Shree Nagalingeshwar Urban Credit Society Niyamit, Mudalgi V. The Assessment Unit, Income Tax Dept., Ministry of Finance, Govt. of India, National E-Assessment Centre, Delhi and The Principal Commissioner of Income Tax, Hubli

WP/108004/2023

AI Insights

The case involves Shree Nagalingeshwar Urban Credit Society Niyamit, represented by its Secretary, challenging an order from the Principal Commissioner of Income Tax, Hubli, which partially allowed a stay application but required the petitioner to pay 20% of the disputed demand amount. The petitioner argued that the order was not in accordance with the guidelines set by the Bombay High Court in similar cases, specifically citing the KEC International Ltd. vs. B.R. Balakrishnan and Others and UTI Mutual Fund vs. Income Tax Officer cases. The respondents defended the order, asserting it was legally sound and followed due process. The court found that the 2nd respondent did not adequately follow the prescribed guidelines, leading to the quashing of the impugned order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 816201 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 30-05-2024
• Assessment Year: misc
• Other Referred Cases: KEC International Ltd. Vs. B.R.Balakrishnan and Others, UTI Mutual Fund Vs. Income Tax Officer 19(3)(2) and Others, N. Rajan Nair v. ITO, Coca Cola India
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M THIRUMALESH; ROOPA ANVEKAR
• Assessee Lawyers: SANGRAM KULKARNI
• Keywords: Assessment Order; Demand notice; Natural Justice; Stay Application; Writ of Certiorari
• Section: 143(3); 143(2); 139(1); 156; 220(6)

