State Bank of India V. Union of India and others

WPMS/292/2014

AI Insights

The case involves the State Bank of India (petitioner) challenging the recovery proceedings initiated by the Union of India and others (respondents) under the Income Tax Act. The petitioner, acting as a banker for the Oil & Natural Gas Corporation Ltd. (ONGC), was deemed an assessee in default for not deducting tax at source on certain deposits, leading to penalty proceedings under Section 271 (C) of the Income Tax Act. The High Court had previously ruled against arbitrary recovery actions without proper proceedings. In the current petition, the bank argued that the penalty proceedings should not be finalized until six months after the conclusion of the appeal proceedings, citing Section 275 (1) (a) of the Income Tax Act. The court dismissed the writ petition, allowing the petitioner to contest the issues during the ongoing appellate proceedings.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 815342 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 17-02-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: H M BHATIA
• Assessee Lawyers: P R MULLICK
• Keywords: Appeal; Arbitrary action; Assessee in default; Interim relief; Penalty proceedings; Recovery proceedings; Stay Application; Tax deduction at source; High handed action
• Section: 271(c); 275(1)(A); 194-A

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition No.292 (M/S) of 2014 The State Bank of India ...…..……..Petitioner Versus The Union of India & others ………..Respondents Hon’ble Sudhanshu Dhulia, J. (Oral) Mr. P.R. Mullick, Advocate, present for the petitioner. 2. Mr. H.M. Bhatia, Standing Counsel, present for respondent nos. 2 to 4. 3. The petitioner has challenged the order dated 27th September, 2013 and subsequent recovery proceedings dated 05.02.2014. The petitioner is a banker for Public Sector Company, namely, the Oil & Natural Gas Corporation Ltd. (from herein after referred to as “the ONGC”). On certain deposits made by the ONGC petitioner was liable to deduct tax at source under Section 194 (A) of Income Tax Act and therefore, the petitioner has been taken to be an assessee in default and, thereafter, a penalty proceedings under Section 271 (C) of Income Tax Act has been initiated against the petitioner. 4. This is second round of litigation. Earlier, the petitioner has filed a Writ Petition No. 487 (MS) of 2013 in which on 13.03.2013, following order was passed:- “After hearing the learned counsel for the parties, I do not find any provision in the Income Tax Act that the assessee can approach Assessing Officer after assessment is over for granting stay. The remedy is by way of appeal and with necessary application for interim relief and interim relief can be granted by the appellate authority. It seems to me that the respondents department has initiated recovery proceedings asking the petitioner to pay the amount after assessment is over. I think this is not the way to recover the amount. Here, I find the recovery proceedings has not been initiated in accordance with the procedure laid down in the Act and Rule framed therein. It appears by the impugned 2 notice and order a threat has been given to recover the amount. I am of the view any action taken by the department without due and proper recovery proceedings tantamount to high handed action, if not, arbitrary. If any action not recognized by the law, nor following the law is taken by any authority with power, such action can only be termed as high handed and arbitrary. This writ petition is entertained on the allegation of high handed arbitrary action being taken. I do not approve of the action taken by the respondents. Accordingly, the respondents will be free to take action as per the procedure established for recovery. I think in ordinary circumstance the respondents should wait till limitation period is over because within the period of limitation, the assessee has every right to prefer appeal within the statutory period. The period of limitation in this case will be over on 6th April, 2013. This recovery proceeding may be initiated after the expiry of 6th April, 2013, the petitioner shall keep apart the amount of Rs.243 crores secured by STDR and shall not touch and appropriate it. Zerox copy of such receipts shall be supplied to the department.” 5. This Court has been informed that though the matter is still pending before the Commissioner of Income Tax (Appeal), but the stay application has been rejected and the matter is fixed for hearing on 25th February, 2014. 6. The new ground which is presently being raised by the petitioner here is that under Section 275 (1) (a) of the Income Tax Act, since against the initial order of assessment, the matter is still pending before the Tribunal, the penalty proceedings though could be initiated but cannot be finalized till elapse of six months before the closing of the proceeding before the Tribunal. Section 275 (1) (a) of the Income Tax Act reads as under:- “Bar of limitation for imposing penalties. 275. (1) No order imposing a penalty under this Chapter shall be passed - (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 [or section 246A] or an appeal to the Appellate Tribunal 3 under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later: [Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later]. 7. On the other hand, the learned counsel for the Income Tax Department Mr. H.M. Bhatia strongly urges that since the matter is still pending in appeal and the date is fixed, all the grounds which are available for the petitioner to be argued before this Court, can be raised before the Tribunal. 8. Since the matter is presently pending before the Commissioner of Income Tax (Appeal), no interference is presently being made. The writ petition is hereby dismissed. The petitioner is at liberty to raise all the grounds before the Appellate Authority which are being raised by him here. (Sudhanshu Dhulia, J.) 17.02.2014 ML "