Income Tax Appellate Tribunal - Mumbai
Maharashtra State Electricity Board vs Joint Commissioner Of Income Tax on 5 March, 2001
Equivalent citations: [2002]81ITD299(MUM)
ORDER
R.V. Easwar, J.M.
1. This is an application for stay of the outstanding demand of Rs. 43,65,82,270 relating to the asst. yr. 1997-98.
2. The brief facts resulting in the filing of the stay application are these. The assessee is the Maharashtra State Electricity Board, established under the Electricity Supply Act, 1948. It is wholly owned by the Government of Maharashtra and its sole objective is to generate and supply electricity. In making the assessment, the AO applied the provisions of Section 115JA of the IT Act, 1961, and computed the book profit for the purpose of income-tax at Rs. 460.88 crores and took 30 per cent thereof as income for assessment purposes, which came to Rs. 138.26 crores. On appeal, the assessment was confirmed. The tax demand was raised accordingly, out of which after giving credit for the payments made by the assessee, a sum of Rs. 43,65,82,270 is outstanding as of now in respect of which the stay is prayed for.
3. The assessee's appeal before the Tribunal against the assessment was filed on 19th Feb., 2001, and the same is pending disposal.
4. After making the assessment, the IT authorities sought to recover the tax, which at that time amounted to about Rs. 98 crores. The assessee filed a stay application before the CIT, Mumbai City-I, which was disposed of by him by order dt. 31st Oct., 2000. It was therein recorded that on 18th Aug., 2000, the assessee's representative had agreed that if the appeal before the CIT(A) pending then was not decided within a period of two months hence, the entire demand will be paid in equal instalments during the remaining period by the end of March, 2001. It is further recorded that the assessee again approached the CIT by application dt. 24th Oct., 2000, and also appeared on 31st Oct., 2000, and requested that the entire demand be kept in abeyance till the disposal of the appeal before the CIT(A). It had been pointed out by the assessee that the appeal was being adjourned at the instance of either the AO or the CIT(A). The CIT, however, rejected the prayer on the ground that the assessee had earlier agreed to pay the tax within two months even if the appeal was not decided in the meantime. He, however, offered an option to the assessee to pay the tax by 15th Nov., 2000, and if the appeal is not decided by that time, to pay the tax before the end of the financial year, i.e., 31st March, 2001. He also held that if this offer is not acceptable to the assessee, he would not interfere and the AO would be at liberty to collect the demand.
5. The applicant-assessee thereafter moved the Hon'ble Bombay High Court in December, 2000, in Writ Petition No. 2464 of 2000 seeking stay of the demand. At that time, the assessee's appeal before the CIT(A) was pending and some hearings had taken place since September, 2000. The Hon'ble High Court ordered on 18th Dec., 2000, that no recovery proceedings will be taken by the IT authorities for a period of 6 weeks from the date of service of the order of the CIT(A) and further held that all other points are kept open.
6. The CIT(A) disposed of the appeal by order dt. 15th Jan., 2001, and this order was received by the assessee on 17th Jan., 2001, along with the order of the AO giving effect to the same in terms of which the demand of tax came to Rs. 50.49 crores.
7. On 15th Feb., 2001, the assessee filed an application for stay before the AO and it was pointed out that the assessment has been raised on a point of law that is disputable, that it involves interpretation of the statutory provisions in respect of which more than one view is possible, that the assessee's accounts are prepared not in accordance with the Companies Act, 1956, in which case alone Section 115JA is attracted, that its accounts are prepared as per the Electricity Supply Act, 1948, and so on and so forth. It was also pointed out that the assessee has been created under a Central law and it holds ample assets, which are sufficient to cover the tax liabilities and that an enforcement of the payment through harsh measures would hamper its operations. Under the circumstances, it was prayed that the demand be kept in abeyance till such time as the decision of the Tribunal is available.
8. An application dt. 16th Feb., 2001, for stay was also filed before the CIT, Mumbai City-I, on 19th Feb., 2001, on substantially the same lines as before the AO and in this letter also it was prayed that the demand be kept in abeyance till the disposal of the appeal before the Tribunal or at least till the disposal by the Tribunal of the stay application.
