Gujarat H.C : Where Assessing Officer issued on assessee demand notice under section 156 on 20-2-2013 directing it to pay tax due within 15 days of service of notice and assessee filed writ petition challenging impugned notice, since Assessing Officer himself had granted stay of recovery of tax upto 31-7-2003, purpose of filing petition was served out

High Court Of Gujarat

Gujarat State Energy Generation Ltd. vs. ACIT

Section : 220, 156

Akil Kureshi And Ms. Sonia Gokani, JJ.

Special Civil Application Nos. 3600 To 3602 Of 2013

May 6, 2013

ORDER

Akil Kureshi, J. – These petitions involve similar issues concerning same parties. They have, therefore, been heard together and would be disposed of by this common order. Facts may be noticed as emerging from Special Civil Application No.3600 of 2013.

2. Petitioner, Gujarat State Energy Generation Ltd (‘the Company’ for short) is a Government company registered under the Companies Act. The petitioner has challenged the notice dated 20th February, 2013 as at Annexure A to the petition issued by the respondent, Assistant Commissioner of Income Tax, seeking recovery of a sum of Rs.3.22 crores (rounded off). In such notice, it was further conveyed as under:

“2. The amount should be paid to the manager, authorised bank/State Bank of India, Reserve Bank of India at within fifteen days of the service of notice. The previous approval of the Deputy Commissioner of Income Tax has been obtained for allowing a period of less than 30 days for payment of the above sum. A challan is enclosed for the purpose of payment.”

3. The notice has been challenged solely on the ground that in terms of sub-section (1) of section 220 of the Income Tax Act, 1961 (‘the Act’ for short), the petitioner-assessee was entitled to a period of thirty days to pay the sum, whereas the notice granted a shorter period of 15 days. The case of the petitioner is that though it may be open for the respondent to curtail such period, as provided under sub-section (1) of section 220, the requirements as provided in the proviso to the said section were not fulfilled. In other words, the case of the petitioner is that the respondent neither recorded reasons to believe that granting full period of 30 days would be detrimental to the Revenue, nor any previous approval of the Joint Commissioner for curtailing the period was taken.

4. On 26.3.2013, we had recorded such a contention of the petitioner’s counsel while issuing notice and granting stay, in following terms:

“2. Counsel for the petitioner pointed out that the assessment order was passed on 20.2.2013. On the same day impugned notice was issued. The petitioner is in the process of filing appeal before the Appellate Commissioner. On 22.3.2013 the petitioner wrote to the respondent pointing out that under Section 220 of the Act, ordinarily, recovery would not be commenced before 30 days of service of notice, whereas in the present case, only 15 days of time is granted and further that in terms of sub-Section (6) of Section 220 of the Act, the petitioner assessee may not be treated as an assessee in default. Without disposing of such application/objection, the respondent is proceeding with coercive recovery.

3. Counsel further pointed out that though under sub-section (1) of Section 220, the Assessing Officer has the power to reduce the period of 30 days for recovery, same should be done only on Assessing Officer having reason to believe that it will be detrimental to the Revenue, if the full period of 30 days is allowed. He submitted that in the present case, no such reasons are either recorded or exist since the petitioner is a Government Company and whose liquidity is not in doubt.

4. Issue notice returnable on 9.4.2013. The respondent shall not carry out coercive recovery pursuant to impugned notice annexed at Annexure A.”

5. In response to such notice, the respondent has appeared and filed affidavit in reply today. In such affidavit, however, there is no denial to the petitioner’s assertion that no reasons were recorded for believing that granting full period of 30 days would be detrimental to the interests of the Revenue. The affidavit also obviously, therefore, does not throw any light on the fulfilment of the requirements and the prior approval of the Joint Commissioner.

6. One more relevant development after filing of the petition is that the petitioner has already preferred an appeal against the assessment order giving rise to the recovery proceedings. Pending such appeal, the petitioner had also applied to the Assessing Officer for staying the recovery. Acting on such a petition, the Assessing Officer has granted stay upto 31st July 2013.

7. Learned counsel Shri Sudhir Mehta for the Revenue produced the original files in which on 4th March 2013, the respondent had recorded his brief reasons for curtailing the period of 30 days envisaged in section 220(1) of the Act. This was on the basis that as per the action plan decided by the CBDT, 30% of the demand raised during the year should be recovered in the financial year 2012-13. For such purpose, it was necessary to reduce the period of 30 days to 15 days so that the demand falls during the current financial year.

8. Counsel for the Revenue, however, stated under instructions of the respondent, who is present before the Court, that no prior approval in writing was obtained from the Joint Commissioner though he further stated that oral approval of the Joint Commissioner can be presumed by virtue of the fact that such decision was taken in a joint meeting with several Income Tax Authorities, including the Joint Commissioner.

9. Section 156 of the Act pertains to notice of demand and provides, inter alia, that when any tax, interest, penalty fine or any other sum is payable in consequence of any order passed under the Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. Sub-section (1) of section 220 in terms provides that any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156, shall be paid within 30 days of the service of the notice. Proviso to sub-section (1) of section 220, however, empowers the Assessing Officer to reduce such a period of 30 days if he has reason to believe that it will be detrimental to the Revenue if the full period is allowed. In such a case, he is required to obtain prior approval of the Joint Commissioner and specify such a shorter period in notice under section 156 of the Act. Section 220(1) reads as under:

“220. When tax payable and when assessee deemed in default -(1) Amy amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice:

Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may with the previous approval of the Joint Commissioner direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid as may be specified by him in the notice of demand.”

10. In the present case, we have serious doubt if the reasons recorded by the Assessing Officer, though not referred to in the affidavit in reply, could be stated to be sufficient to enable him to believe that it was detrimental to the revenue if the full period of 30 days was allowed. Further, admittedly, no prior approval of the Joint Commissioner in writing was obtained. Mere discussion in a meeting of several high ranking tax officers chalking out certain action plan for timely recoveries would not, in our opinion, satisfy such a rquirement which must be observed individually. By very nature of things, curtailing the period of 30 days and reducing the same for tax recovery by a shorter period would cause considerable inconvenience to the assessee. The Act does recognize the power of the Assessing Officer to do so. Exercise of such power would be dependent on the reason to believe that it will be detrimental to the Revenue if the full period is allowed and further that he obtained prior approval of the Joint Commissioner. Approval of the Joint Commissioner, thus is an important safeguard and the manner in which it is stated to have been observed in the present case, is simply not sufficient compliance with such a requirement.

11. Additionally, we also notice that the petitioner is a Government Company. There is nothing on record to suggest that if full period of 30 days was allowed, the petitioner would have defaulted or would have in any manner frustrated the recovery. Under the circumstances, we would have examined the question further and considered whether the period specified in the impugned notice should be tampered with. However, prima facie believing that, under the circumstances that we considering, notice under section 156 thus may not be rendered ineffective, since it may be possible to argue that recovery notice under section 156 can be severed from the period from which the sum demanded under such notice would become payable under section 220(1) of the Act, we are not inclined to pass any further or final order in this respect. Additionally, as already noted, under the order of this Court, the petitioner did receive full period of 30 days and beyond for recovery and in the meantime, the Assessing Officer himself passed an order staying recoveries.

12. Under the circumstances, in our opinion, by virtue of the above noted developments, purpose of filing the petitions is served out. These petitions are disposed of accordingly.

[Citation : 358 ITR 254]