Orissa High Court
Bhubaneswar Stock Exchange vs Union Of India on 28 January, 2004
Equivalent citations: [2004]137TAXMAN318(ORISSA)
Author: A.K. Patnaik
Bench: A.K. Patnaik
JUDGMENT A.K. Patnaik, J.
The miscellaneous case and the two writ petitions have been filed by one and the same petitioner the Bhubaneswar Stock Exchange and as they are connected with each other, they are being disposed of by this common order and judgment.
2. The relevant facts are that the Bhubaneswar Stock Exchange was taken over on 9-1-2003 by the Administrator appointed by the Central Government under section 11 of the Securities Contract (Regulations) Act, 1956. After taking over, the Administrator found that the Assistant Commissioner , Circle- 1 (1), Bhubaneswar had issued notices to the petitioner under section 148 of the Income Tax Act, 1961 (hereinafter referred to as for short, 'the Act') for the assessment years 1996-97, 1997-98, 1998-99, 1999-2000, 2000-2001 and 2001-2002 stating that its income had escaped assessment and pending assessment had provisionally attached the fixed deposits of the petitioner in different banks and in response thereto the petitioner had claimed that its income was exempt from tax under the Act. On 9-1-2003, the Assistant Commissioner issued show-cause notices to the petitioner for the said assessment years to show cause as to why exemption as claimed by the petitioner should not be disallowed and why the entire income of the petitioner for the assessment years under reference should not be treated as taxable as per the provisions of the Act. On 28-2-2003, the Assistant Commissioner issued orders of provisional attachment of the fixed deposits of the petitioner in U.T.I. Bank Ltd., Stayanagar, Bhubaneswar, Canfin Homes, Kharavela Nagar, Bhubaneswar, Vysya bank Ashok Nagar, Bhubaneswar, Canara Bank, Cuttack Road Branch, Bhubaneswar, Canara. Bank, Bapuji Nagar, Bhubaneswar and Canara Bank Sahid Nagar Branch, Bhubaneswar. In the said orders of provisional attachment it was stated that the assessment proceedings against the petitioner were pending for disposal and it was likely that substantial tax liability will be created on completion of the assessment and by the said provisional attachment orders, the aforesaid banks were prohibited and restrained from releasing the maturity proceeds of the fixed deposits and from allowing encashment from the said fixed deposits or any part thereof to any person. Thereafter the Assistant Commissioner passed orders on 13-3-2003 making assessments under section 147/143(3) of the Act for the assessment years 1996-97 to 2001-2002. The said assessments along with notice of demand under section 156 of the Act were served on the petitioner.
3. Aggrieved, the petitioner filed writ petition W.P.(C) No. 3137 of 2003 in this court on 26-3-2003 and prayed, inter alia for quashing the said orders of provisional attachment of the fixed deposits of the petitioner, for directing release of interest from the fixed deposits in favour of the petitioner and for quashing the notices under section 148 of the Act, the orders of re-assessment under section 147 of the Act and the notices of demand. In the said writ petition, the petitioner also prayed for directing the opposite parties to notify the petitioner under section 10(23C) (iv) and (v) of the Act. On 28-3-2003, the court disposed of the writ petition W.P.(C) No. 3137 of 2003 by quashing only the notices of demand for the assessment years 1996-97 and 1997-98 by which the petitioner was asked to pay the demand for the two assessment years within seven days of service of notice instead of the normal period of thirty days after holding that there was no basis for the assessing officer to hold that it would be detrimental to the revenue if the full period of thirty days was allowed to the petitioner to make the payment since the accounts of the petitioner had been frozen by the provisional orders of attachment. Since by the time the said order dated 28-3-2003 was passed by this court the Income Tax Department had collected some Pay Orders from the Banks pursuant to the notices of demand which were quashed, the court also passed orders directing the department to restitute the petitioner to the original position by 31-3-2003. By the said order dated 28-3-2003, the court also granted liberty to the petitioner to move the appropriate authority for drawing interest from the frozen accounts and further observed that if any such prayer was made, the authorities concerned will consider the same keeping in view the fact that the institution of the petitioner was a public institution. Soon thereafter, Miscellaneous Case No. 3179 of 2003 was filed by the department for some clarification and by order dated 2-4-2003, the court clarified that by the order dated 28-3-2003 in W.P.(C) No. 3137 of 2003 the court had not examined the validity of the demand and that the period of thirty days was available to the petitioner to file appeals against the demands. On 15-4-2003 the petitioner filed Miscellaneous Case No. 3703 of 2003 stating therein that at the end of the banking hours on 31-3-2003 the department deposited some refund vouchers but have not fully restituted the petitioner to its original position and praying for a direction to the department as well as the banks to implement the order dated 28-3-2003 directing restitution of the petitioner to its original position as on.28-3-2003.
