High Court Of Bombay
Nickunj Eximp Enterprises (P.) Ltd. vs. ACIT
Assessment Years : 2007-08 And 2008-09
Section : 220
Dr. D.Y. Chandrachud And A.A. Sayed, JJ.
Writ Petition (L) Nos. 2690 And 2691 Of 2011
December 19, 2011
JUDGMENT
1. The petitioner has instituted these proceedings under article 226 of the Constitution, inter alia, to challenge ten orders issued by the Tax Recovery Officer under rule 26(1) of the Second Schedule to the Income-tax Act, 1961, by which the creditors of the petitioner have been restrained and prohibited from making payment of debts due and payable to the petitioner on the ground that the petitioner has to pay arrears of tax amounting to Rs. 97 lakhs together with interest under section 220(2) of the Income-tax Act, 1961.
2. The petitioner has annexed at exhibit A, a position of the demand pending for the assessment year 2007-08. The chart which is annexed to the petition shows that out of the total amount for the assessment year 2007-08, the petitioner had paid an amount representing 78.15 per cent. leaving a balance of 21.85 per cent. outstanding. For the assessment years 2007-08 and 2008-09 combined, an amount representing 37.75 per cent. has been paid. For the assessment year 2007-08, the Income-tax Appellate Tribunal by its order dated April 7, 2011, remitted the proceedings back to the Commissioner of Income-tax (Appeals) for fresh adjudication on the merits. The proceedings for the assessment year 2008-09 are pending in appeal before the Commissioner (Appeals).
3. The record before the court shows that on February 2, 2011, a communication was issued to the petitioner by the Deputy Commissioner of Income-tax 1(2) in which the readiness of the petitioner to pay the outstanding demand in instalments of Rs. 10 lakhs per month was recorded. The petitioner was directed to produce evidence by the 16th of every month of the due payment of instalments failing which it was stated that the instalments granted would be withdrawn and the petitioner would be treated as assessee in default. The petitioner paid an amount of Rs. 10 lakhs each for the months of February, March and April 2011, and then again for September, 2011, making a total payment of Rs. 40 lakhs as indicated in their letter dated November 7, 2011 (exhibit J).
4. Counsel appearing on behalf of the petitioner submitted that the parameters for the grant of stay of recovery proceedings have been set out in the judgment of this court in KEC International Ltd. v. B. R. Balakrishnan [2001] 251 ITR 158 (Bom.). Learned counsel submitted that the petitioner has explained in the charts annexed at exhibits A and B to the petition that for the assessment year 2007-08 that 78.15 per cent. of the tax liability inclusive of interest has been paid and whereas for both the years in question, the total tax liability which has been paid amounts to 37.75 per cent. Hence, it is urged that there was no warrant for issuing garnishee notices to the customers of the petitioner, the effect of which would be to bring the business to a complete standstill.
5. On the other hand, counsel appearing on behalf of the Revenue submitted that the Revenue was compelled to issue the impugned prohibitory order since there was a default on the part of the petitioner in complying with its agreed obligation to discharge the outstanding at the rate of Rs. 10 lakhs per month.
6. Having heard the learned counsel, we are of the view that one factor which must be borne in mind is that both the assessments for the assessment years 2007-08 and 2008-09 are pending before the Commissioner (Appeals). For the assessment year 2007-08, an order of remand was passed by the Tribunal on April 7, 2011. Having taken into account the total payment made by the petitioner as disclosed in the charts annexed at exhibits A and B to the petition respectively, we are of the view that the ends of justice would be met if the impugned orders are stayed conditional on the petitioner making a payment of Rs. 10 lakhs per month of the outstanding towards the liability to tax for the assessment years 2007-08 and 2008-09. This facility was granted to the petitioner which came to be withdrawn as a result of the default by the petitioner. The petitioner has shown its bona fides in paying a substantial amount as noted earlier. Hence, we dispose of the petitions with the following directions :
(i) The petitioner shall make an initial payment of Rs. 10 lakhs on or before December 31, 2011.
(ii) The petitioner shall, on or before the 15th day of every month commencing from January 15, 2012, deposit an amount of Rs. 10 lakhs towards outstandings payable on account of income-tax dues ;
(iii) Conditional on such payment being made, the prohibitory orders at exhibit L shall remain stayed ;
(iv) In the event that the petitioner commits any further default in effecting payment in terms directed by this order, the stay as directed shall come to an end without further reference to the court and the Department would be at liberty to take necessary action in accordance with law to enforce the prohibitory orders ;
(v) The appeals are expedited and the Commissioner (Appeals) is requested to endeavour to dispose of the appeals by March 31, 2012.
7. The petitions are disposed of in the aforesaid terms. No order as to costs.
[Citation : 346 ITR 78]