9. It appears that the assessee also had a few meetings with the AO as well as the CIT with regard to the stay applications. The assessee would also appear to have filed another stay application with the AO on 27th Feb., 2001. On 28th Feb., 2001, the AO wrote to the assessee informing it of his inability to grant any stay. He also observed that he has seen the accounts of the assessee relating to the accounting years relevant to the asst. yrs. 1997-98 to 1999-2000, the reserves and surplus and revenues. He pointed out that the assessee had not come up with any worthwhile proposal to clear the arrears to show its sincerity and commitment to pay the tax, which has been confirmed in first appeal. He, therefore, rejected the application.
10. It has been stated on behalf of the assessee before us that the above letter was received by the assessee on the same day, i.e., 28th Feb., 2001 at 4.45 P.M.
11. On the next day, i.e., 1st March, 2001, the AO issued orders under Section 226(3) of the Act to the assessee's bankers which were served on them on 1st March, 2001, itself.
12. The present stay application was posted for hearing on Friday the 2nd March, 2001. Arguing in support of the applications, Mr. Dastur submitted that the assessee-applicant had a strong prima facie case on merits in the appeal filed before the Tribunal inasmuch as it was not a company within the meaning of Section 2(17) r/w Section 2(26) of the IT Act and that at any rate it was a highly debatable issue whether a Board formed under the Electricity Supply Act which does not conform to the requirements relating to the preparation of its accounts as prescribed by the Companies Act, 1956, is covered by Section 115JA of the IT Act. He drew our attention to printed accounts of the assessee filed along with the stay application to point out that they are prepared in accordance with the requirements of the Electricity Supply Act. He also relied on the Circular No. 762, issued by the CBDT on 18th Feb., 1998 wherein, in para 46.6 it has been stated that the minimum alternate tax provisions contained in Section 115JA are not applicable to companies engaged in the business of generation and distribution of power so that the incentives given to infrastructure development are not affected. It was also submitted by him that even if it is assumed for the sake of argument that the assessee-board is covered by Section 115JA, the assessee has a highly arguable case with regard to the computation of the book profits. In this connection he pointed out that under Clause (iv) of the Explanation below Sub-section (2) the amount of profits derived by the industrial undertaking from the business of generation or generation and distribution of power are to be reduced from the book profits and the revenue subsidies and grants amounting to Rs. 258.71 crores and "other income" of Rs. 243.53 crores ought to have been excluded under the said clause and if they are excluded there would be a deficit. He referred to the nature of these items of revenue from the schedules at p. 28 of the printed accounts for the year and sought to prove therefrom that they must be considered as profits derived from the business of generation and distribution of power. Mr. Dastur thus contended that there exists a strong prima facie case in favour of the assessee-applicant or at any rate a highly arguable case which requires examination and deep consideration by the Tribunal.