4. On 15-4-2003 16-4-2003 the petitioner filed appeals against the assessment orders dated 13-3-2003 under section 147/143(3) of the Act for the assessment years 1996-97 to 2001-2002 and applications for stay of the disputed tax demands till disposal of the appeals before the Commissioner (Appeals)-I, Bhubaneswar. On 15-4-2003, the petitioner also filed applications under section 220(6) of the Act before the Assistant Commissioner praying, inter alia, that the petitioner should not be treated as an assessee in default in respect of the disputed demands for the assessment years 1996-97 to 2001-2002 and praying for stay of the disputed tax demands for the said assessment years till disposal of the appeals by the Commissioner (Appeals). The said applications under section 220(6) of the Act were heard by the Assistant Commissioner on 25-4-2003 and 28-4-2003 but were rejected by order dated 7-5-2003 of the Assistant Commissioner. Aggrieved, the petitioner filed W.P.(C) No. 4937 of 2003 praying for quashing the said order dated 7-5-2003 passed by the Assistant Commissioner rejecting the applications of the petitioner under section 220(6) of the Act. In the said writ petition, the petitioner also filed Miscellaneous Case No. 4624 of 2003 for appropriate interim order and on 16-5-2003, the court passed orders that the matter will be listed on 27-6-2003 and in the meanwhile no coercive measure will be taken for recovery of the demand from the petitioner pursuant to the order dated 7-5-2003 passed by the Assistant Commissioner.
5. On or about 22-5-2003, the Administrator of the petitioner was informed by the U.T.I. Bank Ltd., Satyanagar, Bhubaneswar, Canfin Homes, Kharavela Nagar, Bhubaneswar, Vysya Bank Ltd., Ashok Nagar, Bhubaneswar and Canara Bank, Cuttack Road Branch, Bhubaneswar that notices under section 226(3) of the Act had been issued by the Assistant Commissioner to pay the amounts due from the Banks to the petitioner to the department towards the arrears of income tax liability remaining unpaid by the petitioner. Aggrieved, the petitioner filed writ petition W.P.(C) No. 5356 of 2003 praying for quashing of the said notices under section 226(3) of the Act issued by the Assistant Commissioner to the four Banks. Along with the said writ petition the petitioner also filed Miscellaneous Case No. 5402 of 2003 for appropriate interim orders staying the operation of the said impugned notices under section 226(3) of the Act and directing release of the accounts of the petitioner. On 27-5-2003, the Vacation Judge passed orders issuing notice to the opposite parties and directing release of the accounts of the petitioner by squeezing Rs. 4,71,05,427 and for directing the four Banks to allow operation after the squeezing of the aforesaid amount. By the said order dated 25-7-2003, the matter was to be listed again on 27-6-2003 along with W.P.(C) No. 4937 of 2003 for further orders.
6. On 27-6-2003, the court passed orders in W.P.(C) No. 4937 of 2003 and Misc. Case No. 4624 of 2003 that the interim orders passed by the court on 16-5-2003 will continue till the interim matter was decided and passed orders in W.P.(C) No. 5356 of 2003 that the matter will be listed along with W.P.(C) No. 4937 of 2003. Thereafter on 4-7-2003, after hearing the learned counsel for the parties, the court passed a common order in W.P.(C) No. 4937 of 2003 and W.P.(C) No. 5356 of 2003 that the aforesaid amount of Rs. 4,71,05,427 will be retained in the aforesaid banks in fixed deposit accounts and will not be withdrawn by the petitioner until further orders are passed by this court but the petitioner will be allowed to operate the Current Accounts or any other account over and above the said fixed deposit amount of Rs. 4,71,05,427. By the said order dated 4-7-2003, the court also directed that in the meanwhile the Commissioner (Appeals) will expedite the hearing of the appeals filed by the petitioner against the assessments for the years 1996-97 to 2001-2002.
