High Court Of Bombay
DIT (Exemption), Mumbai vs. Income Tax Appellate Tribunal
Assessment Year : 2010-11
Section : 220, 226
Mohit S. Shah, Cj. And M.S. Sanklecha, J.
Writ Petition (L) No. 3174 Of 2013
February 4, 2014
JUDGMENT
M.S. Sanklecha, J. – At the request of the parties, the petition is taken up for final disposal at the stage of admission.
2. This petition by the revenue challenges the order dated 25 November 2013 passed by the Income Tax Appellate Tribunal (“the Tribunal”) directing the petitioner revenue to refund an amount of Rs.159,84,03,720/- (rounded of to Rs.159.84 crores for this order) within 10 days from the receipt of the impugned order. The impugned order directing refund has been passed in a pending appeal before the Tribunal which is fixed for final hearing on 4 February 2014.
2.1 Brief facts leading to this petition are as under:
(a) The petitioner is a Director of Income Tax (Exemption) having jurisdiction over the respondent No.2 assessee under the Income Tax Act, 1961 (“the Act”).The respondent No.1 is the final authority under the Act dealing with appellable orders passed by authorities under the Act. The respondent No.2 assessee is a statutory corporation established under the Maharashtra Area Housing and Development Act, 1976. The respondent No.2 is engaged in the activity of constructing and providing accommodations to economically weaker sections of the society.
(b) On 30 September 2010, respondent No.2 filed its return of income for assessment year 2010-11 showing its taxable income as Nil. This was based on a claim for exemption under Section 11 of the Act.
(c) On 18 March 2013, the Assessing Officer passed an assessment order for assessment year 2010-11 denying the respondent No.2 -assessee the exemption under Section 11 of the Act as the activities of respondent No.2-assessee did not satisfy the amended definition of charitable purpose under Section 2(15) of the Act. Pursuant to the above assessment order dated 18 March 2013 a demand notice under Section 156 of the Act for Rs.199.82 crores (Rs.146.91 crores of tax and Rs.52.88 crores of interest) was issued on 18 March 2013 itself to respondent No.2.
(d) Being aggrieved by the assessment order dated 18 March 2013 of the Assessing Officer an appeal was filed on 18 April 2013 to Commissioner of Income Tax (Appeals) (CIT)(A). At about the same time on 19 April 2013 the petitioner filed an application under Section220(6) of the Act with the Assessing officer seeking a stay of the demand consequent to assessment order dated 18 March 2013 for A.Y. 2010-11. The Assessing Officer by order dated 23 July 2013 granted a conditional stay of the demand on the respondent No.2- assessee paying the entire demand of Rs.199.82 crores in nine equal monthly instalments of Rs.22.20 crores. Respondent No.2-assessee did pay the first instalment of Rs.22.20 crores on 30 July 2013 in accordance with order dated 23 July 2013. However, before the time to pay the second instalment arrived, respondent No.2-assessee filed an application on 12 August 2013 before the Commissioner of Income Tax as the administrative head seeking a complete stay of the demand of Rs.199.82 crores.
(e) On 4 September 2013, the Commissioner of Income Tax modified the terms of the stay granted by the Assessing Officer and directed respondent No.2-assessee to pay the outstanding balance aggregate demand in 10-equal instalments of Rs.17.76 crores beginning with 15 September 2013. Respondent No.2 paid the first instalment on 15 September 2013. Therefore, respondent No.2 had in the aggregate paid an amount of Rs.39.96 crores out of total demand of Rs.199.80 crores ( Rs.146.91 crores tax and Rs.12.88 crores as interest).
(f) Thereafter, before the second instalment became due, respondent No.2-assessee on 10 October 2013 filed Writ Petition No.2544 of 2013 in this Court seeking stay of demand and the quashing of orders dated 23 July 2013 of the Assessing Officer and 4 September 2013 of the Commissioner of Income Tax. No orders were obtained by respondent No.2 in its Writ Petition No. 2544 of 2013 filed in this Court. However, the Commissioner of Income Tax (Appeals) did hear respondent No.2 assessee on its appeal from the order of the Assessing Officer dated 18 March 2013 and passed an order dismissing the appeal on 29 October 2013. A certified copy of the order dated 29 October 2013 of CIT(A) was served upon the respondent No.2 assessee only on 16 November 2013(Saturday).
