Karnataka High Court
Principal Commissioner Of Income Tax ... vs Bidar Nirmiti Kendra on 27 May, 2019
Author: Aravind Kumar
Bench: Aravind Kumar
1
IN THE HIGH COURT OF KARNATAKA
KALABURAGI BENCH
DATED THIS THE 27TH DAY OF MAY, 2019
PRESENT
THE HON'BLE MR. JUSTICE ARAVIND KUMAR
AND
THE HON'BLE MR. JUSTICE P.G.M. PATIL
WRIT APPEAL No.200650/2018
BETWEEN:
1. THE PRINCIPAL COMMISSIONER
OF INCOME TAX
KALABURAGI - 585 401.
2. INCOME TAX OFFICER
WARD NO.1, BIDAR - 585 401.
3. THE COMMISSIONER
OF INCOME TAX (APPEALS)
KALABURAGI - 585 101.
(TRANSPOSED AS PER ORDER
DATED:19.09.2018)
...APPELLANTS
(BY SRI. AMEET KUMAR DESHPANDE., ADVOCATE)
AND:
1. BIDAR NIRMITI KENDRA
BASAWESHWARA CIRCLE
NAUBAD, BIDAR - 585 403
REPRESENTED BY ITS
PROJECT MANAGER
SRI. SYED ZAFAR ALI.
2
2. AXIS BANK LTD.,
BIDAR BRANCH, BIDAR
REPRESENTED BY ITS
BRANCH MANAGER.
... RESPONDENTS
(BY SRI. CHAITANYA KUMAR ON BEHALF OF
MS. LAKSHMI MENON., ADVOCATE FOR R-1;
SRI. C.K. NANDAKUMAR., SRI. RAGHURAM CADAMBI.,
SRI. BHAIRAV KUTTAIAH., ADVOCATES;
SRI. A.M. NAGARAL., ADVOCATE FOR C/R-1;
V/O DATED:19.09.2018 R-2 IS TRANSFERRED
AS APPELLANT NO.3;
V/O DATED:31.10.2018 NOTICE TO R-2
IS DISPENSED WITH)
THIS WRIT APPEAL IS FILED UNDER SECTION 4
OF THE KARNATAKA HIGH COURT ACT, BY THE
ADVOCATE FOR APPELLANT PRAYING THAT THIS
HON'BLE COURT TO, ALLOW THIS APPEAL AND SET
ASIDE THE FINAL ORDER DATED:07.08.2018 PASSED
BY THE LEARNED SINGLE JUDGE IN
W.P.NO.201260/2018 & 201288/2018, 201300/2018 (T-
IT), AND TO PASS ANY OTHER APPROPRIATE ORDERS
AS THIS HON'BLE COURT MAY DEEM FIT TO GRANT IN
THE CIRCUMSTANCES OF THE CASE, IN THE INTEREST
OF JUSTICE.
THIS WRIT APPEAL HAVING BEEN HEARD AND
RESERVED, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, ARAVIND KUMAR J.,
DELIVERED THE FOLLOWING:
3
JUDGMENT
This intra-Court appeal is directed against the order dated 7.8.2018 passed in W.P.201260/2018, 201288/2018 & 201300/2018 (T-IT) whereunder appellant herein has been directed to refund a sum of Rs.15,82,41,007/- and it has been made clear that refund is subject to recovery of Rs.74,03,763/-.
2. The parties are referred to as per their rank in the writ petition for the sake of convenience. BRIEF BACKGROUND OF THE CASE:
3. The petitioner - assessee is incorporated as a Society under the Karnataka Societies Registration Act, 1960 and as a Nodal Agency facilitate implementation of certain welfare projects on behalf of the State. The funds provided by the State Government are routed through petitioner society to carry out certain construction activities on behalf of local authorities which includes low cost housing, Government offices, Hospitals, schools, bus stands, drains, roads, bridges, etc. for being 4 implemented on behalf of Panchayats, Local Bodies, etc. It is governed by a Board that is comprised of Government Officials including the Deputy Commissioner, Bidar District as its Chairman. Undisputedly, petitioner had not filed its return of income.
4. Third respondent passed assessment orders for the assessment years 2010-11, 2011-12, 2012-13 & 2013-14 under Section 143(3) r/w Section 147 & 264 of the Income Tax Act, 1961 ('Act' for short) on 22.02.2016 and 07.03.2016 respectively determining the tax liability of the petitioner and a total demand for Rs.27.31 Crores came to be raised. Subsequently, by order dated 29.12.2016 third respondent passed assessment orders for the assessment years 2009-10 and 2014-15. However, during the interregnum period, third respondent passed an order under Section 281(b) of the Act for the assessment year 2010-11 to 2014-15 attaching the Bank accounts of the petitioner for a period of six 5 months i.e., up to 30.03.2016 by order dated 19.10.2015 to an extent of Rs.7 Crores vide Annexure-G.
