Division Bench rules for petitioner in bank account attachment case under Income Tax Act, 1961

The Division Bench ruled in favor of the petitioner, a Government of Haryana undertaking, in a case challenging the attachment of its bank accounts for penalty payment under the Income Tax Act, 1961. The Court directed the Department to cancel drafts prepared for payment, refund the appropriated amount, and refrain from coercive action on the penalty demand until the appeal decision by the CIT (Appeals). The petitioner's request for stay on the penalty payment was supported by the Court, emphasizing the need for a quick decision on the appeal proceedings.

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Issues:
1. Challenge to attachment of bank accounts for penalty payment under the Income Tax Act, 1961.
2. Entitlement to exemption under Section 10(23C)(iv) and registration under Section 12AA of the Act.
3. Rejection of stay application by CIT (Appeals) without a hearing.
4. Appropriation of funds by the Department against interest demand.
5. Restraining the Department from withdrawing drafts prepared for payment.
6. Refund of appropriated amount pending appeal decision.
7. Coercive action against penalty demand pending appeal decision.

Analysis:
1. The petitioner, a Government of Haryana undertaking, challenged the attachment of its bank accounts for penalty payment under the Income Tax Act, 1961. The respondents claimed that the petitioner did not have exemption under Section 10(23C)(iv) and registration under Section 12AA of the Act, leading to pending proceedings regarding the exemption refusal. The Division Bench expressed hope for a quick decision on the petitioner's appeal before the CIT (Appeals).

2. The petitioner's application for stay on the penalty payment was rejected by the CIT (Appeals) without a hearing, citing that the pendency of the appeal is not a sufficient ground for granting a stay. However, the petitioner argued that there were other factors, including its constitution and statutory functions, supporting the stay application.

3. An amount of approximately &8377; 11.27 crores was already appropriated by the respondents against a demand of &8377; 51 crores towards interest. The petitioner's request for a refund was not entertained at that stage, pending the appeal decision before the CIT (Appeals). The Court directed the Bank to cancel drafts prepared for payment to the Department and credit the amount to the petitioner's account.

4. Considering the petitioner's status as a statutory corporation receiving grants from the Central Government, the Court ruled against any coercive action on the penalty demand until the CIT (Appeals) decides on the appeal. The petitioner was instructed not to seek adjournments before the CIT (Appeals). The writ petition was disposed of accordingly, with the Court emphasizing the importance of the appeal decision in determining further actions regarding the penalty demand.

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