Gujarat High Court
Sunflower Broking Pvt Ltd vs Deputy Commissioner Of Income Tax ... on 8 June, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
C/SCA/6202/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 6202 of 2017
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SUNFLOWER BROKING PVT LTD....Petitioner(s)
Versus
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1)....Respondent(s)
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Appearance:
MS VAIBHAVI K PARIKH, ADVOCATE for the Petitioner(s) No. 1
MR PRANAV G DESAI, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 08/06/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1 Petitioner has prayed for direction to refund a sum of Rs.19,22,770/ recovered by the respondent Deputy Commissioner of Income Tax from the petitioner's bank account by way of tax arrear. Brief facts are as under:
Petitioner is a Company registered under the Companies Act. For the assessment year 201415, the return filed by the petitioner was taken in scrutiny. The Assessing Officer passed the order of assessment on 23.12.2016 making an addition of Rs.44.80 lacs to Page 1 of 8 HC-NIC Page 1 of 8 Created On Tue Aug 15 08:00:04 IST 2017 C/SCA/6202/2017 ORDER the petitioner's total income and consequently raised an additional tax demand of Rs.19,22,773/ A Demand Notice under Section 156 of the Income Tax Act, 1961, ("the Act" for short), was issued on 23.12.2016 calling upon the petitioner to pay the said sum of Rs.19,22,773/ within 30 days of service of the notice. In the notice itself, it was conveyed to the petitioner that if such payment is not made, penalty may be imposed under Section 221 of the Act after hearing the petitioner. It was also conveyed that if such amount is not paid, recovery proceedings will be taken in accordance with the provisions of Sections 222 to 229 of the Act. Soon after the order of assessment was received by the petitioner, appeal came to be filed before the Appellate Commissioner on 07.01.2017. Since the petitioner did not make the payment within the time indicated in the Demand Notice, the respondent authority issued a notice dated 06.02.2017 on the petitioner conveying that demand of Rs.19,22,770/ for the assessment year 201415 has remain unpaid. The petitioner is, therefore, treated as a defaulter for non payment of tax. However, before taking further action, the petitioner was given an Page 2 of 8 HC-NIC Page 2 of 8 Created On Tue Aug 15 08:00:04 IST 2017 C/SCA/6202/2017 ORDER opportunity to show cause why action for recovery of the said amount should not be initiated. The petitioner was asked to attend the office of the respondent personally or through a representative on or before 15.02.2017 to state the reasons for non payment of tax. If such non payment was on account of any stay or installment granted or application for stay or installment being pending etc., the petitioner should produce documents in support thereof. It was further conveyed that no time will be granted to the petitioner and if the petitioner failed to show cause, recovery would be initiated by any of the modes permitted under law including attachment of the bank account. The letter was to be treated as a Notice under Section 221 of the Act.
2 It is the case of the petitioner and which is not denied by the respondent that such notice dated 06.02.2017 was dispatched only on 16.02.2017 and was received by the petitioner on 17.02.2017. Thus, the notice was dispatched after the last date indicated in the notice for the petitioner to respond to the contents thereof. It is further the case of the Page 3 of 8 HC-NIC Page 3 of 8 Created On Tue Aug 15 08:00:04 IST 2017 C/SCA/6202/2017 ORDER petitioner that 17.02.2017 was a Friday, which was followed by two non working days and the first available working day for the petitioner following the receipt of the notice was the Mondaythe 20.02.2017. However, the respondent by issuing order of attachment of the bank account to the petitioner in the HDFC Bank on 20.02.2017 itself recovered the said sum of Rs.19,22,770/ The petitioner has, therefore, approached this Court for the relief of return of such amount.