5. Petitioner - assessee preferred a revision petition under Section 264 of the Act against the assessment orders passed under Section 144 read with Section 147 dated 22.2.2016 and 7.3.2016 for the assessment years 2010-11, 2011-12, 2012-13 & 2013-14. Said revision petition came to be preferred on 21.03.2016 before the first respondent and it was allowed on 29.12.2016 by setting aside the assessment orders dated 22.02.2016 & 07.03.2016 respectively.
6. In the meanwhile, for the said period, third respondent had recovered a sum of Rs.12.61 Crores on different dates pursuant to the assessment orders and on the basis of demands raised thereunder. For the purposes of convenience, the following tabular column is extracted which would throw a light on the sequential events and dates.
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Sl. A.Y Assessed Date of Demand Tax Date of Balance
No. Income Assessment Raised Collected collection/ Tax Payable
order Recovery
1. 2010-11 108744860 22.02.2016 78965070 78565070 23.03.2016 0
400000 13.05.2016
2. 2011-12 120449290 07.03.2016 81509200 2044784 22/04/2016 47141364
32323052 16/05/2016
3. 2012-13 120969770 07.03.2016 70647550 12808971 16/05/2016 57837679
4. 2013-14 82977940 07.03.2016 42049850 0 42049850
TOTAL 43,31,41,860 27,31,71,670 12,61,42,777 14,70,28,893
7. After the first respondent set aside the assessment orders dated 22.2.2016 and 07.03.2016 vide Annexures-F to F4 and remitted the matter back to third respondent for passing assessment order afresh, assessment orders for the period 2010-11 to 2013-14 came to be passed on 21.12.2017 and 19.12.2017 respectively under Section 143(3) read with Section 264 of the Act. Likewise, for the assessment year 2015-16, revised assessment order came to be passed under Section 143(3) of the Act by the third respondent on 28.12.2017 vide Annexure-H to H4 by determining the taxable income and demand for tax came to be raised thereunder. Notice dated 7 08.02.2018 under Section 226(3) of the Act came to be issued to the petitioner's banker namely, 4th respondent to pay an amount of Rs.4,38,06,092/- due from petitioner for the assessment years 2011-12 to 2015-16 vide Annexure-M and said amount came to be recovered through the assessee's bank by third respondent on 17.2.2018 pursuant to the notice dated 08.02.2018 - Annexure-M. Petitioner filed an application under Section 220(6) of the Act for stay of the demand for the assessment years 2010-11 to 2015-16, which came to be considered by third respondent and stayed the demand on 19.02.2018 and also intimated that a sum of Rs.4,38,06,092/- has been recovered.
8. Being aggrieved by the above said assessment orders, assessee had preferred first appeal before the CIT (Appeals) on 23.01.2018 and said appeals came to be dismissed on 19.03.2018.
9. Assessee filed writ petition for quashing of letters dated 28.03.2018 and 07.04.2018 (Annexures- 8 A and B), notice issued under Section 226(3) of the I.T.Act by the second appellant herein and also for a writ of mandamus to the appellants herein to refund the amount recovered in excess of 20%, contending interalia that statutory prescribed limit for pre- deposit require to be paid by the assessee in terms of the Board's Modified Circular bearing F No.404/72/93-IT CC dated 31.07.2017 and also for a further direction to the appellants not to attach, freeze or initiate any coercive steps for recovery of the balance due.
10. The learned Single Judge by order dated 7.8.2000 has allowed the writ petition in part by arriving at a conclusion that second appellant herein had acted upon beyond the scope of the Act and recovered the amount in excess of prescribed minimum limit which is required to be deposited by the assessee (writ petitioner) while challenging the order of CIT (Appeals). It has been further held that second appellant herein is statutorily prevented from 9 recovering the amount and a sum of Rs.15,82,41,007/- recovered by second appellant as in excess came to be ordered for being refunded. Hence, this appeal is preferred by respondents - 1 and 3 in the writ petition challenging the correctness and legality of the order dated 07.08.2018 passed in W.P.Nos 201260/2018, 201288/2018 and 201300/2018 (T-IT).
11. We have heard the arguments of Sri Amit Kumar Deshpande, learned Advocate appearing for appellant and Ms. Lakshmi Menon, appearing on behalf of Sri C.K.Nandakumar for respondent-1. By order dated 19.09.2018 & 31.10.2018 notice to respondents-2 and 3 came to be dispensed with.
It is the contention of Sri Amit Kumar Deshpande, learned Advocate appearing for appellant that the writ petition itself was not maintainable, since the order of assessment came to be passed under the provisions of Income Tax Act, 1961 and as such, the petitioner ought to have availed alternate 10 remedy of appeal before the Income Tax Appellate Tribunal. He would further contended that certain observations made by learned Single Judge was not called for and the order of stay granted by the appellant No.2 against the demand raised by first appellant was effective only till the appeal came to be disposed of before the CIT (Appeals) on 19.03.2018 and as such, the demand raised became effective. On this ground, he sought to defend the impugned notices issued under Section 226(3) of IT Act.