7. At the hearing of these matters, Mr. Jayant Das, learned counsel for the petitioner, submitted that by the order dated 28-3-2003 passed by this court in W.P.(C) No. 3137 of 2003, a specific direction was given to the department to restitute the petitioner to the original position by 31-3-2003 and thus the fixed deposits of the petitioner were required to be restored to the same position as they were before the fixed deposits were encashed and paid to the department. He further submitted that pursuant to the said order, refund vouchers were submitted by the department on 31-3-2003 to the banks and only two of the banks, namely, U.T.I. Bank and Vysya Bank have put the amounts back in the fixed deposits and restored the petitioner to the original position. But the two other banks, namely, Canfin Homes and Canara Bank, instead of putting the money back in the original fixed deposits, have created fresh fixed deposits on 4-7-2003 and consequently the petitioner has lost interest on the said fixed deposits for the period from 28-3-2003 to 4-7-2003. He further submitted that the fixed deposits of the petitioner in the said two banks, namely, Canfin Homes and Canara Bank, which were encashed carried a higher rate of interest than the fresh fixed deposits which were created on 4-7-2003 and this has also resulted in loss to the petitioner. He vehemently submitted that orders should be passed by this court in Miscellaneous Case No. 3703 of 2003 directing the aforesaid two banks, namely, Canfin Homes and Canara Bank, to pay back the money in the same fixed deposits from which they were encashed and paid to the department so that the petitioner is restored to its original position as on 28-3-2003 in accordance with the direction of this court in the order dated 28-3-2003 in W.P.(C) No. 3137 of 2003 and the petitioner is entitled to interest on the fixed deposits on and from 28-3-2003 at the old rate. In reply, Mr. J. P. Chowdhury, learned counsel for the two banks (opposite parties 4 and 6) submitted that during the period 28-3-2003 to 3-4-2003 after encashment of the fixed deposits the money was with the department and hence the banks were not liable for interest for the said period.
8. The portion of the order dated 28-3-2003 in W.P.(C) No. 3137 of 2003 in which the restitution was directed is quoted herein below:
"For the above reasons, the impugned notices at Annexure- 18 series cannot be supported in law which are hereby quashed.
Shri Das, learned counsel for the petitioner, submitted that the bank has collected pay orders from opposite parties 7 to 10. In view of the fact that we have quashed the impugned notices, as indicated above, the department is directed to destitute the petitioner to the original position by 31-3-2003...."
It is clear from the aforesaid portion of the order dated 28-3-2003 passed by the court that the grievance made by the counsel for the petitioner before the court was that the pay orders had been collected from the U.T.I. Bank Ltd., Canfin Home Finances, Vysya Bank and Canara Bank pursuant to the impugned notices of the Income Tax Department which were quashed by the said order of the court and the court directed only the Income Tax Department to restitute the petitioner of the original position by 31-3-2003. Accordingly, the Income Tax Department which had collected the amounts covered by the pay orders from the Banks in the meanwhile furnished refund vouchers to the aforesaid banks on 31-3-2003 for the amounts recovered pursuant to the impugned notices quashed by the court. Thus, the Income Tax Department had restituted the petitioner to the original position. There was no direction in the said order dated 28-3-2003 to the Income-tax department to pay any interest for any period. In the absence of any express specific direction from the court to the department to pay interest for any period, the petitioner cannot claim interest from the department on the basis of the said order dated 28-3-2003 on the ground that restitution would mean payment of interest. Further, by the said order dated 28-3-2003 no express specific direction was given to the Banks to restitute the petitioner in any manner. If some of the Banks after getting back the money from the Income Tax Department have created fresh fixed deposits with lower rate of interest, no claim can be made by the petitioner on the basis of the order dated 28-3-2003 that the Banks should have retained the money in same fixed deposits as they were prior to the recovery of the amounts by the Income Tax Department and pay interest at the old rate on such fixed deposits. Miscellaneous Case No. 3703 of 2003 for implementation of the order dated 28-3-2003 is accordingly disposed of.