(g) On 11 November 2013, the Assessing Officer issued a recovery notice to respondent No.2 calling upon it to pay by 15 November 2013 the outstanding demand consequent to assessment order dated 18 March 2013. Respondent No. 2 assessee by its letter to the Assessing Officer pointed out that they have not yet received the order of the CIT(A) and they would be filing an appeal and stay application to the Tribunal. Attention was also drawn to the decision of this Court in UTI Mutual Fund v. ITO [2012] 345 ITR 71/206 Taxman 341/19 taxmann.com 250 praying that no recovery be made till the disposal of its stay application before the Tribunal. However, by communication dated 14 November2013 the Assessing Officer rejected the prayer for staying the recovery proceeding made by respondent No.2 assessee while directing compliance with the direction in letter dated 11 November 2013 latest by 15 November 2012.
(h) It was only on 16 November 2013 (Saturday) a certified copy of the order dated 29 October 2013 passed by CIT(A) was served upon respondent No.2. Immediately on receipt of the order of the CIT(A), the respondent No.2 prepared an appeal and stay application to the Tribunal and filed the same on 18 November 2013. The hearing of the above stay application was fixed for hearing on 22 November 2013 by the Tribunal. Immediately on filing of the above appeal and the stay application the Assessing Officer was served on 18 November 2013 itself with copies of the appeal and stay application and also requested the Assessing Officer to refrain from taking any coercive action pending disposal of the stay application fixed on 22 November 2013 by the Tribunal.
(i) However, on 18 November 2013 the Assessing Officer commenced the recovery proceeding from respondent No.2 assessee under Section 226(3) of the Act by attaching the bank account of respondent No.2 for a sum of Rs.159.84 crores. Thereafter on 18 November 2013 itself the aforesaid attached amount of Rs.159.84 crores was also withdrawn by the petitioner-revenue.
(j) On 22 November 2013 the Tribunal heard respondent No.2 and the petitioner. Thereafter by the impugned order the Tribunal directed the petitioner-revenue to refund the entire amount of Rs.159.84 crores to respondent No.2 within 10 days from the receipt of the order. It is against the aforesaid directions in the impugned order dated 25 November 2013 that this petition has been filed.
3. Mr. Vimal Gupta, learned Senior Counsel appearing for the petitioner revenue in support of the petition submits as under:
(a) On facts it is stated that the bank account was attached on the morning of 18 November 2013 while the intimation about the filing of the appeal and stay application before the Tribunal was filed in the office of the petitioner only at 3.30p.m. and reached the Assessing Officer only at 5.30p.m. of 18 November 2013. In the mean time the amounts which were attached had already been withdrawn. Therefore, the attachment and withdrawal of the amounts by the Assessing Officer was prior to knowledge of the filing of the appeal and stay application to the Tribunal and fixing of the hearing on 22 November 2013.
(b) The impugned order dated 25 November 2013 is without jurisdiction. This submission was premised on the fact that the impugned order holds that it cannot exercise jurisdiction with regard to the stay of the recovery of the demand as the matter is subjudice before this Court in view of respondent No.2 having filed Writ Petition No.2544 of 2013.Therefore it is submitted that the Tribunal in the absence of jurisdiction to hear the stay application could not have directed the petitioner to refund the amount of Rs.159.84 crores to respondent No.2 within 10 days from the receipt of its order.