12. He would also contend that appellant has a statutory duty under Chapter XVII-D of the IT Act to recover the assessed tax and no provision under the IT Act restrains the IT Authority from recovering the tax demand raised, merely on the ground that appellate remedy is available to the assessee. He would elaborate his submission by contending that the grievance of the writ petitioner is with regard to recovery made subsequent to the dismissal of the appeal by CIT (Appeals) on 19.03.2018 and there 11 being no impediment under the statute for recovering the said amount, he contends that writ issued for refund of the amount is erroneous.
13. Insofar as the Circulars issued by the Department is concerned, he would submit that the stay of demand of tax raised in assessment order would prescribe the appellate authority to insist for 20% of the demand made and it would be applicable only insofar as first appeal is concerned.
14. He would also contend that the learned Single Judge had erred in not considering Section 226 and other provisions of Chapter XVII - D which enables the second respondent to recover the demand upon dismissal of the appeal before the first appellate authority. His further contention is, the order for refund is not in consonance with the Income Tax business application module for issuing refund as the Department is functioning on an Online system for filing of returns and issuing refund. He would submit that until and unless the appellate Tribunal 12 which is ceased of the matter concludes the tax liability of writ petitioner, refund of the amount would not arise. Hence, he has prayed for allowing the appeal and dismissing the writ petition by setting aside the order of learned Single Judge dated 07.08.2018.
15. Per contra, Ms.Lakshmi Menon, learned Advocate appearing for respondent-1 (writ petitioner) would support the order under challenge by contending that it is a body of Government Officials and without considering the financial hardship which the writ petitioner would be put to, appellants have proceeded to take coercive steps.
16. She would contend that the original assessment orders passed having been set aside on 29.12.2016 by the first appellant under Section 264 of the IT Act, the amount recovered or tax collected in a sum of Rs.12,61,42,777/- ought to have been refunded and it was not done and even after the revised assessment orders came to be passed on 13 21.12.2017 and 19.12.2017 for the assessment years 2010-11 to 2013-14 and for the assessment year 2015-16 on 28.12.2017, the amounts already recovered was not repaid but on the other hand, second appellant proceeded to recover between 17.02.2018 to 12.04.2018 the balance tax payable by attaching the accounts of the petitioner. Though petitioner had filed an appeal on 23.01.2018 and an application under Section 220 (6) of the Act for stay of the demand for the assessment years 2010-11 to 2015-16 which came to be granted on 19.02.2018 whereunder the tax demanded from petitioner came to be stayed. Hence, she would contend that when the statute provides for filing an appeal within the prescribed period namely, within 30 days, the second appellant could not have recovered the amount before the expiry of period of limitation and as such, the amount so recovered has been rightly ordered to be refunded by the learned Single Judge which would not call for interference. Hence, she prays for dismissal of the appeal.
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17. Having heard the learned Advocates appearing for the parties and on perusal of the records, the first contention raised with regard to maintainability of writ petition requires to be dealt with.
18. In the instant case, the writ petitioner has invoked the extraordinary jurisdiction vested under Article 226 of the Constitution of India alleging that fundamental right vested with the petitioner has been violated namely, the right to file an appeal against an order of assessment being a right statutorily carved out and even before availing the said statutory right of appeal, the authorities are not entitled to take coercive steps for recovery of the amount.
19. There cannot be any dispute to the proposition of law that exercise of extraordinary jurisdiction under Article 226 of Constitution of India is of wide amplitude and exercise of such power would be under four exceptions.
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Violation of fundamental rights;
Violation of principles of natural justice; Order made without jurisdiction; and Vires of statute is under challenge.
However, where the injustice is sought to be perpetrated, the right vested under Article 226 of Constitution of India can be exercised and it is a question of discretion. Even in case of availability of alternate remedy would not be an absolute bar for exercise of extraordinary jurisdiction and exercise of jurisdiction even in such circumstances would be one of discretion depending upon facts and circumstances obtained in a given case. Hon'ble Apex Court in the case of WHIRLPOOL CORPORATION vs REGISTRAR OF TRADE MARKS, MUMBAI & OTHERS reported in (1998)8 SCC 1 has held that availability of alternate remedy is no bar for exercise of extraordinary jurisdiction vested under Article 226 of Constitution of India and the bar would be under the three contingencies as noticed herein above. It has been held: 16
"15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if and effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy as been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case- law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field."
20. Hon'ble Apex Court in COMMISSIONER OF INCOME TAX vs CHHABIL DAS AGARWAL reported in (2014)1 SCC 603 has recognized the exceptions to the rule of alternate remedy and held:
"15. Thus, while it can be said that this Court has recognized some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the 17 enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titaghur Paper Mills case and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."
21. In the light of aforestated position of law, when the facts on hand are examined, it would clearly indicate that the petitioner which is a society registered under the Karnataka Societies Act, funded exclusively by the State Government and acting as a Nodal agency for facilitating implementation of certain welfare projects had approached the learned Single Judge by invoking Article 226 & 227 of Constitution of India interalia contending that even before the statutory remedy of appeal being available 18 to challenge the order of assessment expired, the recoveries have been made and it has relied upon the Board's Instruction/Circular dated 31.07.2017 (Annexure-L) which was issued in partial modification of the Circular/Instruction No.1914 dated 21.03.2016 contending that the Department can raise a demand only to the extent of 20% of the tax demand raised and not beyond it and in the instant case, the recovery has been made beyond 20%. In other words, contending that recovery being without jurisdiction. It is in this premise, learned Single Judge had entertained the writ petition and we do not find any error in law for having entertained the said writ petition.
