Calcutta High Court
Anil Kumar Banerjee vs Union Of India And Ors on 3 March, 2014
Author: Harish Tandon
Bench: Harish Tandon
ORDER SHEET
W. P. No. 131 of 2014
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
ORIGINAL SIDE
ANIL KUMAR BANERJEE
Versus
UNION OF INDIA AND ORS
BEFORE:
The Hon'ble JUSTICE HARISH TANDON
Date : 3rd March, 2014.
For Plaintiff/Petitioner :Mr. Dipak Shome, Adv.
Mr. Bijon Majumdar, Adv.
For Respondent 1,2 & 3 : Md. Nizamuddin, Adv.
The Court : Assailing the notice issued under section 226(3) of the Income Tax Act, 1961, the petitioner has filed the instant writ petition before this Court. The said notice is sought to be challenged primarily on the ground that before issuing the order of attachment, no prior notice was served on the petitioner. In support of the aforesaid contention reliance is placed on a co- ordinate bench decision in the case of Purnima Das vs. Union of India & Ors. reported in (2010) 329 I.T.R. (Cal). The petitioner further attacked the action of the authorities for attaching the bank account on the plea that keeping an application under section 220(6) of the said Act as well as an application for stay 2 filed before the appellate authority for nearly two years, the authorities could not have proceeded hastily in passing an order for attachment. When the matter appeared at the motion stage Md. Nizamuddin, learned advocate for the department was directed to take instruction on the above issues.
The facts as it appear, are not disputed. On the basis of a proceeding initiated by the department, an ex parte order of assessment was passed by the assessing officer. The said order was assailed before the CIT (appeals) which is still pending. The petitioner approached the assessing officer under section 220(6) of the said Act on 1st March, 2012 with a prayer to treat him non- defaulter.
Mr. Shome, learned advocate for the petitioner vehemently submits that filing of an application, treating the assessee as non-defaulter, is not a mere formality. The quasi-judicial authorities are statutorily bound to apply their mind on the said application both objectively and dispassionate manner. Mr. Shome appears to have inspired by a division bench judgement of the Bombay High Court rendered in the case of Society of the Franciscan (Hospitaller) Sisters vs. Deputy Directors of Income-Tax (Exemptions) and Others reported in (2013) 351 I.T.R. 302 (Bom). One look at the judgement of the division bench of the Bombay High Court rendered in the above decision, it could be culled out is that the authorities who are discharging quasi-judicial functions cannot keep the application for stay pending and on the other hand to proceed for recovery by taking recourse to section 226 (3) of the said Act. The division bench in univocal term held that the application for stay is not a meaningless formality and the 3 fairness on the part of the quasi-judicial authority is an intrinsic element of such functions in these words ;-
"Applications for stay cannot be treated by the Assessing Officers or for that matter by the appellate authorities as meaningless formalities. Quasi- judicial authorities have to apply their mind in an objective and dispassionate manner to the merits of each application for stay. Which the interest of the Revenue has to be protected, it is necessary for Assessing Officers to realize that fairness to the assessee is an intrinsic element of the quasi-judicial function conferred upon them by law. Applications for stay must be disposed of at an early date. Such applications cannot be kept pending to obviate compliance with the need to evaluate the contentions of the assessee until after monies are recovered using the coercive arm of the law. Appellate authorities must set down time schedules for disposal of stay applications with reasonable expedition. The manner in which recourse has been made to the coercive process of law, leaves much to be desired and we are of the view that the action which was pursued was completely high handed and arbitrary. There could have been absolutely no apprehension that the assessee in the present case was likely to spirit out the monies which were invested in fixed deposit receipts. The assessee is an old trust which carries on welfare activities."
Md. Nizamuddin learned advocate for the department is very much vocal in contending that the division bench of the Bombay High Court decides the matter in the special facts involved therein. He relies upon the relief granted by the division bench in the said case wherein the division bench directed 75 per 4 cent of the tax to be deposited with the department by the assessee. This Court does not find any quarrel to the proposition that the decision of a case is decided on the facts involved therein as the additional or a little difference on the fact made tilt the decision in one way or other. The ratio which could be culled out from the above judgement for its a binding efficacy is that the authorities while keeping the application for stay in abeyance should not have hastily proceeded to pass an order for attachment or to take any coercive measures. In the present case an application for stay before the assessing authority was filed on 1st March, 2012. There is no explanation offered by the department as to why such application is not disposed of expeditiously. Md. Nizamuddin tried to give an explanation at the bar that the said application is bereft of any averments which may justify the invocation of the bars provided under section 220 (6) of the said Act. Such submissions have no foundation for the simple reason that the authorities have not set in motion the said application but have kept the same in suspended animation. Even if the application is devoid of any explanation and /or averments there is no impediment on the part of the authorities to decide the same, in one way or the other. Keeping the application for stay pending for nearly two years and thereafter proceeded to pass an order of attachment amounts to proceeding in haste and such action cannot be said to be free from arbitrariness and unreasonableness.