9. Mr. Das, learned counsel for the petitioner submitted that the question as to whether the petitioner was entitled to claim exemption of its income under section 10(23C) (iv) and (v) of the Act arose also in the assessment year 1992-93 and the Commissioner (Appeals), Orissa, Cuttack in his order dated 16-7-1996 in I.T. Appeal No. 23/Co/95-96, after considering the objects for which the petitioner has been promoted has held that the petitioner company is a general public utility and has been established for charitable purposes and its income will be exempt from tax under section 11 of the Act. Mr. Das submitted that the department has not assailed the said order dated 16-7-1996 of the Commissioner (Appeals), Orissa and the said order of the Commissioner (Appeals) was binding on the assessing officer. Mr. Das cited the decision of the Division Bench in Orissa Forest Corpn. Ltd v. Asstt. CCE 1982 ELT 875 (Ors.), for proposition that decisions rendered by an Appellate Collector should be respected by the subordinate revenue authorities so long as they remain in force and are not set aside by higher authorities. In the said decision, the Division Bench further held that if the demand for one period is set aside by the appellate authority, another demand cannot be raised for subsequent period on the same facts until the order of the appellate authority is not set aside by the revisional authority. Mr. Das argued that the petitioner had thus a strong prima facie case and the Assistant Commissioner should have passed an order under section 220(6) of the Act treating the petitioner as not being in default in respect of the amounts which were in dispute in the appeals before the Commissioner even though the time for payment had expired as long as the appeals of the petitioner remained undisposed of. Mr. Das further submitted that the Central Board of Direct Taxes has issued circulars on how the discretion of the assessing officer under section 220(6) of the Act should be exercised when the assessee has presented an appeal against the order of assessment. Circular No. 530 dated 6-3-1989 of the Central Board of Direct Taxes in Para 2 provides that the assessing officer will exercise discretion under section 220(6) of the Act subject to such conditions as he may think fit to impose so as to treat the assessee as not being in default in respect of the amount in dispute in the appeal when the demand in dispute relates to the issues that have been decided in favour of the assessee in an earlier order by an appellate authority or court in the assessee's own case. Mr. Das submitted that in the present case the Commissioner (Appeals) has decided for the year 1992-93 that the income of the petitioner was exempt under section 11 of the Act and therefore the Assistant Commissioner should have treated the petitioner as not being in default in respect of the tax in dispute in the appeals before the Commissioner (Appeals). Mr. Das cited the decision of the Supreme Court in Navnit Lal C. Javeri v. KK Sen, Appellate Assistant Commissioner (1965) 56 ITR 198 (SC), in which the Supreme Court has held that circular issued by the Central Board of Revenue would be binding on all officers and persons employed in execution of the Income Tax Act, 1922 under section 5(8) of the said Act. He pointed out that similar provisions as in section 5(8) of the Income Tax Act, 1922 have also been made in section 119 of the Income Tax Act, 1961 empowering the Central Board of Direct Taxes to issue instructions to other income-tax authorities from time to time as it may deem fit for the proper administration of the Act and such authorities and all other persons employed for execution of the Act are to follow and observe such instructions issued by the Board. Mr. Das also cited the decision of a Division Bench of this court in State of Orissa v. Janamohan Das AIR 1993 Ori. 180 (Jhar), for proposition that no authority should be vested with unlimited or unfettered discretion. Mr. Das submitted that the petitioner presently has no income other than interest from the Fixed Deposits in different Banks and if the Fixed Deposits are encashed and appropriated by the Income-tax department, the petitioner will not be able to meet even its establishment expenses and the petitioner will suffer immense hardship. Mr. Das further submitted that the petitioner has not moved the Commissioner in revision because the nil assessments of the petitioner for different years have been reopened and the provisional attachment orders have been passed with the approval of the Commissioner and the revision before the Commissioner would be an exercise in futility. He further explained that although the petitioner has filed application for stay before the Commissioner (Appeals) along with the appeal, it is doubtful as to whether the Commissioner (Appeals) would have powers to grant stay. In this regard, Mr. Das submitted that there is no express provision in the Act conferring powers on the Commissioner (Appeals) to pass an order of stay with regard to a matter in appeal before him whereas section 220(6) of the Act confers powers on the assessing officer to treat the assessee as not in default when the assessee has filed an appeal against the assessment. Mr. Das submitted that a Division Bench of this court in State of Orissa v. Member, Sales Tax Tribunal (1971) 28 STC 652, following the decision of the Supreme Court in ITO v. M.K. Mohammed Kunhi AIR 1969 SC 430, has held that the implied power incidental and ancillary to appellate jurisdiction will be excluded where express power has been vested in some other authority to deal with a particular contingency. Mr. Das submitted that since the power of stay has been vested by express provision in section 220(6) of the Act on the assessing officer, the Commissioner (Appeals) may not have the implied power as an appellate authority to grant stay with regard to a matter in appeal before him. Mr. Das submitted that the petitioner thus had no option but to move this court under article 226 of the Constitution in W.P.(C) No. 4937 of 2003 against the order dated 7-5-2003 passed by the Assistant Commissioner rejecting the application of the petitioner under section 220(6) of the Act.