22. The incidental relief which has also been sought by the petitioner is for refund of the amount collected in excess of 20% of the tax demanded, contending that a first appeal was preferred before CIT (Appeals) on 23.01.2018 and an order of stay came to be passed on 19.03.2018 and during the 19 interregnum period i.e., between 19/21.12.2017 to 19.02.2018 the second appellant could not have recovered the amount and same is bad in law. In this background, we are of the considered view that contention raised with regard to maintainability cannot be accepted and it stands rejected.
23. The main thrust of the arguments advanced and grounds urged in the writ petition as it may emerge is to the effect that:-
(a) After the original order of assessment came to be passed during February/March, 2016, tax demand raised therein was partially collected/recovered and said orders came to be set aside on the revision petition filed under Section 264 of the Act came to be allowed by setting aside the assessment orders with a direction to complete the re-assessment afresh by remanding the matter back to the assessing officer. Accordingly, fresh assessment order came to be passed with a total demand of tax to the tune of RS.21,90,30,460/- and on revision being allowed, the tax collected on the original assessment orders to the tune of Rs.12,61,42,777/- was not refunded.
(b) After fresh assessment order was passed raising a tax demand of Rs.21,90,30,460/-, by assessment orders dated 19.12.2017 (for the AY -
2011-12, 2012-13 & 2013-14), 20 21.12.2017 (for the AY - 2010-11) and dated 28.12.2017 (for the AY - 2015-
16), appeals came to be filed on 23.01.2018 along with an application under Section 226(3) of the Act for stay of the demand, which came to be granted on 19.02.2018 and during this interregnum period, a sum of Rs.4,38,06,092/- had been recovered, which was in excess of 20% of the amount prescribed under the Board's Circular bearing No.F.NO.404/72/93-
IT CC dated 31.07.2017 (Annexure-L).
(c) On dismissal of the First Appeals on 19.09.2013, assessee was contemplating of filing second appeals before the Income Tax Appellate Tribunal and even before the expiry of 60 days period, the Bank account of assessee was attached on 28.03.2018 and an amount of Rs.5.73 crore was recovered on 12.04.2018.
(d) Thus, even before the petitioner was made aware or could go through the contents/effect of the orders dated 19.03.2018 (dismissal of First Appeals) and received on 27.03.2018 to enable it to take steps to file necessary appeals before the Tribunal, coercive measures to forcefully recover the balance demand have been initiated and thereby, crippling the activity of petitioner and total recovery made is more than 70% of the total demand.
In the background of above stated facts, it requires to be noticed that a notice of demand under section 156 of the Act is required to be served upon the assessee, by the assessing officer, specifying the sum so 21 payable. Chapter XVII-D of the Act provides for collection and recovery of the sum due by the assessee. Sub-section (1) of Section 220 mandates that any amount, otherwise than by way of advance tax, which has been specified in the demand notice issued under section 156 would be payable within 30 days of service of notice and proviso thereto enables the assessing officer for his reason to believe that it will be detrimental to revenue if full period of 30 days is allowed, he may with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand would be paid within such period being less than 30 days, as specified by him in the notice of demand. A notice of demand served upon the assessee shall be deemed to be valid till the disposal of the appeal, in the event of any appeal or other proceeding is initiated in respect of the amount so specified in the notice of demand. Sub-section (2) of Section 220 enables the revenue to levy simple interest @ 1% for every month or part of a month on the amount so due. Sub-section (3) of Section 220 22 empowers the assessing officer to extend the time for payment or allow payment by installments subject to such conditions as he may think fit to impose in the circumstances of the case.
24. Under Section 226(3)(i), the assessing officer is empowered to issue notice in writing to require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee, to pay to the assessing officer either forthwith or upon the money becoming due or being held or at or within the time specified in the notice, so much of the money as is sufficient to pay the amount due by the assessee as the case may be.
25. A plain reading of Section 240 would indicate that as a result of any order passed in appeal or other proceeding under the Act, refund of any amount becomes due to the assessee, the assessing officer is required to refund the amount to the assessee without the necessity of assessee making a 23 claim. First proviso to said section would indicate that in the event of assessment set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment. Second proviso would disclose that in the event of assessment is annulled, the refund would become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee.
26. Chapter XX of the Act provides for appeals and revisions. The orders which are appealable to the Deputy Commissioner, Appeals is provided under Section 246(1) and (1A). Sub-section (2) of Section 246 would indicate that orders which are appealable to the Commissioner (Appeals). Sub- section (3) of Section 246 provides for transferring any appeal by the authorities to such other authorities as specified thereunder. Section 246A enables the assessee to file appeal/s before 24 Commissioner (Appeals) against the orders specified in clause (a) to clause (r) of sub-section (1).