3 In short, the case of the petitioner is that the respondent affected the recovery in hot haste, without giving reasonable opportunity to the petitioner to explain the facts. Soon after the order of assessment was passed, the petitioner had filed an appeal before the Appellate Commissioner which was pending. The authority could not have made such unilateral recovery. The CBDT Circular dated 29.02.2016 provides that ordinarily when appeal is pending against the order of assessment, recovery should be stayed upon deposit of 15% of the disputed amount. The case of the department on the other hand is that pursuant to Page 4 of 8 HC-NIC Page 4 of 8 Created On Tue Aug 15 08:00:04 IST 2017 C/SCA/6202/2017 ORDER notice dated 23.12.2016 under Section 156 of the Act, the petitioner neither deposited the additional tax nor applied to the Assessing Officer or the Appellate Authority for stay pending appeal. The petitioner was thus an assessee in default.
4 Facts are not seriously in dispute. The order of assessment resulting into additional tax demand of Rs.19,22,770/ Against such order, the petitioner filed appeal before the Appellate Commissioner immediately upon the receipt of the order of assessment. When such appeal was pending, the respondent authority first issued notice under Section 156 of the Act, which was simultaneous with the order of assessment granting 30 days time to the petitioner to pay the tax. When the petitioner did not do so, recovery proceedings were initiated by issuing notice under Section 221 of the Act calling upon the petitioner to state reasons why he should not be treated as an assessee in default and to produce any stay or installment granted by any authority. The notice was issued on 06.02.2017 allowing the petitioner to appear before the authority latest Page 5 of 8 HC-NIC Page 5 of 8 Created On Tue Aug 15 08:00:04 IST 2017 C/SCA/6202/2017 ORDER before 15.02.2017. This notice itself was dispatched on 16.02.2017 and was received by the petitioner on 17.02.2017. On first working day after that, the bank account of the petitioner was attached and full recovery made.
5 In our opinion, the authorities acted in most arbitrary and unreasonable manner. It is not even the case of the respondent that notice dated 06.02.2017 was not necessary in law. If that be so, the authority should have realised that the notice was being dispatched after the last date permitted for the petitioner to react. For a moment if we believe that late dispatch of the notice was an administrative lapse and the Deputy Commissioner himself may not be aware about such time lapse, nevertheless, when he has taken an action as strong as of attaching a bank account of an assessee and withdrawing a sizeable sum of more than Rs. 19Lacs from such bank account unilaterally, least that was expected of him was to ascertain that the notice was duly dispatched and received by the assessee. If he had exercised such basic care, he would have immediately realised that Page 6 of 8 HC-NIC Page 6 of 8 Created On Tue Aug 15 08:00:04 IST 2017 C/SCA/6202/2017 ORDER the notice was wholly redundant and the opportunity granted in the notice was an eyewash. Thus, the respondent affected recovery from the bank account of the petitioner without following due process. It is true that, the petitioner ought to applied to the Assessing Officer or to the Appellate Authority for keeping the additional tax demand in abeyance, which the petitioner did not do. Nevertheless, this would not enable the authorities to ignore the legal requirements before affecting the recovery. 6 Under the circumstances, the recovery of Rs.19,22,770/ made by the respondent is declared to be illegal. The respondent has not setup a case that the petitioner is a chronic defaulter, a person who may ultimately not be able to pay the dues if the appeal is dismissed or that there are other assessment or appeals pending, in which sizeable tax demands are held up. Under the circumstances, the petitioner should get the benefit of stay pending the appeal on depositing 15 percent of the disputed tax dues. The respondent shall therefore refund 85 percent of the sum of Rs.19,22,770/ recovered from the petitioner Page 7 of 8 HC-NIC Page 7 of 8 Created On Tue Aug 15 08:00:04 IST 2017 C/SCA/6202/2017 ORDER and retain 15 percent thereof by way of tax, pending outcome of the petitioner's appeal before the Commissioner. This shall be done latest by 15.07.2017. If so done, the amount shall not carry any interest. If not from the date of recovery till actual return, the amount shall carry simple interest at the rate of 8 percent per annum.
(AKIL KURESHI, J.) (BIREN VAISHNAV, J.) Bimal Page 8 of 8 HC-NIC Page 8 of 8 Created On Tue Aug 15 08:00:04 IST 2017