Kesav Cashew Co. vs Deputy Commissioner of Income Tax and Others

P.A. Mohammed, J.—The petitioner is a partnership firm and it is an assessee under the provisions of the Income Tax Act, 1961. The petitioner-firm is engaged in the manufacture and export of cashew kernels. For the assessment year 1986-87, the first respondent has passed exhibit P-1 assessment order. As against exhibit P-1, the petitioner-firm filed exhibit P-3 appeal before the second respondent. The petitioner has also filed an application for stay of collection of tax pending the appeal. Exhibit P-6 is the copy of the stay application. In the meanwhile, the third respondent has issued exhibit P-5 demand notice seeking to recover the arrears in respect of the aforesaid year. It is in that background that the petitioner-firm came before this court with the present writ petition.

Heard learned counsel appearing for the petitioner and Sri N.R.K. Nair, junior standing counsel, for the Department.

Learned standing counsel pointed out that the petitioner-firm has not approached the first respondent with a petition u/s 220(6) of the Act. Of course, the petitioner could have approached the first respondent but that does not mean the petitioner cannot invoke the inherent power of the second respondent to stay the collection of tax pending the appeal. As far as this position is concerned, there is no dispute. Even in a case where the assessee has not filed an application u/s 220(6), he can very well approach the appellate authority invoking the inherent jurisdiction for staying collection of tax pending the appeal. It is said that no order has been passed on exhibit P-6 application for stay. In view of the fact that exhibit P-5 notice has been issued to recover the tax, I feel, in the interest of justice, a direction can be issued to the second respondent to consider and dispose of the appeal at an early date. In that view of the matter, I direct the second respondent to consider and dispose of exhibit P-3 appeal as expeditiously as possible, at any rate, within a period of three months from the date of receipt of a copy of this judgment.

Learned counsel appearing for the petitioner submits that unless further steps pursuant to exhibit P-5 are restrained, the petitioner-firm will be put to irreparable prejudice. It is said that the firm has no liquid funds to comply with the demand now. Apart from that the petitioner-firm contends that it has got a fair chance of success in the appeal. The assessee''s case is that it is an exporter and is entitled to claim the exemption in respect of the entire income. It is also brought to my notice, exhibit P-4, circular issued by the Central Board of Direct Taxes which indicates certain guidelines as to how the stay of collection of tax pending the appeal is to be dealt with. Considering all the aspects of the case, I direct respondents Nos. 1 and 3 not to take further proceedings pursuant to exhibit P-5 till the disposal of exhibit P-3 appeal by the second respondent as directed above.

The original petition is disposed of as above.