27. Sub-section (2) of Section 249 prescribes the time limit of 30 days of the date as specified in clause (a) to (c) as indicated thereunder. Sub-section (3) enables the appellate authority to condone the delay after the expiration of the period on sufficient cause being shown.
28. Section 281B of the Act enables the assessing officer to attach provisionally any property belonging to the assessee in the manner provided in the second schedule by previous approval of the authorities specified thereunder. Sub-section (2) would indicate that such attachment would cease to have the effect after the expiry of period of 6 months from the date of order made under sub-section (1), provided for the reasons to be recorded in writing said period is extended, which extension shall not exceed two years.
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29. Where a statute provides right of appeal, such statutory right cannot be scuttled by resorting to coercive recovery, that too, even before the prescribed appeal period is over. The over zealous officers of the Revenue in order to achieve the targets fixed are tempted to resort to such recovery, ignoring the principles of law and also crossing their jurisdictional limits and in utter disregard to the extant circulars governing such mode of recovery. In cases where the Bank guarantees are offered by the assessees, same cannot be encashed or attempt to encash would be highly improper that too, before the expiry of the statutory period prescribed under the enactment for filing an appeal.
30. Hon'ble High Court of Mumbai in the matter of UTI MUTUAL FUND vs INCOME TAX OFFICER reported in (2012) 345 ITR 71 has held that administrative directions for fulfilling recovery targets for the collection of revenue should not be at the expenses of foreclosing remedies which are available 26 to assessee for challenging the correctness of a demand. The sanctity of rule of law must be preserved. The remedies which are legitimately open in law to an assessee to challenge a demand cannot be allowed to be foreclosed by hasty recourse to coercive powers and noticing the guidelines in regard to the manner in which the application for stay should be disposed of as observed in KEC INTERNATIONAL LIMITED vs B.R.BALAKRISHNA reported in (2001) 251 ITR 158, the Divison Bench has directed the revenue authorities to follow the guidelines as prescribed thereunder. It reads:
"1. No recovery of tax should be made pending
(a) Expiry of the time limit for filing an appeal;
(b) Disposal of a stay application, if any, moved by the assessee and for a reasonable period thereafter to enable the assessee to move a higher forum, if so advised.
Coercive steps may, however, be adopted where the authority has reason to believe that the assessee may defeat the demand, in which case brief reasons may be indicated.
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2. The stay application, if any, moved by the assessee should be disposed of after hearing the assessee and bearing in mind the guidelines in KEC International;
3. If the Assessing Officer has taken a view contrary to what has been held in the preceding previous years without there being a material change in facts or law, that is a relevant consideration in deciding the application for stay;
4. When a bank account has been attached, before withdrawing the amount, reasonable prior notice should be furnished to the assessee to enable the assessee to make a representation or seek recourse to a remedy in law;
5. In exercising the powers of stay, the Income Tax Officer should not act as a mere tax gatherer but as a quasi judicial authority vested with the public duty of protecting the interest of the Revenue while at the same time balancing the need to mitigate hardship to the assessee. Though the assessing officer has made an assessment, he must objectively decide the application for stay considering that an appeal lies against his order:
the matter must be considered from all its facets, balancing the interest of the assessee with the protection of the Revenue."
In the background of above analysis of law, the Office Memorandum and extant circulars issued by the 28 Department by way of instructions to the authorities requires to be noticed.
31. As per Office Memorandum dated 21.02.2016 (Annexure-E), the procedure to be followed for recovering outstanding demand, including procedure for grant of stay of demand has been prescribed. A perusal of the same would disclose that under clause - 4, the assessing officer is empowered to grant stay of the demand till disposal of first appeal on payment of 15% of the disputed demand. However, it does not preclude the assessing authority to call upon the assessee to deposit in excess of the said 15% if he is of the view that the nature of addition resulting in the disputed demand is warranted on account of same issue having been confirmed by the appellate authorities in the earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the revenue or addition is based on credible evidence collected in search or survey operation, etc.,. The assessing 29 officer if he is of the view that nature of addition resulting in disputed demand is such that payment of a lumpsum amount should be lower than 15% on account of same reasons as assigned herein above, he may refer the same to the administrative Principal Chief Commissioner of Income Tax or Commissioner of Income Tax, who after considering all the relevant facts, would decide the quantum/proportion of the demand to be paid by the assessee as lump sum payment for granting a stay of the balanced demand.
