Indian Chamber of Commerce and Others vs Director of Income Tax (Exemption) and Others

I.P. Mukerji, J.—Although initially it seemed that the writ application was completely meritless, it now appears that Ms. Sweta Ghatak, learned advocate for the petitioners, has been able to make out some substantial case in favour of the writ petitioners. For the assessment year 2010-11, the Income-tax Department claimed a sum of Rs. 50,42,410 as its dues from the writ petitioner. The assessment order was made on March 21, 2013. On April 22, 2013, this assessment order was challenged by the assessee-writ petitioner before the Commissioner of Income-tax (Appeals). However, the stay application was filed before the said authority on March 26, 2014.

The total demand was over Rs. 93 lakhs.

According to Ms. Ghatak, a sum of Rs. 42,96,760 was due to her client from the income-tax authorities as refund. According to Ms. Ghatak this sum of Rs. 42,96,720 was adjusted or set off by the income-tax authorities against the total demand from the refund amount.

Whilst the appeal together with the stay application was pending before the appellate authority, the Income-tax Department by an order in the nature of garnishee dated March 25, 2014, attached and obtained the payment from the Bank of Baroda with which the writ petitioners were maintaining their account a sum of Rs. 50,42,410 in full satisfaction of its claim.

Two questions are raised on behalf of the writ petitioners. ''

The first is that during the pendency of the appeal and the stay application the sum of Rs. 50,42,410 was realised in great haste. The action was arbitrary. Reliance was placed on a Division Bench judgment of the Delhi High Court in the case of Sony India Pvt. Ltd. Vs. Addl. Commissioner of Income Tax and Another, ; [2014] 100 DTR 177 and a Division Bench judgment of the Bombay High Court in the case of The Director of Income Tax (Exemption), Mumbai Vs. The Income Tax Appellate Tribunal Mumbai Branch B and The Maharashtra Housing and Area Development Authority, . I have gone through those judgments. I do not think that the facts of those cases are identical to those facts of this case. In those cases, an adverse decision had been made against the assessee and immediately thereafter, without granting him an opportunity of filing an appeal and obtaining a stay of that decision, recovery proceedings were started. Such hasty recovery was deprecated by the court, branding it as arbitrary.

In this case, the appeal is pending for about one and a quarter year. The stay application is pending before the Commissioner of Income-tax (Appeals) for about four months. It cannot be said that the writ petitioner received coercive action from the Income-tax Department with suddenness. It is trite that execution or recovery has to be made with promptitude. If a decree holder or the Revenue in income-tax cases sleeps over a demand there would be every likelihood of their being unable to realise the fruits of the decree or the demand.

Moreover, Mr. Nizamuddin is absolutely right when he submitted that in an identical matter relating to a previous year Indira Banerjee J. had passed an order disposing of a writ application on July 23, 2012, on more or less identical facts. Her ladyship directed expeditious disposal of the appeal and stay application before the income-tax authorities. The writ petitioners did not challenge this decision on appeal. Hence, they are estopped from contending the contrary to what is held in that order. But the case that is in favour of the writ petitioners, in my notion is CIT v. J.K. Industries Ltd. a Division Bench judgment of our court reported in Commissioner of Income Tax Vs. J.K. Industries Ltd., . In this case, the Division Bench observed that the Income tax Department could not unilaterally adjust the amount due on refund against a tax demand without giving a notice to the assessee. This was so because there was no appeal from set off orders.

Therefore, if an amount of Rs. 42,96,720 has been set off against the above income-tax demand, by the income-tax authorities without notice to the writ petitioners they have acted contrary to this Division Bench judgment. If that is the case, the Department will immediately remit that amount to the account of the writ petitioners with the Bank of Baroda mentioned in annexure P-10 at page 180 of the petition.

It will be open to the Income-tax Department to take steps with regard to the same in recovery proceedings. Such transmission of the above amount to the bank account of the writ petitioners has to be made within four weeks of communication of this order. Following the order of Indira Banerjee J. dated July 23, 2012.

I direct the Commissioner (Appeals) to dispose of the appeal and stay application pending before him within six weeks of communication of this order.

It would be open to the Revenue to approach the Commissioner (Appeals) to pray for orders against the writ petitioners to secure the tax allegedly due.

Affidavits were not invited as all the relevant papers were before the court, in my opinion.

This writ application is disposed of by this order.

As no affidavits were not invited the allegations, if any, contained in this writ petition are deemed not to be admitted. Certified photocopy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.