The other point which Mr. Shome canvassed before this Court is that before taking recourse to section 226 (3) of the said Act, the authority should have issued a prior notice to the assessee. The aforesaid submissions have been 5 made by Mr. Shome in taking aid from a judgement of the co-ordinate bench rendered in Purnima Das's case (supra). The co-ordinate bench held that ;-
"Admittedly, for the assessment year 2007-08 on December 24, 2009 order or assessment under section 143(3) of the Act was passed by the said respondent. Being aggrieved, on January 22, 2010 the petitioner preferred an appeal before respondent No. 3. Thereafter, on February 11, 2010 an application for stay under section 220 (6) of the Act for the assessment year 2007-08 was filed before the said respondent. It appears that on February 11, 2010 the income-tax authorities had issued four notices under section 226(3) of the Act upon the concerned branches of the Indian Overseas bank, Syndicate Bank, Bank of India and Central Bank of India who are the respondents herein. Thereafter, as noted, pursuant to the directions by the income-tax authorities on February 12, 2010 the branch manager of respondent No. 4 debited a sum of Rs.1,66,000 and consequently a debit note was issued. Thereafter, as evident from paragraph 8 of the affidavit-in-opposition filed by the Revenue, on February 15, 2010 copies of the notices under section 226(3) of the Act were served on the petitioner.
Now, the question is whether it was proper on the part of the Assessing Officer to attach and debit a sum without serving a copy of the notice of attachment on the assessee. Looking at the language of section 226(3) (iii) of the Act which stipulates that "A copy of the notice shall be forwarded to the assessee at his last address known to the (Assessing) Officer ...." The answer has to be in the negative. The argument on behalf of the Revenue that actual service of the notice of attachment is not necessary cannot be accepted since the use of the word 6 "shall" in section 226(3)(iii) mandates that such notice has to be served before action is taken. If recourse is not taken by the Revenue to the mode postulated under the Act it is bound to make the assessee off guard. Precisely for that reason service of notice prior to attachment is mandatory as evident from the language of section 226(3)(iii)."
The Hon'ble Judge who rendered the decision in the case of Purnima Das (supra) had no occasion to consider the prior co-ordinate bench decision rendered in the case of Golam Momen vs. Assistant Commissioner of Income - Tax and Others reported in 263 I.T.R. page 69. In the said decision it is held that mere filing an appeal does not tantamount to stay of the recovery proceedings. Section 226(3) of the Act contemplates the notice to be issued to the assessee but it does not say that prior notice before taking course to the aforesaid provision is required to the assessee. The aforesaid observations can be aptly quoted as under ;-
"A bare reading of the aforesaid provisions leaves no doubt that there is no scope for giving further hearing to an assessee once the Assessing Officer proceeds under section 226(3). All that the aforesaid sub-section directs is to "forward" a copy of the notice given to the person from whom money is payable to the assessee or who holds money on account of the assessee, to the assessee for his information. The assessee at this stage as not role to play except to be informed that the Assessing Officer has proceeded to recover the amount.
Such notice is generally forwarded to the assessee after the issue of notice upon the debtors or bankers of the assessee lest he can escape the recovery. 7 Therefore, I find no substance in the contention of Mr. Bhattacharya that for non service of notice under section 226(3)(iv) of the Act the process of recovery under section 226(3) should be annulled. With great respect, I am unable to subscribe to the opinion expressed by the learned judge of the Punjab and Haryana High Court in the case of Mohan Singh[1993] 204 ITR 571.
I thus find no substance in the contention of the petitioner that recovery of amount by giving notice under section 226(3) of the Act from the State Bank of India is visited in any way."
The judgement rendered in the case of Golam Momem (supra) which was not taken note of by the other co-ordinate bench in case of Purnima Das (supra) appears to me to have interpreted the provisions of section 226(3) in consonance with the legislative intend. The section does not postulate that before an action is set into motion, a notice is required to be served on the assessee but what is held is that if such an action is contemplated, the notice should also be served to the assessee and, therefore, this Court finds that the judgement rendered in the case of Golam Momen (supra) depicts the correct proposition of law.
In the instant case a special fact is also required to be narrated. The petitioner appears to have carrying on the business as a civil contractor and have purchased a flat on a hire purchase basis. Since a defaulter was committed, a proceeding was initiated at the instance of the financier which went up to the Supreme Court. The Supreme Court by an order dated 7th May 2012 directed the petitioner to pay the money in instalments in terms of the revised schedule agreed by the parties. According to the petitioner they have to pay Rs.1,36,243/- 8 per month in terms of the said order. Two consecutive defaults would make the financier entitled to repossess the flat.
Mr. Shome submits that it would be an unjust hardship on the part of his client if the amount which was deposited in the bank account for the purpose of meeting out the liability under the order of the Supreme Court is allowed to continue under the order of attachment issued by the department. The parties are unison on the fact that out of the total demand a sum of Rs.1 lac have already been paid by the petitioner. While considering the unjust hardship which may be caused to the assessee, the Court shall also bear in mind the interest of the revenue as well. Since the last date for making the instalment is due on 5th March 2014 this Court to mitigate the situation and to render justice between the parties, directs the petitioner to pay a further sum of Rs.1 lac in the manner as has been done earlier, by tomorrow in the department. For such limited purposes, the bank shall allow the petitioner to operate the bank account, under attachment. Immediately upon payment of sum of Rs. 1 lac to the department, the order of attachment shall stand recalled/revoked/ cancelled. The bank shall thereafter allow the petitioner to operate the bank account and permit the withdrawal of the other amounts therefrom.
In addition to the payment of Rs. 1 lac by tomorrow, the petitioner shall also pay a further sum of Rs. 2 lacs on or before 24th March 2014. If the aforesaid payments are made, the respondent authorities are directed to make all endeavour to dispose of the appeal before CIT (appeals)- XIX Calcutta within two weeks from he date of communication of this order. In default of any of the 9 payments as indicated above the order of attachment passed by the department shall remain and they will be free to further take steps as permissible under the law.
With these observations this petition is disposed of. No Costs. All parties concerned are to act on a signed photocopy of this order on the usual undertakings.
(HARISH TANDON, J.) SBI