This Office Memorandum came to be modified subsequently by O.M. dated 31.07.2017 (Annexure-L) whereunder the rate prescribed at 15% is revised to 20% of the disputed demand, where the demand is contested before CIT (A). However, it requires to be noticed at this juncture itself that these two O.Ms are referable to original O.M. issued on 2.12.1993 whereunder it has been specifically brought to the notice of the assessing officer steps to be taken for recovery of the tax demand and comprehensive instructions have been issued in order to streamline 30 recovery procedures. Apart from indicating several instructions to be followed, it has been indicated/prescribed specifically the following instructions:
"2. The Board is of the view that, as a matter of principle, every demand should be recovered as soon as it becomes due. Demand may be kept in abeyance for valid reasons only in accordance with the guidelines given below:
A. xxx B. xxx C. Guidelines for staying demand:
i. A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand . A few illustrative situations where stay could be granted are:
It is clarified that in these situations also, stay may be granted 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 above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive.
ii. In granting stay, the Assessing Officer may impose such conditions as he may think fit. Thus he may - a. require the assessee to offer suitable security to 31 safeguard the interest of revenue; b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in instalments; c. require an undertaking from the assessee that he will co-operate in the early disposal of appeal failing which the stay order will be cancelled. d. reserve the right to review the order passed after expiry of a reasonable period, say up to 6 months, or if 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 above situations; e. reserve a right to adjust refunds arising, if any, against the demand.
iii. Payment by installments may be liberally allowed so as to collect the entire demand within a reasonable period not exceeding 18 months.
iv. Since the phrase "stay of demand" does not occur in section 220(6) if the Income-tax Act, the Assessing Office should always use in any order passed under section 220(6) [or under section 220(3) or section 220(7)], the expression that occurs in the section viz., that he agrees to treat the assessee as not being default in respect of the amount specified, subject to such conditions as he deems fit to impose.
v. While considering an application under section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order."32
32. From the above, it would emerge that, it is the declared policy of the Department not to initiate recovery proceedings during the period prescribed under the Act for filing an appeal would expire, unless the situation so warrants that the assessing officer has reason to believe that it will be detrimental to the interest of the revenue, can proceed to recover the sum specified in the notice of demand within a shorter period.
33. Turning back our attention to the facts on hand, it requires to be noticed that in the first instance, for the assessment year 2010-11 to 2013- 14, assessment order came to be passed under Section 144 read with Section 147 of the Act on 22.02.2016 and 07.03.2016 (Annexure-C to C3). Being aggrieved by the same, petitioner - assessee filed revision petitions before the Principal Commissioner of Income Tax under Section 264 of the Act on 21.03.2016 and said revision petitions came to be allowed by order dated 29.12.2016 vide 33 Annexures-F to F3. However, even prior to the original assessment order came to be passed during February/March 2016, the jurisdictional Income Tax Officer passed an order under Section 281B of the Act attaching an amount of Rs.7 crores in the assessee's account at the Banks specified in the order dated 19.10.2015 (Annexure-G). It is true that subsequent to the original order of assessment being set aside on 21.03.2016 in the revision petitions by the Principal Commissioner of Income Tax, there was no order for refund of the tax already collected. At this juncture, it would be appropriate to refer to the provision governing refund namely, proviso (a) to Section 240 of the Act. It reads:
"240. Where, as a result of any order passed in appeal or other proceeding under this Act", refund of any amount becomes dues to the assessee, the Assessing Officer shall except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf:
Provided that where, by the order aforesaid, -34
(a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment."
Thus, refund in case of assessment order being set aside with a direction to pass fresh order of assessment would not be automatic and it would become due only on fresh assessment being passed. Thus, the first ground raised in the writ petition cannot be sustained and this aspect having not been gone into by learned Single Judge, we are of the considered view that refund would not be automatic in case of order of assessment being set aside in appeal or other proceeding under the Act and it would be subject to Section 240 of the Act. It would be apt and appropriate to note at this juncture that for the assessment years 2010-11 to 2013-14, assessment orders came to be passed on 22.02.2016 (AY - 2010-11) and on 07.03.2016 (AY - 2011-12 to 2013-14). The demand raised under Section 156 has 35 not been recovered or collected within 30 days. But, on the expiry of 30 days and for immediate reference on the dates on which the tax collected or recovered can be noticed from Tabular A already extracted herein above, in order to avoid repetition.
34. On such order in revision petitions being passed on 21.03.2016 by the Principal Commissioner of Income Tax, in exercise of the power vested under Section 264 of the Act, jurisdictional assessing officer passed a revised assessment orders under Section 143(3) read with Section 264 of the Act on 21.12.2017 (for the AY - 2010-11), on 19.12.2017 (for the AY-2011-12 to 2013-14) and on 28.12.2017 (for the AY - 2015-16) vide Annexures-H to H4. A perusal of the said orders would disclose that a demand has been raised and set off has been given to the recoveries already made as tax paid/prepaid taxes. For immediate reference, the details thereof is extracted herein below:
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Sl. A.Y. Assessed Assessment Demand Tax Date of Balance No. Income Order passed u/s Raised Collected/ collection/ Tax and date Recovered Recovery Payable 1 2010-11 143(3) r.w.s 264, 105946438 0 0 0 DT.21.12.2017 2 2011-12 143(3) r.w.s 264, 3,56,71,288 12.04.2018 115931928 4,45,89,110 0 DT.19.12.2017 89,17,822 17.02.2018 143(3) r.w.s 264, 2,16,55,498 12.04.2018 3 2012-13 112877960 5,54,02,530 2,18,66,523 DT.19.12.2017 1,08,80,506 17.02.2018 4 2013-14 143(3) r.w.s 264, 66382944 3,43,08,890 68,61,778 17.02.2018 2,74,47,112 DT.19.12.2017 TOTAL 40,11,39,270 13,33,00,530 8,39,86,892 4,93,13,635 2015-16 143(3), 5 170568060 8,57,29,930 1,71,45,986 17.02.2018 6,85,83,944 DT.28.12.2017 GRAND TOTAL 57,17,07,330/- 21,90,30,460 10,11,32,878 11,78,97,579
35. It is at this juncture, the extant circulars or O.M referred to herein above requires to be recapitulated. The Department is clear that as a matter of principle, every demand should be recovered as soon as it becomes due. Section 156 of the Act would indicate that the assessing officer is to serve upon the assessee a notice of demand and information provided thereunder would be deemed to be a notice of demand for the purposes of said section. Section 220 of the Act mandates that any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under Section 156 is to be paid within 30 days of the notice.
