and others, W.P.No.1339-1342/2017 (T-IT), decision dated 23.02.2017. 8. Jagdish Gandabhai Shah v. Principal Commissioner of Income Tax, Spl. Civ. Application No.5679 of 2017, decision dated 29.03.2017. 9. The Shri SaibabaSansthan Trust (Shirdi) v. The Union of India and others, W.P.No.939 of 2018 decided on 27.03.2018. 12 10. Tata Teleservices (Maharashtra Limited) v. The Ministry of Finance, Department of Revenue and others, W.P.No.1014 of 2014 decided on 29.01.2014. 11. Greater Mohali Area Development Authority v. The DCIT, M.A.No.70/Chd/2018. 12. Authorized Officer, State Bank of Travancore and Another v. Mathew K.C. (2018) 3 SCC 85. 13. Commissioner of Income Tax and Others v. Chhabil Dass Agarwal (2014) SCC 603. 14. Ram and Shyam Compnay v. State of Haryana and Others (1985) 3 SCC 267. 15. Press release of the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, Dated 07.11.2014. The sum and substance of the aforesaid judgments clearly support the contention of the petitioner that the third respondent has acted beyond the scope of the provision of the Act in high handed manner and 13 recovered the amount in excess of prescribed minimum limit which is required to be deposited by the petitioner, while challenging the order of Commissioner of Income Tax (Appeals). 5. In this proceedings the learned counsel appearing for the respondent Nos.1 to 3 tried to substantiate the act of the third respondent in relying upon Section 225 of the Act and other relevant provisions which are coming under Chapter 17(d) in support of the action of third respondent Income Tax officer in recovery of the tax assessed. This Court is of the opinion that the respondents have miserably failed to substantiate the illegal act committed by the third respondent in high handedly recovering the assessed amount. Despite the fact that statutorily he is prevented from doing so which is fortified by several judgments of various High Courts and Hon’ble Apex Court. In that view of the matter only thing this Court 14 can understand is the pathetic incompetence of the officer either in understanding the legal provisions which is borne out from the book or in understanding the judgment, which governs the law with reference to the manner of recovery. The conduct of third respondent is nothing but causing harassment to assessee. In that view of the matter this Court finds the amount of Rs.15,82,41,007/- which is recovered by third respondent is in excess of his right in the fact situation, also in the light of the judgment referred to supra as could be seen from Annexure-A, the same is ordered to be refunded within one week from the date of receipt of copy of this order. If the same is not refunded, liberty is reserved to the petitioner to approach this Court in contempt of Court proceedings, where the high handed respondent will be dealt with appropriately. 15 However it is made clear that refund of Rs.15,82,41,007/- is subject to recovery of Rs.74,03,763/-. Sd/- JUDGE RSP Ct: RRJ "