PANCHMAHAL STEEL LTD V. ASST COMMISSIONER OF INCOME TAX

SCA/4719/2018

AI Insights

Panchmahal Steel Ltd. challenged the actions of the Income-tax authorities, specifically the non-granting of stay against recovery of outstanding dues and the attachment of its bank account. The dispute arose from the assessment years 2010-2011 and 2011-2012, where the petitioner argued that the MAT credit available should offset the required 20% payment to stay further recoveries. The Assessing Officer had initially rejected the stay request but allowed for the adjustment of MAT credit upon verification. The court found that the drastic action of attaching the bank account should be suspended pending verification of the MAT credit availability.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 753639 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 28-03-2018
• Assessment Year: misc
• Other Referred Cases: Kaneria Granito Ltd. v. Assistant Commissioner of Income-tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VARUN PATEL
• Assessee Lawyers: MANISH SHAH
• Keywords: Assessment Order; Bank Account Attachment; Cash Credit Facility; MAT credit; Stay against recovery
• Section: 115JAA; 226(3)

Judgement Text

"C/SCA/4719/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 4719 of 2018 ========================================================== PANCHMAHAL STEEL LTD Versus ASST COMMISSIONER OF INCOME TAX ========================================================== Appearance: MR MANISH J SHAH(1320) for the PETITIONER(s) No. 1 MR.VARUN K.PATEL(3802) for the RESPONDENT(s) No. 1,2,3 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 28/03/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged the action of the Income­tax authorities in not granting stay against recovery of outstanding dues as per the order of assessment pending appeal against such order. The petitioner has also challenged the action of the Assessing officer of attaching the petitioner's bank account and in particular, the cash credit facility provided by the bank to the petitioner. 2. Facts are as under. The petitioner is a company registered under the Companies Act. For the assessment year 2010­ 2011, the petitioner had filed return of income. The tax was computed under the MAT provisions. Case of the petitioner is that such tax paid for the assessment year 2010­2011 was available by way of MAT credit in terms of section 115JAA of the Act. Amount of such tax credit Page 1 of 5 C/SCA/4719/2018 ORDER comes to Rs. 2.62 crores (rounded off). 3. For the assessment year 2011­2012, the return filed by the petitioner was taken in scrutiny. The Assessing Officer passed the order of assessment on 29.1.2018 making the tax demand of Rs.10.95 crores (rounded off). The petitioner has filed appeal against such order of assessment. The petitioner also approached the Assessing Officer seeking stay of the tax pursuant to the order of assessment. The Assessing Officer passed the order dated 1.3.2018 rejecting such request observing that the petitioner was not prepared to pay even 20% of the outstanding demand. However, he granted last chance to deposit 20% of the demand computed at Rs.2.19 crores (rounded off) within seven days, upon which, the stay would be granted. 4. The petitioner approached the Commissioner of Income­tax and reiterated the request of stay pending appeal. Before the Commissioner, the petitioner contended that the petitioner has MAT credit of Rs. 2.62 crores which is far in excess of 20% of the disputed tax demand of Rs. 2.19 crores. Same may be adjusted and stay may be granted without any further payment. While rejecting the stay application, the Principal Commissioner nevertheless, allowed the assessee to move an application before the Assessing Officer seeking adjustment of the MAT credit of 2.62 crores and the Assessing Officer thereupon would pass necessary order allowing the MAT credit after verification. 5. While such efforts of the petitioner for getting stay pending Page 2 of 5 C/SCA/4719/2018 ORDER appeal were going on, the Assessing Officer issued notice under section 226(3) of the Income Tax Act on 23.3.2018 addressed directly to the State Bank of India, Vadodara, the petitioner's banker, asking the bank to pay over sum in credit of the petitioner for recovery of entire amount of Rs.10.95 crores of outstanding dues, copy of such order tendered by the learned counsel for the petitioner is taken on record. 6. Counsel for the petitioner raised two fold contentions. One that even otherwise upon payment of 20% of the tax, the petitioner would be spared the further recoveries. Even the Assessing Officer had so provided. The petitioner had pointed out that MAT credit is available with the petitioner for paying such tax in excess of 20% of the outstanding tax dues. Such credit could be adjusted for fulfilling the requirement. The second contention of the petitioner is that in any case, the cash credit facility cannot be attached in exercise of powers under section 226(3) of the Act. The bank cannot be stated to be a debtor of the assessee which debt the department can seek to utilise to recover the petitioner's dues. Reliance in this respect is made on decision of this Court in case of Kaneria Granito Ltd. v. Assistant Commissioner of Income­tax reported in (2016) 241 Taxman 315 (Gujarat). 7. On the other hand, learned counsel Shri Varun Patel for the department who appeared on short notice issued looking to the urgency involved stated that as permitted by the Principal Commissioner, it is open for the petitioner to approach the Assessing Officer and demonstrate that MAT Page 3 of 5 C/SCA/4719/2018 ORDER credit is available for payment of current tax dues. Without verification of such details, the attachment of bank account cannot be released. 8. We had issued short notice to gather full facts from the department in view of the urgency involved. The petitioner had pointed out that as a going concern, the petitioner had outstanding electricity bills and workers' wages to be paid before 31.3.2018. The order passed by the Assessing Officer has made it impossible for the petitioner to do so. 9. We are concerned with a case where the petitioner has already preferred an appeal against the order of assessment. As per the CBDT directives, ordinarily, in such a case, upon depositing 20% of the disputed tax dues, further recoveries would be stayed. This is what even the Assessing Officer had provided. The petitioner wishes to utilise the MAT credit for making such payment. The Principal Commissioner has permitted the petitioner to approach the Assessing Officer who upon verification that such credit is available, would accept the petitioner's request. Thus even the department is not averse to adjusting the petitioner's MAT credit if not already utilised towards the 20% of the disputed tax dues. 10. For full verification, let the petitioner approach the Assessing Officer. However, in the meantime, the drastic action initiated by the Assessing Officer must be suspended. This is for various reasons. As of now, there is nothing on record to suggest that the petitioner is not correct in contending that MAT credit in excess of 20% of Page 4 of 5 C/SCA/4719/2018 ORDER tax dues is available for adjustment. Further, the petitioner's statutory and labour wage liabilities cannot be suspended, unless there are strong reasons to do so. Prima facie, it would also appear that other issue of the cash credit facility, is not something that can be utilised by way of garnishee order for recovering tax dues of the assessee. This Court has taken a view that bank is not the debtor of the assessee in such a case. 11. Under the circumstances, the impugned notice dated 23.3.2018 under section 226(3) of the Act issued by the Assistant Commissioner of Income­tax is set aside. The petitioner shall approach the Assessing Officer latest by 5.4.2018 pointing out the extent of MAT credit available for adjustment and request for such adjustment towards 20% of the petitioner's disputed tax dues. Assessing Officer shall pass appropriate order thereon after verification latest by 25.4.2018. 12. Petition is disposed of. (AKIL KURESHI, J) (B.N. KARIA, J) raghu Page 5 of 5 "