(c) The decision of Bombay High Court in the case of UTI Mutual Fund (supra) as well as decision of the Tribunal in the matter of RPG Enterprises Ltd. v. Dy. CIT [2001] 251 ITR AT 20 (Mum.) and Maharashtra State Electricity Board v. Jt. CIT [2002] 81 ITD 299 (Mum.) relied upon in the impugned order are rendered in different fact situation and would have no application in the present facts. The distinguishing feature in this case according to the petitioner was that respondent No.2’s writ petition was pending before this Court which was not so in the cases relied upon. Therefore, the Tribunal could not have directed a refund while holding it has no jurisdiction to grant stay as the matter is subjudice before this Court. and
(d) The notice of demand was issued to respondent No.2 under Section 156 of the Act on 18 March 2013. The application for stay filed by respondent No.2 under Section 220(6) were disposed of by the Assessing officer’s order dated 23 July 2013 and further application by Commissioner of Income Tax by the order dated 4 September 2013 granting a stay of the demand subject to payment of tax by installments. The respondent No.2-assessee not having complied with the conditional order of the stay the amounts demanded by a notice dated 18 March 2013 became payable. Though the respondent No.2 had filed writ petition in this Court seeking stay of notice of demand, no orders in respect thereof were obtained from the Court. In the above circumstances, it is submitted that action of the Assessing Officer in attaching the respondent’s bank account and recovering the amount of Rs.159.84 crores cannot be found fault with.
4. Mr. Soli Dastur, learned Senior Counsel appearing for respondent No.2 in support of the impugned order dated 25 November 2013 submits as under:—
(a)The course of events on 18 November 2013 as stated by the petitioner is disputed. According to respondent No.2 on 18 November 2013 (Monday) respondent No.2-assessee filed its appeal and stay application before the Tribunal. The stay application was scheduled to be heard on 22 November 2013. On 18 November 2013 itself not only was the appeal and the stay application served upon the Assessing Officer at about 12.30p.m. But intimation that stay application was listed for hearing on 22 November 2013 was also given to the Assessing Officer. Notwithstanding the above, the Assessing Officer visited the bankers of respondent No.2 in the afternoon and delivered a notice under Section 226(3) to the Manager of the petitioner’s bank and forcibly recovered the amount of Rs.159.84 crores. The above conduct, it is submitted, clearly demonstrates that the Assessing Officer wanted to preempt the Tribunal from dealing with the petitioner’s stay application which was scheduled for hearing on 22 November 2013.
(b) No fault can be found with the impugned order dated 25 November 2013 of the Tribunal directing a refund of the entire amount of Rs.159.84 crores as it merely follows the binding decisions of this Court in Mahindra & Mahindra v. Union of India [1992] 59 ELT 505 wherein the amounts recovered by the revenue by encashing the bank guarantee even before the time to file appeal had expired was ordered to be refunded to the assessee. Further, the revenue was restrained from adopting coercive proceedings for recovery till the disposal of the stay application. In this case, order of the Commissioner of Income Tax (Appeals) was received by respondent No.2 only on 16 November 2013 and respondent No.2 had 60 days time to file an appeal and stay application to the Tribunal. The petitioner revenue did not wait even for four days after communicating the order of the CIT (A) to respondent No.2 before adopting coercive proceedings to take away forcibly the amount of Rs.159.84 crores from the respondent No.2’s bank account. Besides this Court in UTI Mutual Funds case (supra) has laid down guidelines for the authorities under the Act and directed that no coercive proceedings should be taken till the period to file an appeal expires. Moreover, it also directed the authorities under the Act not to withdraw money from the attached bank account without giving notice to the assessee to enable the assessee to obtain appropriate orders.
(c) The action of the petitioner revenue in not only attaching the petitioner’s bank account but also withdrawing the amount of Rs.159.84 crores on 18 November 2013 when the stay application was already fixed for hearing before the Tribunal on 22 November 2013 was only done with a malafide intent to foreclose respondent No.2 from obtaining any stay from the Tribunal. Besides rendering nugatory the powers of the Tribunal in terms of proviso to Section 254(2A) of the Act to grant stay in respect of any proceeding relating to an appeal filed before it. The action of the petitioner was a malafide attempt to render the Tribunal powerless. Therefore, in the above circumstances the impugned order cannot be faulted with as it only corrects an unjust and arbitrary exercise of powers by the Assessing Officer in recovering the amount of Rs.159.84 crores from bank account of respondent No.2.