13. Mr. Dastur also submitted that enforcement of the demand through harsh measures such as garnishee orders under Section 226(3) affected the day-to-day functioning of the MSEB (the assessee), that the amounts sought to be recovered from the banks represented application monies pending allotment of bonds, that these monies strictly speaking have not become due to the assessee, that the assessee is a State Government undertaking owning huge assets throughout the State and the interests of Revenue are certainly not going to be prejudiced, that it is a public utility undertaking dealing with the public at large and any harsh measures such as garnishee orders are likely to adversely affect its credibility in the public eye and that its financial position as indicated by recent press reports was dismal and, therefore, it was imperative that there should be a stay of the recovery proceedings till the disposal of the appeal or at least as an interim measure there should be a stay of the enforcement of the garnishee orders which have been issued to the banks on 1st March, 2001. Mr. Dastur in particular criticised the IT authorities for showing undue haste in issuing garnishee orders even during the pendency of the application for stay before the Tribunal and contended that the attempt was to thwart or render infructuous the power of the Tribunal to grant stay. He cited an order of the Mumbai Bench of the Tribunal in the case of RPG Enteipiises in S.A. No. 64 (Mum) of 2000, dt. 14th July, 2000 (reported at (2002) 74 TTJ (Mumbai) 391] wherein it was held, following the ruling of the Hon'ble Bombay High Court in the case of Mahindra & Mahindra Ltd. v. Union of India (1992) 59 ELT 505, that "when the assessee is having a right to seek extension of time/stay of recovery of the disputed demand pending an appeal" and that "the rationale behind the decision of the Bombay High Court in the case of Mahindra & Mahindra Ltd. (supra) is that the authorities cannot by their actions render the provisions of the Act as ineffective and nugatory". It was further held by the Tribunal, following the judgment in Mahindra & Mahindra Ltd. (supra) that if the AO is permitted to recover the dues even before the expiry of the time-limit for filing an appeal to an appellate forum which has the power to grant stay of recovery or during the pendency of the stay application before any Revenue authority or the Tribunal that would be improper and contrary to various decisions of the Tribunal and High Courts. (The Tribunal observed that the Hon'ble Bombay High Court in Mahindra & Mahindra Ltd. (supra) have held that it is highly improper for the Revenue authorities to recover the disputed demand when they are informed about the pendency of the stay application (paras 11 to 13 of the Tribunal's order). It was pointed out by Mr. Dastur that in the case of RPG Enterprises the Tribunal found that the tax had been collected contrary to the principles laid down by the Hon'ble Bombay High Court in the case of Mahindra & Mahindra (supra) and, therefore, ordered the same to be refunded to the assessee. It was further pointed out that in the present case the IT authorities were aware that the assessee had approached the Tribunal for stay and that the stay application was coming up for hearing on 2nd March, 2001, but still proceeded to take coercive measures for the recovery of the demand which is contrary to the law laid down by the Hon'ble Bombay High Court in Mahindra & Mahindra (supra) and by the Tribunal in RPG Enterprise (supra).
14. So far as the garnishee orders are concerned, Mr. Dastur contended on the basis of the judgment of the Supreme Court in Kesoram Industries & Cotton Mills Ltd. v. CWT (1966) 59 ITR 767 (SC) at 779 that the monies in the bank have not become due to the assessee within the meaning of Section 226(3), that the banks merely "owed" those monies to the assessee and, therefore, the orders suffered from a fundamental infirmity. He also submitted that the rules of natural justice require that an opportunity ought to be given to the assessee to object to the garnishee orders before they are sought to be enforced which has not been done in the present case. He cited the judgment of the Delhi High Court in the case of ONGC v. Union of India (2000) 246 ITR 211 (Del) at 215 in this behalf.
15. On the basis of the aforesaid arguments Mr. Dastur strongly urged that stay should be granted.
16. In a spirited defence of the action of the IT authorities, Mr. Tralshawala, CIT (Departmental Representative) appearing for the Department, pointed out that the assessment was done in February, 2000 and that sufficient time had been given to the assessee to find resources and pay the demand but there has been no effort on the assessee's part to come up with any worthwhile payment or proposal as to how the arrears would be cleared. He pointed out further that the demand was not a current demand but an "arrear demand" meaning thereby that it related to an earlier financial year and that itself showed that the Department had not been harsh in enforcing the payment. He further pointed out that the assessee had agreed before the CIT, Mumbai City-I, as far back as August, 2000 to clear the arrears in instalments and the present conduct on its part is wholly opposed to its earlier commitment and there is no explanation for the volte face. He contended that the action of the AO in issuing garnishee orders under Section 226(3) was well within the four corners of the IT Act and there is nothing illegal about it. He pointed out that as held by the Karnataka High Court in the case of Vysya Bank Ltd. v. Jt. CIT (2000) 241 ITR 178 (Kar) the AO is empowered to encash the deposits prematurely. He relied on the decision of the Madras High Court in Paulsons Litho Works v. ITO and Ors. (1994) 208 ITR 676 (Mad) at 690 to contend that no prejudice is caused to the assessee if the fixed deposits are merely attached by the IT authorities and, therefore, the grievance of the assessee is without substance. He cited the judgment of the Supreme Court in the case of Siliguri Municipality and Ors. v. Amalendu Das & Co. (1984) 146 ITR 624 (SC) to contend that stay cannot be granted for the asking and that the Court/Tribunal has to take into account the fact that money is required by the Government for various welfare measures which cannot wait and mere promises of furnishing bank guarantees are not enough. Mr. Tralshawala further contended that even if it be assumed for the sake of argument that the assessee has a prima facie case on merits before the Tribunal (without conceding the same) that alone would not justify the grant of stay as held by the Supreme Court in the case of Asstt. Collector of Central Excise v. Dunlop India Ltd. (1985) 154 ITR 172 (SC) that the Court/Tribunal has to take into account the balance of convenience, the prejudice caused to the Revenue and the financial condition of the assessee and that all these were in favour of the Revenue in the present case.
