Punjab Kashmir Finance (P) Ltd. vs Income Tax Appellate Tribunal and Others

N.K. Agrawal, J.—These are three writ petitions involving common questions of facts and law.

The petitioners in these petitions under Art. 226 of the Constitution are seeking a direction to the Tribunal, Amritsar Bench, Amritsar, to decide their appeals at an early date and also a direction to the IT authorities not to recover tax relating to the subsequent years.

Petitioners are engaged in the business of hire-purchase, lease of vehicles, etc. They are working as non-banking finance companies. They are assessees under the IT Act, 1961. They received hire-purchase charges from the hirers of the vehicles. The AO, while framing assessment for the asst. yr. 1996-97, disallowed their claim that hire-purchase charges did not fall within the meaning of chargeable interest under the Interest-tax Act, 1974. The AO took the view that the hire-purchase charges received by the petitioners from the hirers were liable to be taxed under the Interest-tax Act. Consequently, demand under the Interest-tax Act was created and the petitioners were asked to deposit tax. The petitioners filed appeals before the CIT(A) which are still pending. They filed applications before the AO also praying for the grant of stay of the tax demand till the decision of the appeals. The AO declined to stay the demand and asked the petitioners to pay the tax. Another application was filed by the petitioners before the CIT(A) for the stay of the demand, which is pending.

Shri B. S. Gupta, learned counsel for the petitioners, has argued that the AO should not have rejected the petitioners'' stay applications without affording opportunity of hearing to them. The demand of tax on the amount of hire-purchase charges is contrary to the provisions of the Interest Tax Act. Our attention has been drawn to a decision of the Tribunal, Madras Bench, wherein it has been held that hire-purchase finance charges and service charges collected under hire-purchase transactions are not taxable as chargeable interest under the Interest Tax Act. It is further argued by Shri Gupta that appeal against a similar order relating to the asst. yr. 1992-93 is already pending before the Tribunal, Amritsar Bench. Since that appeal is not being heard and decided, the IT authorities are levying tax in subsequent years following the assessments made in the earlier years.

Shri Gupta has placed reliance on the following decisions :

(1) N. Rajan Nair Vs. Income Tax Officer and Another,

(2) Mrs. R. Mani Goyal vs. CIT & Anr. (1966) 217 ITR 641

(3) Maharana Shri Bhagwat Singhji of Mewar (Late his Highness) Vs. Income Tax Appellate Tribunal, Jaipur Bench and Others,

(4) Debasish Moulik Vs. Deputy Commissioner of Income Tax and Another, and

(5) Pawan Kumar Vs. Income Tax Officer,

In N. Rajan Nair vs. ITO & Anr. (supra), it has been held that discretion to stay recovery of tax should be exercised by the tax authorities judiciously.

In Mrs. R. Mani Goyal vs. CIT & Anr. (supra), income returned by the assessee was Rs. 11,710 and tax was determined by the AO at Rs. 33,04,450. Assessee''s appeal was pending before the CIT(A). It was held that the assessee could not be treated to be in default in the light of the instructions issued by the CBDT.

In Maharana Shri Bhagwat Singhji of Mewar (Late His Highness) vs. ITAT & Ors. (supra), it was ordered that collection of tax be stayed in the light of the circular of the CBDT and in view of the absence of evidence that the accountable person had cash money belonging to the estate of the deceased so as to pay the estate duty.

In Debasish Mulik vs. Dy. CIT & Anr. (supra), it was held that the Appellate Authority had the power to grant stay in appropriate cases. The assessee was directed to approach the Appellate Authority.

In Pawan Kumar vs. ITO (supra), it appeared that the application filed by the assessee under s. 220(6) of the IT Act had been rejected by the AO and the bank account of the assessee was attached. The AO was directed to pass a fresh order after affording an opportunity of hearing to the assessee.

On a consideration of the question raised by the learned counsel for the petitioners, it is found appropriate that the applications of the petitioners pending consideration before the CIT(A) should be heard expeditiously as these applications involve the question of the stay of demand of tax. It is also found expedient that the AO should also afford an opportunity of hearing to the petitioners before enforcing recovery of tax. It is however, not found necessary to go into the merits of the main controversy regarding the nature of hire-purchase charges earned by the petitioners as the petitioners have only challenged the recovery of tax while their stay applications are pending consideration.

All the writ petitions are, therefore, disposed of in limine with a direction to the CIT(A) to decide the applications filed by the petitioners seeking stay of the recovery of tax, expeditiously, preferably within fifteen days from the receipt by him of a copy of this order. The AO is also directed to afford an opportunity of hearing to the petitioners before declaring them as assessees in default and adopting coercive methods for the recovery of tax.