(d) The impugned order of the Tribunal directing refund merely restores the status quo ante i. e. the position as existing on 18 November 2013. The non granting of stay by the Tribunal because it was of the view that the subject matter of the stay before the Tribunal was also the subject matter of a writ before the High Court does not in any way detract from the inherent powers of the Tribunal as a quasi judicial authority to right a wrong which has been done to any party before it. Therefore, the Tribunal holding that it has no jurisdiction to deal with application for stay, has nothing to do with the power of the Tribunal to grant refund of amount illegally collected pending the hearing of stay application by the Tribunal. This is particularly so as no stay could have been granted by the Tribunal on the application for stay in view of the fact that there was nothing to be stayed as the amount of Rs.159.84 crores had already been taken away by the petitioner revenue. Besides, there was no reason to be in such unseemly hurry when an amount of Rs.39.96 crores i.e. 25% of the tax demand of Rs.146.91 crores has already been deposited. In view of the above, it is submitted that the petition should not be entertained.
5. We have considered the rival submissions. We find that the order dated 29 October 2013 of the Commissioner of Income Tax (Appeals) dismissing the appeal of respondent No.2 was served upon respondent No.2 only on 16 November 2013 (Saturday). Respondent No.2 filed an appeal and stay application before the Tribunal on the next working day i.e. 18 November 2013 and informed the Assessing Officer that the hearing of the stay application of respondent No.2 was fixed on 22 November 2013. There is a dispute on the sequence of events on 18 November 2013 between the parties. According to the petitioner the notice was served by respondent No.2 only at 3.30p.m. in the Income Tax office and the Assessing Officer got notice of the same only in the evening i.e. after attachment and withdrawal of the amounts from the bank. According to respondent No.2, the notice of hearing as well as the appeal and stay application was served on the Assessing Officer on 18 November 2013 at 12.30 p.m. It is relevant to note that the sequence of events on 18 November 2013 being urged by the petitioner is stated for the first time in its affidavit in rejoinder. This is not found mentioned in the impugned order of the Tribunal or also in its petition as filed. Therefore, it does cast a doubt on the sequence of event being suggested by the petitioner at the bar on the basis of averments made only in the affidavit in rejoinder. However, for the purposes of these proceedings we nevertheless proceed on the basis of sequence of events as stated by the revenue.
6. The Act provides a period of sixty days to an assessee to file an appeal from the order of CIT(A) to the Tribunal. This Court in the matter of UTI mutual funds case (supra) has laid down the following guidelines for effecting recovery of dues.
“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, he 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 application, if any, moved by the assessee should be disposed of after hearing the assessee and bearing in mind the guidelines in KEC International Ltd. (supra);
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;
5. In exercising the powers of stay, the Income Tax Officer should not act as a mere tax gatherer but as a quasi judicial authority vested with the public duty of protecting the interest of the Revenue while the same time balancing the need to mitigate hardship to the assessee. Though the assessing officer has made an assessment, he must objectively decide the application for stay considering that an appeal lies against his order; the matter must be considered from all its facets, balancing the interest of the assessee with the protection of the Revenue.”
The above order in UTI Mutual funds case (supra) was brought to the notice of the Assessing Officer on 13 November 2013 by respondent No.2 while pointing out that it would be filing an appeal and stay application to the Tribunal in respect of the order of CIT(A).
7. The action of the petitioner revenue, in particular, the Assessing Officer was in defiance of the above directions of this Court in UTI Mutual Funds case (supra) wherein this Court had inter alia directed the revenue that no recovery of tax should be made before expiry of the time limit for filing an appeal before the higher forum has expired. The Court also has directed that when the bank account has been attached the revenue would not withdraw the amount unless it has furnished a reasonable prior notice to the assessee to enable the assessee to seek recourse to a remedy in law. The action of the petitioner revenue in not only attaching the bank account but withdrawing the money from the bank was before the expiry of the time limit for filing appeal was only with a view to foreclose the option of respondent No.2 of obtaining a stay from the Tribunal. The respondent No.2 had received the order of the Commissioner of Income Tax (Appeals) only on 16 November 2013. Respondent No.2 had 60 days time to prefer appeal there from. However, the petitioner revenue attached the bank account of respondent No.2 on 18 November 2013 itself i.e. within two days of communication of the order of the Commissioner of Income Tax (Appeals) by respondent No.2. Further, not only the bank account has been attached on 18 November 1013 but the amounts were forcibly withdrawn on that date itself from the bank so as to completely foreclose the remedy available to respondent No.2 under the Act. Long years ago in East India Commercial Co. v. Collector of Customs AIR 1962 SC 1893 the Supreme Court had observed that the law declared by the High Court is binding on all authorities functioning within the State over which the High Court has jurisdiction. The decision of this Court in UTI Mutual Funds case (supra) was binding upon the petitioner revenue and the Assessing Officer.