10. Regarding W.P.(C) No. 5356 of 2003, Mr. Das submitted that in case this court quashes the order dated 7-5-2003 of the Assistant Commissioner challenged in W.P.(C) No. 4937 of 2003 and directs stay of the demands pending disposal of tha appeal before the Commissioner (Appeals), the notices under section 226(3) of the Act issued to the Banks for realization of the arrears of income-tax liability of the petitioner impugned in W.P.(C) No. 5356 of 2003 will have to be quashed by the court.
11. Mr. Akhil Kumar Mohapatra, learned Standing counsel for the Income Tax Department, on the other hand, submitted that the order passed by the Commissioner (Appeals) for the assessment year 1992-93 holding that the petitioner is entitled to exemption under section 11 of the Act was not be binding on the Assistant Commissioner f or making the assessments for the subsequent assessment years as it is the settled law that each assessment year can be assessed independently of the findings in the earlier assessment years. Mr. Mohapatra argued that the language of section 10(23C) (iv) and (v) of the Act would show that it is only a fund, institution or trust established for charitable purposes that is notified by the Central Government in the Official Gazette which is exempt from tax on its income and therefore in the absence of a notification by the Central Government in the Official Gazette notifying the institution of the petitioner under section 10(23C) (iv) and (v), the income of the petitioner is not exempt from tax. Relying on the averments in paragraph 10 of the counter-affidavit Mr. Mohapatra submitted that in instruction No. 1914 of the Central Board of Direct Taxes the decision in the matter of stay of demand should normally be taken by the assessing officer and his superior authority will interfere with the decision of the assessing officer only in exceptional circumstances, for example, where the assessing officer's order will appear to be high-pitched or a genuine hardship is likely to be caused to the assessee. He submitted that instead of exhausting the normal departmental channels the assessee has sought to directly approach this court under article 226 of the Constitution. In reply to the contention of Mr. Das that it will be an exercise in futility for the petitioner to file a revision before the Commissioner against the order dated 7-5-2003 of the assessing officer, Mr. Mohapatra argued that even if the Commissioner approves the reopening of the assessment or provisional attachment orders, the proceedings under section 220 of the Act and revisions arising therefrom are entirely different proceedings. Mr. Mohapatra further submitted that if the petitioner is apprehensive that he may not get a fair order from the Commissioner in a revision, the petitioner should have moved the Commissioner (Appeals) for stay in the appeals filed before him. He cited the decision of the Supreme Court in M.K. Mohammed Kunhi's case (supra) for the proposition that an appellate authority has the power to grant stay as incident or ancillary to its appellate jurisdiction. He argued that even if there is no express provision in the Act conferring powers on the Commissioner (Appeals), as an appellate authority he has the incidental or ancillary power to grant stay. In support of this submission he cited the decision of the Allahabad High Court in Prem Prakash Tripathy v. CIT (1994) 208 ITR 461 (All), in which the Division Bench of the Allahabad High Court following the decision of the Supreme Court in ITO, Cannanore v. M.K. Mohammed Kunhi (supra) has held that the Commissioner (Appeals) must be held to have the power to grant stay as incidental or ancillary to his appellate jurisdiction. Finally, Mr. Mohapatra vehemently submitted that in Asstt. CCE v. Dunlop India Ltd. AIR 1985 SC 330, the Supreme Court deprecated the tendency of the High Courts to grant interim orders while entertaining writ petitions under article 226 of the Constitution and has also held that where statutory remedies are available, the court must have good and sufficient reason to bypass the alternative statutory remedy while entertaining a writ petition under article 226 of the Constitution. According to Mr. Mohapatra, since there are sufficient statutory remedies available to the petitioner against the impugned order dated 7-5-2003 of the Assistant Commissioner, this court should dismiss the writ petition under article 226 of the Constitution.