Proviso to the said section as noticed already herein 37 above would enable the assessing officer to reduce the period of 30 days, if he has reason to believe that it will be detrimental to the revenue if the full period of 30 days is allowed, which reduction of period can be subject to previous approval of the Joint Commissioner.
36. In the instant case, as noticed herein above and at the cost of repetition, there is no dispute with regard to the recovery made immediately after the first assessment orders came to be passed during February/March, 2016. In other words, recovery so made was beyond the period of 30 days from the notice of demand. However, on revised assessment orders being passed during December, 2017 i.e., on 19.12.2017, 21.12.2017 & 28.12.2017 recovery has been made in a sum of Rs.4,38,06,092/- on 17.02.2018. The order of fresh assessment having been passed during December, 2017, the assessee had right of appeal being filed within 30 days from the date of intimation of the order and undisputedly, 38 assessee filed first appeals before CIT(A), Kalaburagi on 23.01.2018 and order of stay came to be passed on 19.02.2018, by which time the sum of Rs.4.38 Crores for the period 2011-12 to 2015-16 had already been recovered on 17.02.2018. In fact, the balance amount of tax as per the fresh assessment orders which remained unpaid for the years 2010-11 to 2015-16 was to the tune of Rs.21,90,30,460/- and 20% of the same would be Rs.4,38,06,092/-. Thus, on facts, there is no infraction of either the statutory provisions namely, the amounts having been recovered even prior to the period prescribed for filing the appeal having expired or the Department having recovered in excess of 20% as prescribed under the O.M. dated 31.07.2017 (Annexure-L).
37. The third limb of the argument canvassed on behalf of the petitioner - assessee is that even before it could go through the order dated 19.03.2018 passed by CIT (Appeals) which is said to have been received on 27.03.2018, a sum of Rs.5.73 crores has 39 been forcefully recovered on 07.04.2018 (factually recovered on 12.04.2018 in a sum of Rs.3,56,71,288/- + Rs.2,16,55,498/-) and thereby it had crippled the activities of the assessee. In order to buttress the above urged ground, O.M.F No.404/72/93-ITCC dated 29.02.2016 (Annexure-E) as well as O.M. dated 31.07.2017 (Annexure-L) have been relied upon. In fact, the Central Board of Direct Taxes (for short 'Board') by Instruction for recovery of outstanding tax amounts had issued instruction No.1914 F. No.404/72/93 ITCC dated 02.12.1993 for streamlining the recovery procedures and clause 2 and sub-clause - C(i) to (v) has already been extracted herein above, whereunder it is clarified that every demand should be recovered as soon as it becomes due and such demand can be kept in abeyance for valid reasons only in accordance with guidelines indicated thereunder. The said Instructions came to be partially modified by Instruction No.1914 dated 21.03.1996 and subsequently, further modified on 29.02.2016 40 (Annexure-E). Subsequently, on 31.07.2017 (Annexure-L) it has been partially modified. A bare perusal of these Instructions/O.Ms issued by the Board would clearly indicate that it relates to the power of the assessing officer to be exercised under Section 220(6) of the Act. Section 220(6) of the Act would indicate that where an assessee has presented an appeal under Section 246 or Section 246A of the Act, the assessing officer may, in his discretion and subject to such conditions as he may thinks 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 time for payment has expired, as long as such appeal remains undisposed of. Thus, emphasis is on the expression "appeal" namely, the appeal preferred by the assessee under Section 246 or 246A of the Act. Thus, legislature has consciously omitted to incorporate the provision of Sections 253 and 254 of the Act from the purview of Section 220(6), in other words, provision of Section 220 is applicable or 41 relatable only to such appeals which are filed under Section 246 and 246A which are pending. In fact, a plain reading of the three provisos to sub-section (2A) of Section 254 would clearly indicate that the power to stay the order of first appellate authority is vested with the Tribunal and it is the Tribunal alone which is empowered to consider such prayer for stay. In this background, when the three Instructions/O.Ms. issued by the Board are perused at the cost of repetition, it would clearly indicate that said Instructions are applicable to streamline the process of grant of stay, insofar as, it relates to tax demand disputed before CIT (A) and for purposes of immediate reference, clause 4 of the O.M. dated 29.02.2016 (Annexure-E) as well as paragraph 2 of the O.M. dated 31.07.2017 (Annexure-L) are extracted herein below:
"4. In order to streamline the process of grant of stay and standardize the quantum of lump sum payment required to be made by the assessee as a pre-condition for stay of demand disputed before CIT(A), the following modified 42 guidelines are being issued in partial modification of Instruction No.1914:"
Paragraph 2 of O.M. dated 31.07.2017.