8. Therefore, the above action on the part of the Assessing Officer was against the elementary principles of rule of law. The State is expected to act fairly. The undue haste on the part of the Assessing Officer in recovering a sum of Rs.159.84 crores was not only contrary to the binding decisions of this Court but also shocking to the judicial conscience. The entire action appears to have been directed to make the Tribunal and respondent No.2 helpless so that no relief can be granted in favour of respondent No.2. Leaving aside the case laws in favour of respondent No.2, on first principle itself no appellate authority and much less the Tribunal can be a silent spectator to the arbitrary and illegal actions on the part of the Assessing Officer so as to frustrate the legal process provided under the Act.
9. In the aforesaid circumstances, the submissions on behalf of the revenue that the Tribunal having held that it had no jurisdiction to grant a stay in view of same being a subject matter agitated before this Court was not entitled to direct refund, is unacceptable. Once the amount of Rs.159.84 crores being the balance amount of tax payable by respondent No.2 to the petitioner revenue was withdrawn by the revenue there is no occasion for the Tribunal or the High Court to grant any stay. Therefore, the impugned order could not have granted any stay as there was nothing to be stayed. However, the grant of refund was in the exercise of Tribunal’s inherent powers to ensure that the assessee is not left high and dry only on account of illegal and highhanded actions on the part of the petitioner revenue and the Assessing Officer.
10. In any event, so far as Writ Petition No.2544 of 2013 filed by respondent No.2 in this Court is concerned, the same was for the purpose of seeking a stay essentially of the order of the Assessing Officer dated 23 July 2013 and of the Commissioner of Income Tax dated 4 September 2013 which had granted a conditional stay of notice of demand issued by the Assessing Officer. These applications before the Assessing Officer and the Commissioner of Income Tax as well as Writ Petition were all filed before the CIT(A) disposed of the petitioner’s appeal. The Act itself does not give any power of granting a stay to the CIT(A) in respect of appeals pending before it from the orders of Assessing Officer. Consequently, the assessee has to make application for stay to the Assessing Officer under Section 220(6) of the Act and the Administrative Head viz. Commissioner of Income Tax. However, once the CIT(A) has passed an order in appeal then from such an order an appeal would lie to the Tribunal. In terms of the proviso to Section 254(2A) of the Act, the Tribunal is empowered to grant stay against any demand, pending disposal of appeal before it. Consequently, the writ petition which was filed in this Court by respondent No.2 being Writ Petition No.2544 of 2013 would come to an end when the Tribunal is seized of a stay application filed in pending appeal from the order of CIT(A). Moreover, even if the Assessing Officer and the CIT(A) had not granted the stay of the demand, the power of the Tribunal to consider and grant application for stay of the demand in an appeal filed before it does not get extinguished or curtailed. Therefore, the emphasis placed on Paragraph 9 of the impugned order by the learned Counsel for the revenue to our mind does not in any way bar the Tribunal from restoring the status quo ante as existing on 18 November 2013 by ordering the refund of Rs.159.84 crores to respondent No.2.
11. The petitioner revenue and the Assessing Officer would do well to remember that we live in State which is governed by Rule of law. It is primary obligation of the officers of the State that it follows the law laid down by the Courts in letter and spirit before taking any coercive action.
12. In the above circumstances, we see no reason to interfere with the order passed by the Tribunal directing the revenue to refund the amount of Rs.159.84 crores to respondent No.2 in the exercise of our extra ordinary jurisdiction under Article 226 of the Constitution of India. However, since the appeal is fixed for final hearing before the Tribunal today, we leave it open to the Tribunal to pass such other and further orders, as it may deem fit after hearing the parties.
Subject to the above clarification, the petition is dismissed. No order as to costs.
[Citation : 361 ITR 469]