12. The first question to be decided is whether the petitioner has any alternative statutory against the order dated 7-5-2003 of the Assistant Commissioner which is under challenge in W.P. (C) No. 4937 of 2003. Against this order dated 7-5-2003 rejecting the application under subsection (6) of section 220 of the Act, no appeal has been provided under the Act as in the appeal provisions in sections 246 and 246A of the Act, we do not find any mention of the order under sub-section (6) of section 220 as an appealable order either before the Deputy Commissioner (Appeals) or before the Commissioner (Appeals). The petitioner, however, has filed applications for stay before the Commissioner (Appeals). There is no express power vested under the Act on the Commissioner (Appeals) to grant stay, but express power has been vested under sub-section (6) of section 220 of the Act on the assessing officer not to treat the assessee as being in default pending appeal before the Commissioner (Appeals). The decision of the Supreme Court in M.K. Mohammed Kunhi's case (supra) is on the point that the Income Tax Appellate Tribunal has the implied power to grant stay as incidental and ancillary to its appellate jurisdiction and not that the Commissioner (Appeals) has the implied power to grant stay in appeals pending before him. This court in Member, Sales Tax Tribunal's case (supra) after considering the said decision of the Supreme Court has held that express power of stay in some other authority conferred under the Act will rule out implied power in the appellate authority to grant stay and a Commissioner (Appeals) in Orissa is bound to follow the decision of this court and not of any other High Court in the absence of any decision of the Supreme Court on a point. The decision of the Allahabad High Court in Prem Prakash Tripathy's case (supra) cited by Mr. Mohapatra on the point that the Commissioner (Appeals) has the implied power to grant stay will not be binding on the Commissioner (Appeals). There is, however, a statutory remedy of revision against the said order dated 7-5-2003 of the Assistant Commissioner to the Commissioner under section 264 of the Act, but according to the petitioner this will be an exercise in futility because the Commissioner himself has approved the reopening of the case of the petitioner for assessment under section 147 and has also approved the provisional attachment orders. The case of the department, on the other hand, is that the fact that the Commissioner has approved the provisional attachment orders will not make the remedy by way of a revision to the Commissioner against the order dated 7-5-2003 ineffective. In Dunlop India Ltd.'s case (supra), the Supreme Court following its earlier decision in Titaghur Paper Mills Co. Ltd. v. State of Orissa AIR 1983 SC 603, held:
"... It is only where statutory remedies are entirely ill suited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to article 1 226 of the Constitution. But then the court must have good and sufficient reason to by-pass the alternative remedy provided by statute. Surely matters involving the revenue where statutory remedies are available are not such matters. We can also take judicial notice of the fact that the vast majority of the petitions under article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged." (p. 332) In the aforesaid decision, the Supreme Court has held that matters involving revenue where statutory remedies are available are not matters where the court should by-pass the statutory remedy, but this is not to say that in no matter involving revenue where statutory remedies are available, the High Court will not interfere under article 226 of the Constitution. The acid test, in our considered opinion, would be whether interference of the High Court under article 226 of the Constitution is necessary for vindication of public justice to meet the demands of an extraordinary situation, as has been clearly held in the aforesaid judgment of the Supreme Court.
13. Thus, what is to be considered in this case is whether the impugned order dated 7-5-2003 of the Assistant Commissioner rejecting the application of the petitioner as not being in default in respect of the amounts in dispute in appeals before the Commissioner (Appeals) as long as the appeal remains undisposed of needs interference in the interest of public justice to meet the demands of extraordinary situation. Sub-section (6) of section 220 of the Act is quoted herein below:
"When tax payable and when assessee deemed in default.