"Vide O.M.No.404/72/93-ITCC dated 29.2.2016, revised guidelines were issued in partial modification of Instruction No.1914, wherein, inter alia, vide para 4(A) it had been laid down that in a case where the outstanding demand is disputed before CIT(A), the Assessing Officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in para (B) thereunder. Similar references to the standard rate of 15% have also been made in succeeding paragraphs therein."
38. Thus, reliance placed by the learned Advocate appearing for petitioner on the Instructions/O.Ms dated 29.02.2016 (Annexure-E) and 31.07.2017 (Annexure-L) would be applicable to a second appeal filed by the assessee before the Appellate Tribunal cannot hold water or in other words, it cannot be made applicable.
43
39. It is also required to be noticed that assessee cannot contend as a matter of right, that under all circumstances, Department cannot recover more than 20% of the tax demand, that too by relying upon the instructions/OMs dated 29.02.2016 (Annexure-E) and 31.07.2017 (Annexure-L), inasmuch as, it only refers to the power of the assessing officer to be exercised under Section 220(6) of the Act when first appeal is pending before the first appellate authority.
40. In the instant case, first appeal filed by the assessee before CIT (A) on 23.01.2018 came to be dismissed on 19.03.2018 and served on the assessee on 27.03.2018. As against a total tax demand of Rs.31,08,52,438/- (for the assessment years 2010-11 to 2015-16) a sum of Rs.16,99,48,869/- had already been recovered. Thus, leaving a balance of Rs.14,09,03,569/- towards tax demand payable by the assessee. The moot question which would arise would be whether the Department could have 44 recovered a sum of Rs.5.73 Crores by attaching the bank account of the assessee on 28.03.2018 and recovering the same on 12.04.2018. There being no legal embargo, on the part of the Department to take steps to recover the amount, it could have called upon the assessee to furnish such security or undertaking to pay the said amount within the stipulated period of time on the second appeal being dismissed.
41. It is also pertinent to note at this juncture that the assessee had submitted a representation to the second appellant on 07.04.2018 (Annexure-N) requesting to keep the demands in abeyance. Sub section (3) of Section 220 of the Act enables the assessing officer to extend the time for payment and before consideration of the said application. However, in the light of first appeals filed by petitioner having already been dismissed, tax due from petitioner which came to be recovered on 12.04.2018 to the tune of Rs.5.73 Crores would only 45 be refundable. Thus, under any circumstances the claim of the assessee for refund of the amount cannot be beyond Rs.5.73 Crores as indicated in the garnishee notice dated 07.04.2018 (Annexure-B) issued by second appellant itself.
42. During the course of hearing of this appeal, an affidavit of undertaking came to be filed by the second appellant whereunder it is undertaken by the Department, that tax demand raised under respective assessment orders which has since been recovered from the assessee would be refunded within four (4) weeks from the date of the order of the tribunal, if decided in favour of the assessee i.e., writ petitioner. Undertaking furnished to this Court reads:
"2. I state that, in case the Hon'ble Income Tax Appellate Tribunal Bengaluru, decides the appeal Nos.1860/BANG/2018 to 1864/BANG/2018 in favour of the assessee i.e. Bidar Nirmiti Kendra, the amount of refund would be issued within four weeks from the date of receipt of order of Hon'ble Income Tax Appellate Tribunal Bangalore."46
43. Thus, we are of the considered view that ends of justice would be met to modify the order dated 07.08.2018 passed in W.P.No.201260/2018 and 201288/2018 and 201300/2018 (T-IT) by the learned Single Judge.
Hence, we proceed to pass the following:
JUDGMENT
(i) Writ appeal is allowed in part.
(ii) Order dated 07.08.2018 passed in
W.P.Nos.201260/2018 and
201288/2018 and 201300/2018 (T-IT) by learned Single Judge, is hereby modified and it is ordered that amount recovered by way of tax from petitioner shall be refunded within four (4) weeks from the date of order passed by the Income Tax Appellate Tribunal, Bengaluru, in Appeal Nos.1860/BANG/2018 to 1864/BANG/2018 in favour of the 47 assessee/writ petitioner only in the event of assessee/writ petitioner succeeding in the appeals as undertaken by second appellant.
(iii) In view of the above order, further directions issued by the learned Single Judge stands set aside.
(iv) No order as to costs.
Sd/-
JUDGE
Sd/-
JUDGE
*sp