SHRI.RAJESH S/O BABURAJ PATIL V. THE INCOME TAX OFFICER

WP/107225/2019

AI Insights

The case involves Shri Rajesh Patil, the petitioner, who challenged a demand notice issued by the Income Tax Officer, Ward-1, Nipani, under the Income Tax Act. The notice demanded 50% of the total assessed tax demand of Rs.38,67,834 for the assessment year 2016-17, which the petitioner contested as being issued without a hearing, thus violating the principles of natural justice. The petitioner had previously appealed the assessment order and deposited 20% of the demand. The court found that the demand notice was issued in violation of natural justice as the petitioner was not given an opportunity to be heard before the issuance of the notice.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 695822 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 31-03-2021
• Assessment Year: misc
• Other Referred Cases: UTI Mutual Fund Vs. Income Tax Officer 19(3)(2) & others, Plipkart India Private Limited Vs. Assistant Commissioner of Income Tax & others
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: SANGRAM KULKARNI
• Keywords: Assessment Order; High-pitched assessment; Natural Justice; Stay of demand; Writ of Certiorari
• Section: 143(3); 220(6); 220(3)

Judgement Text

"IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 31ST DAY OF MARCH, 2021 BEFORE THE HON’BLE MR. JUSTICE SACHIN SHANKAR MAGADUM W.P.NO.107225/2019 (T-IT) BETWEEN : SHRI RAJESH S/O BABURAJ PATIL, AGE : 45 YEARS, OCC: BUSINESS, R/O 721, RAJASHILA, ASHOK NAGAR, NIPANI, TALUKA CHIKODI, DIST: BELAGAVI-591237. ... PETITIONER (BY SRI SANGRAM S.KULKARNI, ADV.) AND : THE INCOME TAX OFFICER, WARD-1, NIPANI, 747, 1ST FLOOR, NEMCHAND BUILDING, ASHOK NAGAR, NIPANI, TALUKA CHIKODI, DIST: BELAGAVI-591 237. ... RESPONDENT (BY SRI Y.V.RAVIRAJ, ADV.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING THIS HON’BLE COURT TO ISSUE A WRIT OF CERTIORARI AND QUASH THE IMPUGNED ORDER VIDE ANNEXURE-D DATED 12.03.2019 FOR THE ASSESSMENT YEAR 2016-17 PASSED BY THE RESPONDENT INCOME TAX OFFICER WARD NO.1, NIPANI, BEARING NO.F.NO.ITO.W-1/NPN/ARR.COLLN/2018-19 AND SUCH OTHER RELIEFS. THIS PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: 2 : ORDER : The captioned writ petitioner is filed seeking writ of certiorari to quash the impugned order dated 12.03.2019 passed by the respondent Income Tax Officer, as per Annexure-D. 2. Facts leading to the case are as under: Respondent-Assessing Authority having scrutinized the assessment materials has completed the assessment under Section 143(3) and has determined the total income of the assessee i.e., the present petitioner at Rs.88,81,519/- and thereby has raised a demand of Rs.38,67,834/-. The petitioner aggrieved by the additions made in the assessment order has preferred an appeal before the Commissioner of Income Tax (Appeals), Belagavi and also deposited 20% of the demand for the assessment year 2016-17. 3. During pendency of the appeal, the respondent assessing authority has passed the impugned order as per Annexure-D and in the said endorsement, it is stated that, the Principal 3 Commissioner of Income Tax, Belagavi has given permission collect 50% of the total demand raised, which is tune of Rs.38,67,834/-. After passing of impugned demand notice as per Annexure-D, the present petitioner filed application seeking stay of demand under Section 220(3) and Section 220(6) of the Income Tax Act. 4. Petitioner being aggrieved by the impugned demand notice as per Annexure-D, has filed the present petition seeking writ of certiorari and also seeking a mandamus to direct the respondent to consider and pass appropriate orders on the stay application after affording opportunity to the present petitioner herein. 5. Learned counsel appearing for the petitioner to would vehemently argue and contend before this Court that the impugned demand notice as per Annexure-D is passed in gross violation of principle of natural justice. The demand notice calling upon the petitioner to deposit 50% of the total demand raised is without affording any opportunity to the present petitioner herein. 