** ** ** (6) Where an assessee has presented an appeal under section 246 or section 246A, the assessing officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of."
The aforesaid section vests a discretion in the assessing officer either to treat the assessee as not being in default or to treat the assessee as in default in respect of the amount in dispute in the appeal as long as the appeal remains undisposed of. There is no indication in sub-section (6) of section 220 as to how this discretion is to be exercised by the assessing officer. In exercise of powers under section 119 of the Act, the Central Board of Direct Taxes has issued instructions from time to time as how such discretion under sub-section (6) of section 220 of the Act will be exercised by the assessing officer in different situations. Paragraphs 2 and 3 of the Board Circular No. 530, dated 6-3-1989 (See Taxmann's Direct Taxes Circulars, Vol. 3, 2002 edn., p. 1.2577) are extracted herein below:
"2. Having regard to the proper and efficient management of the work of collection of revenue, the Board has considered it necessary and expedient to order that on an application being filed by the assessee in this behalf, the assessing officer mill exercise his discretion under section 220(6) of the Act (subject to such conditions as he may think fit to impose) so as to treat the assessee as not being in default in respect of the amount in dispute in the appeal in the following situations:
(i) the demand in dispute has arisen because the assessing officer had adopted an interpretation of law in respect of which, there exists conflicting decisions of one or more High Courts, or, the High Court of jurisdiction has adopted a contrary interpretation but the department has not accepted that judgment, or
(ii) the demand in dispute relates to issues that have been decided in favour of the assessee in an earlier order by an appellate authority or court in the assessee's own case.
3. It is clarified that in the situations mentioned in paragraph 2 above the assessee will be treated as not in default only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the situation referred to in paragraph 2 above, the assessing officer will no longer be bound by the instructions and will exercise his discretion independently."
Thus, the Central Board of Direct Taxes has issued the aforesaid instructions in Circular No. 530, dated 6-3-1989 that where the demand in dispute relates to issues that have been decided in favour of the assessee in an earlier order by an appellate authority or court in the assessee's own case, the assessee should be treated as not being in default in respect of the amount in dispute in appeal keeping in mind the well settled principle of justice and equity. These instructions have not been superseded but reiterated and claimed by the Central Board of Direct Taxes in its Circular No. 589 dated 16-1-1991. In the very case of the petitioner for assessment year 1992-93 the assessing officer had rejected the claim of the petitioner for exemption on the ground that although the petitioner had applied claiming exemption, no notification had been issued by the Central Government in respect of the petitioner under section 10(23)(c)(iv) and (v) of the Act and in the absence of such notification, the petitioner was not entitled to exemption from income-tax in respect of its income. Against the assessment order passed by the assessing officer, the petitioner filed Income Tax Appeal No. 23/Co/95-96 and the Commissioner (Appeals), Orissa, Cuttack held that the assessing officer was right in not allowing the petitioner's claim for exemption under section 10(23)(c) (iv) and (v) of the Act, but the assessing officer had to consider the petitioner's application for exemption from income-tax under section 11 of the Act and thereafter allowed the claim of the petitioner for exemption to the extent indicated in his order dated 16-7-1996 relevant portion of which is quoted hereunder :
". . . The appellant's income for the year relevant to assessment year 1992-93 had been Rs. 19,98,038. It had applied income of Rs. 10,20,199 for charitable purposes. Exemption under section 11 will be available to the appellant for the income of Rs. 10,20,199. However, the application of the income for charitable purposes being less than 75% of the income, the question of exemption under section 11 for the remaining income of Rs. 9,77,879, which had been accumulated, has to be examined. On furnishing the notice in Form No. 10 specifying the purposes, towards the fulfilment of its objects, for which the income was being accumulated and the deposit of the accumulated income in Canara Bank, a nationalized bank, the appellant has satisfied the conditions of section 11(2) and, as a result, exemption under section 11 will be available to the appellant on the accumulated income as well. In other words, the appellant's income of Rs. 19,98,038, for the year relevant to assessment year 1992-93 will be exempt under section 11.