17. Mr. Tralshawala was very critical of the conduct of the assessee-Board, particularly its seeking stay after having agreed before the CIT to make payments in instalments even if the appeal before the CIT(A) is not disposed of within two months. He pointed out that motive of the assessee at every stage was to buy time, which should be deprecated. He also contended at one stage of his arguments that the assessee rushed to the Hon'ble High Court to obtain stay in December, 2000 and, therefore, it should have followed the same course this time also. He was at pains to point out that the Hon'ble High Court had allowed sufficient time for the payment of the taxes, that the AO was well within his powers to have initiated coercive steps for recovering the dues the moment the time granted had expired (i.e., on 28th Feb., 2001) and that the assessee cannot complain even where the action of the AO is in deference to the order of the Hon'ble High Court. Mr. Tralshawala highlighted these facts to show that the assessee was never serious in clearing the arrears of tax and was always trying to buy time at every stage. He strongly protested against such tactics and submitted that they should not be encouraged.
18. Just before the arguments of Mr. Tralshawala came to a close, we wanted to know whether the gamishee orders were served on the assessee, to which he replied, on instructions, that they had been issued to the assessee but could not give a categorical answer as to whether they were served on the assessee. We also wanted to know the fate of those orders issued to the bankers and his reply, on instructions, was that the amount of Rs. 43,65,82,270, which is the subject-matter of the present stay application, has been recovered by the Department. He, however, submitted that the deposits in the banks represented fixed capital and not working capital which has not been touched. We directed Mr. Tralshawala to file a confirmation of the fact of recovery in writing which was done later in the day by filing a copy of the letter, dt. 2nd March, 2001, written by the AO to him confirming that the arrears "have been recovered in full by way of attachment under Section 226(3) on 1st March, 2001, and the same have been deposited in the authorised bank on 2nd March, 2001". Copies of the gamishee orders along with the letters written by the AO to the garnishees were also filed at our request.
19. In the course of his reply, Mr. Dastur clarified that there was no question of the assessee approaching the Hon'ble High Court when its application for stay was pending before the Tribunal. He submitted that the earlier commitment (given in August, 2000 before the CIT) became relevant when the assessee approached the Hon'ble High Court in writ proceedings, that the Hon'ble High Court had granted six weeks' time from the date of service of the appellate order of the CIT(A) for payment of the taxes which itself showed that the earlier commitment or undertaking was no longer binding on the assessee, that the order of the Hon'ble High Court made it clear that all points were open and that under these circumstances it is not open now to the Department to contend that the assessee went back on its commitment. As regards the attachment, he contended that the bonds had been issued both for fixed and working capital and the taking away of the deposits has depleted the assessee's working capital also, contrary to what has been contended for the Department. He pointed out that a full, reading of the judgment of the Karnataka High Court in the case of Vysya Bank Ltd. (supra) would show that it has been recognised by the High Court that the assessee should be given time when its stay application is pending disposal, that it should also be given an opportunity to protest against the garnishee orders before recovery is made and that the action of the Departmental authorities in the present case was contrary to these principles.