4 6. Learned counsel for the petitioner would also submit before this Court that, the impugned order as per Annexure-D is contrary to the Office Memorandum dated 31.07.2017 issued by Union of India, which is produced as per Annexure-C. Placing reliance on this Office Memorandum, learned counsel appearing for the petitioner submits that in a high pitched assessment, the Government of India has modified and revised that, the 20% of the disputed amount as against earlier existing 15% of the disputed demand. Placing reliance on this Office Memorandum, he would submit to this Court that this Office Memorandum is binding of all Officers of Income Tax. Though the said circular runs contrary to the provisions of Section 220 of Income Tax Act, where there is no provision to impose conditions while granting interim orders. 7. He would also place reliance on the judgment rendered by the Bombay High Court in case of UTI Mutual Fund Vs. Income Tax Officer 19(3)(2) & others in W.P.Lodging No.606/2012, wherein the Division Bench having come across several cryptic and 5 arbitrary orders passed by the authorities was compelled to laid down the guidelines. The said guidelines are culled out as follows: a) While considering the stay application, the authority concerned will at least briefly set out the case of the assessee. b) In the cases where the assessed income under the impugned order for 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 considered can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may 6 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 assessed 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. Learned counsel for the petitioner has also placed reliance on the judgment rendered in the case of Plipkart India Private Limited Vs. Assistant Commissioner of Income Tax & others1 9. On these set of grounds he would request this Court to quash the impugned demand notice as per Annexure-D. 1 (2017 98 CCH 0104 KarHC 7 10. Per contra learned counsel appearing for the respondent-Authority supporting the impugned demand notice as per Annexure-D would submit to this Court that it is well within the power of the Assessing Authority to impose suitable conditions and the same is prescribed under Sub-Section (6) of Section 220 of Income Tax Act. In that view of the matter he would submit to this Court that, the order under challenge does not suffer from any illegality and thereby would not warrant any interference by this Court. He would also submit to this Court that the petitioner has an efficacious remedy by approaching the Principal Commissioner of the Income Tax Act (Appeals), where appeal is already pending. 11. Heard learned counsel appearing for the petitioner and learned counsel appearing for the respondent. Perused the order under challenge. 12. Prima facie. I would find that the impugned order passed by the respondent Assessing Authority is in gross violation of principles of natural justice. The provision of Section 220 also contemplates that the 8 Assessing Authority is empowered to grant blanket stay. If the Assessing Authority is of the view that suitable conditions are to be imposed, then it is incumbent on the part of Assessing Authority to afford an opportunity of being heard in the matter. 13. In the present case on hand, the assessing authority has violated the principles of natural justice. The petitioner was not at all heard before passing the impugned order. It is also forthcoming that the petitioner has filed stay application as per Annexure-E subsequent to issuing of demand notice as per Annexure-D. 14. In that view of the matter, I am of the view that the order under challenge is not at all sustainable and the same needs to be set aside. Accordingly this Court is pass the following: : ORDER : a. Writ petition is allowed. b. The impugned demand notice as per Annexure-D is set aside. The matter is remitted back to the Assessing Authority. 9 c. The Assessing Authority after affording reasonable opportunity shall pass appropriate orders on the stay application filed by the petitioner as per Annexure-E. d. This exercise shall be done within a period of eight weeks from the date of receipt of certified copy of this order e. Till the disposal of the application pending before him, the respondent-authority is directed not to take coercive steps, since the petitioner has already deposited 20% of the demand before Commissioner of Income Tax (Appeals). f. The Assessing Authority shall take cognizance of the guidelines laid down by the Division Bench of the Bombay High Court which are culled out for reference. Sd/- JUDGE EM/- "