M/S MCML ECI JOINT VENTURE V. INCOME TAX OFFICER

WP/11683/2022

AI Insights

The case involves a writ petition filed by Ceiba ECI JV and others against the Income Tax Department, challenging a demand for payment of 20% of outstanding tax arrears for multiple assessment years, including 2016-17. The petitioners argued that the demand was arbitrary and unreasonable, especially since their appeal for the same assessment year was still pending with the Commissioner of Income Tax (Appeals)-6. The respondents contended that the demand was reasonable to protect the interest of the revenue. The court found the demand by the Tax Recovery Officer to be unjustified due to the pending appeal and directed the Commissioner to expedite the decision on the appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 769194 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 13-07-2022
• Assessment Year: misc
• Laws Referred To: Income-tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: ARAVIND CHAVAN
• Keywords: Appeal; Assessment Year; Demand; Income Tax; Tax Recovery
• Section: 143(3)

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF JULY 2022 BEFORE THE HON’BLE MR. JUSTICE M.I.ARUN WRIT PETITION No.11683 OF 2022 (T-IT) BETWEEN: 1. M/S MCML ECI JOINT VENTURE C-9, INDUSTRIAL ESTATE YELHANKA, BENGALURU – 560 064 NOW KNOWN AS CEIBA ECI JV REP. BY ITS MEMBER SRI. GOTTIPATI LAKSHMANA KUMAR (JOINT VENTURE) 2. M/S ECI ENGINEERING & CONSTRUCTIONS CO. LTD. NO.1-10-44/2/1 BEGUMPET POST, HYDERABAD REP. BY ITS DIRECTOR SRI.K.AJAY, (REGISTERED PVT. LTD. COMPANY) INCORPORATED UNDER COMPANIES ACT 1956 3. M/S MCML SYSTEMS PVT. LTD. NO.C9, KSIIDC INDUSTRIAL ESTATE YELAHANKA NEW TOWN BANGALORE – 560 064 NOW MERGED WITH CEIBA ECC PVT. LTD. REP. BY ITS DIRECTOR, SRI. GOTTIPATI LAKSHMANA KUMAR (REGISTERED PVT. LTD. COMPANY), INCORPORATED UNDER COMPANIES ACT 1956 ... PETITIONERS (BY SRI.ARAVIND V. CHAVAN, ADV.) - 2 - AND: 1. INCOME TAX OFFICER WARD-6(3)(4), 4TH FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA 6TH BLOCK BANGALORE – 560 095 2. PRL. COMMISSIONER OF INCOME TAX-6 4TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA 6TH BLOCK, BANGALORE – 560 095 3. COMMISSIONER OF INCOME TAX (APPEALS)-6 ROOM NO.753, BMTC BUILDING, 7TH FLOOR KORAMANGALA 6TH BLOCK, BANGALORE – 560 095 4. TAX RECOVERY OFFICER-1 BMTC BUILDING, 80 FEET ROAD KORAMANGALA 6TH BLOCK BANGALORE – 560 095 5. COMMISSIONER OF INCOME TAX (APPEALS) NATIONAL FACELESS APPEAL CENTRE ROOM NO.245-A, NORTH BLOCK NEW DELHI – 110 001 ... RESPONDENTS (BY SRI. E. I. SANMATHI, ADV.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE APPELLATE COMMISSIONER R-3 TO DECIDE THE APPEAL FILED BY THE FIRST PETITIONER CHALLENGING THE ASSESSMENT ORDER IN RESPECT OF THE ASSESSMENT YEAR 2016-17. THIS WRIT PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: - 3 - O R D E R The petitioners have approached respondent No.3, Commissioner of Income Tax (Appeals)-6 and the dispute pertains to income generated from works carried out pursuant to the contract between petitioner Nos.1 and 2 for the assessment year 2016-2017. In respect of the same contract, for the assessment years 2012-2013 and 2013- 2014, 2014-15, respondent No.3 had held it against petitioners and the petitioners had approached the Income Tax Appellate Tribunal and the Tribunal was pleased to remand the matter back to respondent No.3. The said appeals including the instant appeal for the assessment year 2016-2017 is pending before the respondent No.3. Petitioners in the instant case approached respondent No.3 on 01.02.2019. The appeal is not yet decided. However, respondent No.4 by a demand bearing DIN & Letter No.ITBA/COM/F/17/2021-22/1040372402(1) dated 04.03.2022 vide Annexure – H to the writ petition has raised the following demand:- “Sir/Madam/M/s, Subject: Proceedings under Second Schedule of Income-tax Act – - 4 - Letter Sub: Recovery of Income-Tax arrears in the case of your own for the A.Y’s.2012- 13, 2013-14, 2014-15 and 2016-17- PAN-AABAM1277H Request for payment of 20% of the demand. Ref: This office letter dated: 20.01.2022 and your reply dated 18.02.2022. ************ Please refer to be above. You are hereby requested to pay at least 20% of the outstanding demand of Rs.11,75,60,171/- on or before 14.03.2022, to avoid further coercive action to recover the same, since you have preferred an appeal against the order passed u/s 143(3) by the AO.” Aggrieved by the same, the instant writ petition is filed. 2. It is submitted that petitioner No.1 is not an association of person and is not liable to tax. Respondent No.3 is yet to decide the same and the appeal has been submitted to him on 01.02.2019 itself and that it is inappropriate on behalf of respondent No.4 to raise the impugned demand on 04.03.2022 and the same is arbitrary, unreasonable and without application of mind. For the said - 5 - reasons, it is prayed that the same be quashed and respondent No.3 be directed to decide the dispute as expeditiously as possible. 3. Per contra, learned counsel appearing for the respondents submits that though the matter is pending before the Commissioner of Income Tax (Appeals)-6, what is demanded is only 20% of the amount which is reasonable and that the interest of the revenue needs to be protected otherwise the State Machinery cannot function and if the petitioners were to ultimately succeed, the amount to be paid by them as per the demand would be adjusted for future transactions or refunded as the case may be. On the said grounds, it is prayed that the writ petition may be dismissed. 4. The petitioners have preferred an appeal before the respondent No.3 on 01.02.2019 itself. For the reasons best known to him, the appeal is not yet disposed. Respondent No.4 belatedly has raised the impugned demand on 04.03.2022. No reasons are assigned nor it is - 6 - justified and consequently is liable to set aside. Hence, the following:- ORDER (i) The demand of respondent No.4 as against petitioner No.1 bearing DIN & Letter No.ITBA/COM/F/17/2021-22/1040372402(1) dated 04.03.2022 vide Annexure – H to the writ petition is hereby set aside. (ii) Respondent No.3 – Commissioner of Income Tax (Appeals)-6 is hereby directed to dispose of the case of the petitioners as expeditiously as possible. (iii) It is hereby made clear that no opinion has been expressed on merits of the case and it is for respondent No.3 to take a decision in accordance with law without being influenced by any of the observations made herein above. (iv) It is also made clear that petitioners will have to pay such tax as determined by respondent No.3 subject to further challenges if any and - 7 - the petitioners shall not be entitled to claim the benefit of limitation in this regard. (v) The writ petition is disposed of accordingly. Sd/- JUDGE MH/- "