20. Mr. Dastur very strongly protested against the recovery of the tax by enforcing the garnishee orders during the pendency of the stay application of which the authorities were fully aware and a day prior to the date on which the stay application was to be heard by the Tribunal. He pointed out that the tax has been recovered on 1st March, 2001, as confirmed by the learned CIT(Departmental Representative) in the course of his arguments. He termed this action as wholly arbitrary and calculated to render the power of the Tribunal infructuous or nugatory. He submitted that it was contrary to the law laid down in Mahindra & Mahindra Ltd. (supra) by the Hon'ble High Court and in RPG Enterprise (supra) by the Mumbai Bench of the Tribunal (supra). He, therefore, prayed that the status quo ante should be restored and directions be issued by the Tribunal for refund of the amount recovered, as was done by the Tribunal in the case of RPG Enteiprise.
21. We have carefully considered the rival contentions. There can be no gainsaying that collection or recovery of tax is a concomitant of assessment and that if the circumstances so warrant, the IT authorities are empowered to resort to coercive measures for realising the arrears of tax. Therefore, there can be no quarrel with the proposition put forward by Mr. Tralshawala that by seeking to collect the tax through coercive steps such as garnishee orders issued under Section 226(3), the authorities were merely executing the Act and were performing their duty. The only question is whether the power can be exercised in such a manner as was done in this case, during the pendency of the stay application before the Tribunal and when the application itself was coming up for hearing just the day after the AO sought to issue the garnishee orders. The law laid down in this behalf by the Hon'ble Bombay High Court in Mahindra & Mahindra Ltd. (supra) is that steps for recovery should not be effected in such manner as would render the power vested in the judicial authority to grant stay infructuous, The IT authorities knew, that the assessee had moved an application for stay before the Tribunal and that it was coming up for hearing on 2nd March, 2001. Notice of hearing dt. 26th Feb., 2001, had been served on the office of the authorised representative of the Department on 27th Feb., 2001. The time granted by the Hon'ble High Court for payment of the taxes no doubt expired on 28th Feb., 2001 and if there had been no stay application pending with the Tribunal on that date, perhaps the AO's action could not have been commented upon: but the Tribunal was already seized of the stay application and the Department had been informed that it would be taken up for hearing on 2nd March, 2001. Therefore, notwithstanding that the AO was technically correct in issuing garnishee orders on 1st March, 2001, he was not justified. in ignoring the legal principles that have to be followed in such circumstances and the conduct to be observed consistent with those principles. As already observed by us, the tax no doubt has to be collected and perhaps not in all cases as painlessly as the bee would gather honey for Ceasar, but then there are well-established parameters within which the power should be exercised. These have been laid down both in Mahindra & Mahindra Ltd. (supra) and RPG Enterprise (supra) by the Hon'ble Bombay High Court and the Tribunal respectively. [The reason for such a principle is that when a judicial fotum or appellate authority, empowered to adjudicate upon the justification for the prayer for stay, is in seisin of the matter, if would indicate lack of faith in the judicial process on the part of the authority empowered to recover the tax through coercive measures if he proceeds to do so without waiting for the orders of the higher forum). The fundamental principle is that the rule of law should govern all administrative actions and where the action complained against is coloured by illegality, irrationality or procedural impropriety, judicial review can strike down such administrative action [See Lord Diplock's observations in. Council of Civil Services Union v. Minister for Civil Services (1984) 3 All ER 935. Though the action in question before us cannot be termed illegal, as we have already noted, it has touches of irrationality and certainly smacks of procedural impropriety. The noble lawlord added the test of "proportionality" but also cautioned that it is likely to become a subjective test and, therefore, we prefer to leave out the same from consideration. In Ranjit Thakur v. Union of India AIR 1987 SC 2386. His Lordship Justice Venkatachallah (as His Lordship then was) applied Lord Diplock's test of irrationality and held that "irrationality and perversity are recognised grounds of