4. Appeal allowed.
Sd/ (S.K. Sirear) Commissioner (Appeals), Orissa, Cuttack."
Thus, in the very case of the petitioner the appellate authority had held that the petitioner was entitled to exemption under section 11 of the Act even though the institution of the petitioner had not been notified by the Central Government under section 10(23)(c) (iv) and (v) of the Act. The demands in respect of which appeals have now been filed by the petitioner before the Commissioner (Appeals) for the years 1996-97 to 2001-02 relate to issues which have been decided earlier in favour of the petitioner by the appellate authority in the very case of the petitioner and as per the instructions issued in Circular No. 530 dated 6-3-1989 by the Central Board of Direct Taxes quoted above, the Assistant Commissioner should have exercised discretion under sub-section (6) of section 220 of the Act subject to such conditions as she thought fit to impose so as to treat the petitioner as not being in default in respect of the amounts in dispute in the appeals. But by the impugned order dated 7-5-2003 the Assistant Commissioner has rejected the application of the petitioner under sub-section (6) of section 220 of the Act to treat the petitioner as not being in default in respect of the amounts in dispute in appeals before the Commissioner (Appeals) contrary to the said instructions of the Central Board of Direct Taxes. No useful purpose will be served in such a case by asking the petitioner to file a revision before the Commissioner under section 264 of the Act because the Commissioner in such a revision cannot be expected under law to pass an order contrary to the said instructions of the Central Board of Direct Taxes in the Circular No. 530 dated 6-3-1989. The assessing officer and the Commissioner cannot totally ignore the said instructions issued by the Central Board of Direct Taxes in exercise of the statutory powers under section 119 of the Act. The assessing officer or the Commissioner, however, could impose some conditions subject to which the petitioner was to be treated as riot in default keeping in mind the circumstances of the case'. The only income of the petitioner presently appears to be the interest on the Fixed Deposits and this interest income is being utilized in meeting the establishment expenses of the petitioner. In these circumstances, if the fixed deposits are encashed the petitioner will be put to genuine hardship. On the other hand, if the Fixed Deposits are withdrawn by the petitioner, there will be risk of the income tax amount not being realized in the event the petitioner does not succeed in the appeals before the Commissioner (Appeals). This is thus an extraordinary situation where interests of public justice demands interference of the High Court under article 226 of the Constitution with appropriate writs /directions.
14. For the aforesaid reasons, we quash the impugned order dated 7-52003 of the Assistant Commissioner rejecting the application of the petitioner under sub-section (6) of section 220 of the Act and lay down the condition that the petitioner will not withdraw the amount of Rs. 4,71,05,427 kept in fixed deposit and may only operate the Current Accounts or any other account over and above the said amount till the appeals pending before the Commissioner (Appeals) are disposed of. By our order dated 4-7-2003, we had directed that the Commissioner (Appeals) will expedite hearing of the appeals against the assessment under section 147 of the Act for the assessment years 1996-97 to 2001-02. We now direct that the Commissioner (Appeals) will finally dispose of the appeals of the petitioner by 28-2-2004. In case the petitioner does not co-operate in the hearing of the appeals before the Commissioner (Appeals), the petitioner will not be entitled to the benefit of Para 2 of Circular No. 530 dated 6-3-1989 of the Central Board of Direct Taxes, as has been clarified in paragraph 3 of the said circular itself and it will be open for the department to move this court for appropriate orders in that regard. As a consequence of the aforesaid order, the notices under section 226(3) of the Act issued by the Assistant Commissioner on or about 22-5-2003 for recovery of the amounts in dispute to the U.T.I. Bank Ltd., Canfin Homes, Vysya Bank Ltd. and Canara Bank are also quashed.
15. Since we have directed the Commissioner (Appeals)-I, Bhubaneswar to finally dispose of the appeals of the petitioner by 28-2-2004, he is impleaded as opposite party No. 2 in W.P.(C) No. 4937 of 2003. Miscellaneous Case No. 3703 of 2003, W.P.(C) No. 4937 of 2003 and W.P.(C) No. 5356 of 2003 are disposed of in terms of the aforesaid judgment. Considering, however, the facts and circumstances, there shall be no order as to costs.