Judgement Text

" - 1 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 30TH DAY OF MAY, 2024 BEFORE THE HON'BLE MR JUSTICE PRADEEP SINGH YERUR WRIT PETITION NO.108004 OF 2023 (T-IT) BETWEEN: SHREE NAGALINGESHWAR URBAN CREDIT SOCIETY NIYAMIT, MUDALGI, TQ: MUDALGI, DIST: BELAGAVI, REPRESENTED BY ITS SECRETARY, SHRI MAHADEV S/O. RANGAPPA MALGOUDAR, AGE: 49 YEARS, OCC: SERVICE, R/O: AT POST MUDALGI, TQ: MUDALGI, DIST: BELAGAVI-591312. … PETITIONER (BY SRI SANGRAM S. KULKARNI, ADVOCATE) AND: 1. THE ASSESSMENT UNIT, INCOME TAX DEPT., MINISTRY OF FINANCE, GOVT. OF INDIA, NATIONAL E-ASSESSMENT CENTRE, DELHI-110002. 2. THE PRINCIPAL COMMISSIONER OF INCOME TAX, HUBLI, C.R. BUILDING, NAVANAGAR, HUBLI-580025. … RESPONDENTS (BY SRI M. THIRUMALESH AND SMT. ROOPA ANVEKAR, ADVOCATES) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A WRIT OF CERTIORARI AND QUASH THE IMPUGNED ORDER PASSED BY THE SECOND RESPONDENT THE PRINCIPAL COMMISSIONER OF INCOME TAX, HUBLI, BEARING DIN NO. ITBA/COM/F/ 17/2023- 24/1052028045(1) DATED 12-04-2023 FOR THE ASSESSMENT YEAR 2020-21 VIDE ANNEXURE-D AND ETC. BHARATHI H M Digitally signed by BHARATHI H M Location: HIGH COURT OF KARNATAKA DHARWAD BENCH Date: 2024.06.05 15:33:10 +0530 - 2 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 THIS PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING: ORDER Heard learned counsel Sri Sangram S. Kulkarni appearing for the petitioner and learned counsel Sri M.Thirumalesh, appearing for respondents No.1 and 2. 2. The petitioner a Co-operative Society represented by its Secretary is before this Court seeking to quash the impugned order passed by the 2nd respondent, the Principal Commissioner of Income Tax, Hubballi for the assessment year 2020-21 dated 12.04.2023 vide Annexure-D and to pass such other orders. 3. The petitioner is a co-operative Society engaged in the business of providing credit facilities to its members. Petitioner filed his returns under Section 139(1) of the Income Tax Act, 1961 (for short, ‘the IT Act’) for the assessment year 2020-21 declaring no taxable income at Rs.NIL after claiming exemptions and deductions. The said returns was filed by the petitioner was selected for limited scrutiny assessment through CASS. The 1st respondent- Assessment Unit of the Income Tax Department issued - 3 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 notice under Section 143(2) of the IT Act calling upon the petitioner to produce details. The petitioner produced documentary proof. According to the petitioner, respondent No.1 without considering the contents of reply and the supporting documents so produced, passed the assessment order dated 26.09.2022 erroneously assessing the net taxable income of the assessee at Rs.3,09,06,259/- under Section 143(3) of the IT Act. Based on which, respondent No.1 issued the demand notice dated 26.09.2022 under Section 156 of the IT Act. 4. It is this impugned assessment order and demand notice, the petitioner is aggrieved and he preferred an appeal before the appellate authority. Appeal is pending before the Principal Commissioner of Income Tax (Appeals). The petitioner filed the application under Section 220(6) of the IT Act on 26.10.2022 seeking stay of the demand notice, the 2nd respondent without considering the guidelines issued by the Bombay High Court in the case of KEC International Ltd. Vs. B.R.Balakrishnan and Others, reported in (2001) 251 ITR 158 (BOM) has passed the impugned order dated - 4 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 12.04.2023. The said order in the case of KEC International (supra) passed by the Bombay High Court has subsequently reiterated and fresh guidelines were issued by the Division Bench of Bombay High Court in the case of UTI Mututal Fund Vs. Income Tax Officer 19(3)(2) and Others, Writ Petition Lodging No.606/2012. 5. It is the case of petitioner that respondent No.2 failed to consider the impugned assessment order passed by the 1st respondent and has not provided the relief of absolute stay and has directed the petitioner to pay 20% of the disputed demand amount, which is questioned by the petitioner herein. It is also contended by the learned counsel for petitioner that the impugned order dated 12.04.2023 passed by the 2nd respondent partly allowing the stay application is illegal, perverse and capricious and same deserves to be quashed. He also contends that the 2nd respondent has failed to consider the guidelines prescribed by the Bombay High Court by the Single Judge order and also by the Division Bench which framed guidelines in such cases. Therefore, he contends that the impugned order is in - 5 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 violation of the guidelines set up by the High Court of Bombay in two Judgments and so also the same is in violation of principles of natural justice. It is also contended that it is not a well reasoned speaking order. Hence, the same deserves to be quashed and the stay application is to be considered in its entirety. It is also contended by the learned counsel for petitioner that respondent No.2 failed to consider the amount declared by the petitioner after claiming deduction under Section 80(P) of the IT Act as NIL, whereas respondent No.1 has calculated the assessed amount at Rs.3,09,06,259/-. Therefore prima facie the impugned assessment order is the faulty assessment order. 6. Per contra, the learned counsel Sri M.Thirumalesh appearing for the revenue sustains the order passed by the 2nd respondent and contends that there is no illegality, perversity or blatant violation of principles of natural justice in passing the impugned order, wherein 20% of the demand amount has been ordered to be paid by the petitioner. He sustains the order and contends that the writ petition is liable for dismissal. - 6 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 7. Having heard the learned counsel for both parties, the contention put forth by the learned counsel for the petitioner is pretty appealing for the reason that the Bombay High Court in its Judgment in the case of KEC International stated supra has framed the certain guidelines and parameters in dealing with such matters, which is stated at paragraph No.6 of the said Judgment, which reads as under : “6. Parameters: (a) While considering the stay application, the authority concerned will at least briefly set out the case of the assessee. (b) In cases where the assessed income under the impugned order far exceeds returned income, the authority will consider whether the assessee has made out a case for unconditional stay. If not, whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order. (c) In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. - 7 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 (d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order. (e) We clarify that if the authority concerned complies with the above parameters while passing orders on the stay application, then the authorities on the administrative side of the Department like respondent No.2 herein need not once again give reasoned order.” 8. Similarly, the Hon’ble Division of Bench of the Bombay High Court taking into consideration the Judgment passed in the case of KEC International (supra) in the case of UTI Mutual Fund stated supra has formulated the additional guidelines, which reads as under : “4. (2006) 285 ITR 419 wpl-606-2012 Ltd. in disposing of stay applications also noted that the practice of attaching bank accounts even before communicating the order passed on the stay application was high handed. The Court expressed the hope that the Revenue shall ensure that such - 8 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 instances do not occur in future. The caution which was addressed by the Division Bench in Coca Cola India has again not been followed. In N. Rajan Nair v. ITO5, the Kerala High Court observed thus: \"In exercising his power, the Income-tax Officer should not act as a mere tax gatherer but as a quasi judicial authority vested with the power of mitigating hardships to the assessee.\" These are, we may say so with respect, sage observations which must be borne in mind by the assessing authorities. Consistent with the parameters which were laid down by the Division Bench in KEC International and the observations in the judgment in Coca Cola, we direct that the following guidelines should be borne in mind for effecting recovery: 5. (1987) 165 ITR 650 wpl-606-2012 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 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 - 9 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 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 facts 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 a representation or seek recourse to a remedy in law;” 9. Under the circumstances, after giving thoughtful consideration to the submissions put forth by both sides, this Court is of the opinion that the order passed by the 2nd respondent requires to be interfered and a direction requires to be issued to the 2nd respondent to comply and follow the guidelines framed by the High Court of Bombay in its Division Bench Judgment in the case of UTI Mutual Fund (supra). Therefore, in view of non-following of the said guidelines prescribed by the Division Bench of Bombay High Court the impugned order would not sustain and the same will have to be quashed. Accordingly, I pass the following : - 10 - NC: 2024:KHC-D:7224 WP No. 108004 of 2023 ORDER (i) Petition is allowed. (ii) The impugned order passed by the 2nd respondent dated 12.04.2023 in bearing DIN No.ITBA/COM/F/17/2023-24/ 1052028045(1) is hereby quashed. (iii) Writ of mandamus is issued to the 2nd respondent to deal with the matter afresh by taking into consideration and relying upon the guidelines stipulated by the Division Bench in the case of UTI Mutual Fund vs. Income Tax Officer 19(3)(2) and Others, Writ Petition Lodging No.606/2012 by the Bombay High Court. (iv) Respondent No.2 is also directed to dispose of the said application expeditiously. (v) The petitioner is at liberty to move the Appellate Authority for expeditious disposal. Sd/- JUDGE CKK CT:BCK LIST NO.: 1 SL NO.: 40 "