judicial review" of administrative action. The latest to join the long list of concepts that are applied to test the validity of administrative action is the "doctrine of reasonable expectation" which was adverted to, probably for the first time in an order of the Tribunal, by Hon'ble Shri T.N.C. Rangarajan (later Hon'ble Justice Rangarajan of the Andhra Pradesh High Court) in the case of Security & Detective Bureau Ltd. v. Asstt. CIT (1993) 45 TTJ (Mad) 329 : (1993) 46 ITD 86 (Mad). Briefly stated, [the doctrine is that a person may have a legitimate expectation of being tested in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. Even in cases where he has no legal right, he may still have a legitimate expectation of receiving the benefit or. privilege. Such expectation may arise from a promise or from the existence of a regular practice, which the applicant can reasonably expect to continue and be adopted in his case also. If his expectations are belied, the Court or Tribunal may intervene and protect him by applying principles that are analogous to the principles of natural justice and fairplay in action). As held in Schmidt v. Secretary of State (1969) 1 All ER 904 at 914, in such cases the Court may not insist on the administrative authority acting judicially but may still insist that he acts fairly. The doctrine was applied in favour of a housing society which was refused allotment of land, though it had applied earlier in accordance with the policy of allotment on a "first-come-first-served" basis Navjyoti Coop. Group Housing Society v. Union of India AIR 1993 SC 155 and in the case of Supreme Court Advocates on Record Association v. Union of India AIR 1994 SC 268 where it was held that in recommending appointments to the Supreme Court, due consideration of every legitimate expectation has to be observed. All the same, the doctrine is not of universal application under all circumstances and where there exist overriding considerations on grounds of public interest, the Court would be justified in refusing relief though the doctrine is found applicable to the case and the applicant has been put to hardship on account of breach of the doctrine Union of India v. Hindustan Development Corporation AIR 1994 SC 980. Following this principle, Courts in India have refused to give relief even in cases where the doctrine was applicable, on the ground that the security of the State was involved or that the doctrine cannot override legislative power or that public interest required that no relief be given to the complainant.
22. We have before us a case where despite the clear dictum of the Hon'ble High Court of Bombay in Mahindra & Mahindra Ltd. (supra) that the tax should not be recovered through coercive measures when even the time-limit for filing an appeal has not expired or during the pendency of the stay application before the Court/Tribunal competent to adjudicate upon the same, the AO has recovered the tax contrary thereto. This is, therefore, a case where the doctrine of legitimate expectation should be applied and the action of the AO struck down. The Tribunal has applied the rule laid down in Mahindra & Mahindra Ltd. (supra), in RPG Enterprises (supra) and had ordered refund of the amount realised subject to satisfactory security being offered. In the light of this state of the law, the assessee had a right of legitimate expectation--to expect that the IT authorities would act in conformity with the law while dealing with his stay application and while considering the question whether it would be reasonable of proper to recover the tax through coercive steps such as gamishee orders even during the pendency of the stay application before the Tribunal. It is quite correct to say that the stay granted by the Hon'ble High Court expired on 28th Feb., 2001, and so the AO was technically right in refusing to grant further stay. But the tests of rationality and procedural propriety have not been followed when he showed undue haste in passing orders rejecting the stay on 28th Feb., 2001, itself and had them served on the assessee in the evening of the same day and in issuing garnishee orders the very next day, i.e., on 1st March, 2001. By pursuing the garnishee orders and by realising the entire amount of the arrears on 1st March, 2001, when the stay application was posted for hearing before the Tribunal the next day (i.e., 2nd March, 2001)--all the time aware of the hearing before the Tribunal the next day--the AO has rendered the power vested with the Tribunal to entertain and adjudicate upon the stay application wholly nugatory and futile. This is contrary to the parameters within which his powers of recovery are to be exercised in such cases as laid down by the Hon'ble High Court and adopted by the Tribunal.
23. The order of the Tribunal in the case of RPG Enterprises Ltd. (supra) was sought to be distinguished by Mr. Tralshawala on the ground that the Tribunal in that case found that the AO had back-dated his orders which is not the case before us and therefore, the rule laid down in the said order is not applicable. It is true that in RPG Enterprises Ltd. (supra) the Tribunal did notice that the AO had back-dated his orders but the rule laid down therein did not turn on that fact. The ground of decision in that case was the rule propounded by the Hon'ble High Court of Bombay in the case of Mahindia & Mahindra Ltd. (supra) and the fact that the AO had back-dated his orders was a wholly independent ground which influenced the decision. In our opinion, a proper and fair reading of the Tribunal's order makes it clear that even if there had been no backdating by the AO, that would not have made any difference to the ultimate decision of the Tribunal. Therefore, notwithstanding that there is no backdating of the orders passed by the AO in the case before us, the ratio laid down in RPG Enterprises (supra) is still applicable.
24. It is also a little disturbing to note that until we queried Mr. Tralshawala, the CIT (Departmental Representative), towards the close of his arguments, we were not apprised of the fact that the tax had been collected the earlier day. The assessee also did not appear to be aware of the fact since nothing was mentioned by Mr. Dastur in the course of his arguments. However, in fairness to Mr. Tralshawala, we must say that he was also not aware of this until the officers present on behalf of his clients brought it to his notice in response to our query.
25. We are also satisfied that on merits the assessee would appear to have an arguable case and the contentions raised by Mr. Dastur in this behalf merit serious consideration when the appeal is heard. It is a question of interpretation of the provisions of Section 115JA, r/w Clause. (iv) of the Explanation below Sub-section (2) as also the definition of a "company" and an "Indian company" in Section 2(17) r/w Section 2(26) of the Act. The effect of the circular issued by the CBDT to which reference has been made earlier has to be considered. A further question, which is also an arguable one, on which the arguments of neither side can be brushed aside without in-depth examination, is whether even if it is assumed that the assessee is covered by Section 115JA, can it be said that the "revenue subsidies and grants" and the "other income" are profits "derived" from the business of generation and distribution of electricity. So far as the financial position is concerned, the reference to the paper-cuttings produced by Mr. Dastur do show that all is not well because of certain recent developments relating to Dabhol Power Company, heavy monthly shortfall, etc. The assessee is a State Government undertaking, established under a central law, and owns fixed assets running to several hundreds of crores of rupees. It serves the public by providing electricity. Its well-being or otherwise affects the services, which in turn affects the public directly. For that reason, it is constantly under the gaze of the public. Any coercive measures taken by the IT authorities are likely to affect the public confidence on the assessee-Board, given the reach of the media in the present days. (A public utility undertaking should be, if possible, insulated from such circumstances if it is permissible to do so in law. We are not to be understood as saying that Government undertakings stand on a special footing so far as tax arrears are concerned. The objection is only to the methods employed to realise them under the peculiar circumstances of the case which we have narrated earlier. The interests of the Revenue were not going to be prejudiced beyond repair if the AO had chosen to await the outcome of the stay application pending before the Tribunal. All that would have happened is that the judicial process would have taken over. The haste exhibited by the AO perhaps shows, if we may say so with due respect to all concerned, lack of faith in the judicial process and should be deprecated.
26. We, therefore, hold that the Departmental authorities were not justified in recovering the amount, in respect of which stay has been prayed for, by enforcing the orders issued under Section 226(3) against the bankers. As held by the Tribunal under similar circumstances in the case of RPG Enterprises Ltd. (supra) and for the same reasons given in the said order, we direct as follows :
(i) The AO shall refund the amount of Rs. 43,65,82,270 collected under Section 226(3) within a period of two weeks from the date of service of this order;
(ii) The recovery of the aforesaid amount is stayed till the disposal of the appeal before the Tribunal on condition that the assessee furnishes security to the satisfaction of the AO within the same time-limit as stated above;
(iii) That the appeal shall be posted for hearing on 2nd April, 2001, the date suggested by Mr. Dastur for the assessee and that the assessee shall not request for any adjournment on that date.
The Registry to serve this order on both the parties forthwith along with the notice posting the appeal for hearing as directed above.
27. The stay application is allowed in the above terms.