2017 (3) TMI 107 - HC - Income Tax

Court quashes tax recovery notices, citing excess payments; petitioner's claim denied.

The Court ruled in favor of the petitioner, quashing the notices issued under Section 226(3) of the Income-tax Act for the mentioned Assessment Years. The ... Attachment of bank accounts under Section 226(3) of the Income-tax Act - Recovery limited by CBDT Office Memorandum dated 29/02/2016 (15% rule) - Stay of demand pending statutory appeal - Precedential effect of Bombay High Court decision in Andrew Communications India Pvt. Ltd.Attachment of bank accounts under Section 226(3) of the Income-tax Act - Recovery limited by CBDT Office Memorandum dated 29/02/2016 (15% rule) - Precedential effect of Bombay High Court decision in Andrew Communications India Pvt. Ltd. - Validity of attachment notices dated 16/01/2017 and 17/01/2017 issued to banks in respect of Assessment Years 2011-12 and 2012-13 - HELD THAT: - The Court found that the material facts in the present petition are identical to those considered in Andrew Communications India Pvt. Ltd. and that it is not disputed that amounts exceeding 15% of the disputed demand for the two assessment years have already been secured by the Revenue. Applying the principle reflected in the CBDT Office Memorandum dated 29/02/2016 and the cited decision, the respondents were not justified in issuing attachment notices under Section 226(3) while the appeals before the CIT(A) were pending. The petitioner's separate claim for refund of amounts attached pursuant to those directions was held not to be maintainable in the present writ petition. [Paras 7, 9]Impugned attachment notices dated 16/01/2017 and 17/01/2017 to the State Bank of India, ICICI Bank Ltd. and HDFC Bank in respect of AY 2011-12 and AY 2012-13 are quashed and set aside; rule made absolute.Final Conclusion: Writ petition allowed to the extent of quashing the attachment notices; the petitioner's separate claim for refund of amounts attached is not granted in this petition. Issues:Challenge to notices under Section 226(3) of the Income-tax Act, 1961 and proceedings initiated in pursuance thereof.Analysis:The petitioner sought to quash notices dated January 16, 2017, and January 17, 2017, issued to several banks under Section 226(3) of the Income-tax Act, 1961, and all related proceedings. The petitioner argued that the tax demands for Assessment Years 2011-12 and 2012-13, totaling Rs. 12.85 Crores and Rs. 21.61 Crores respectively, were already settled in their favor by various Appellate Authorities. Despite pending appeals before the CIT (Appeals), the respondent issued a demand notice for Rs. 40.25 Crores, including the disputed amount. The petitioner contended that recovery exceeding 15% of the demand had already been made, which was against CBDT guidelines and a previous court decision. The respondent rejected the petitioner's plea, leading to the present challenge.The petitioner's counsel argued that attaching the petitioner's bank accounts was unjustified, as more than 15% of the disputed demand had been recovered and appeals were pending. Citing a prior judgment, the counsel emphasized that the petitioner's grievance was already addressed in case law. On the other hand, the respondent's counsel acknowledged that over Rs. 10.74 Crores had been refunded to the petitioner, exceeding the 15% threshold of the disputed demand. The respondent did not contest the similarity of facts with the aforementioned case law.After considering the arguments and examining the records, the Court found that the facts mirrored those of the previous case law, where 15% of the disputed amount had already been recovered, aligning with CBDT guidelines. Consequently, the Court held that the attachment notices issued by the respondent were unwarranted. The petitioner's claim for a refund of the attached amounts at this stage was deemed unjustified and not granted in the present petition. The Court also acknowledged a Memo submitted by the petitioner's counsel, detailing the disputed amounts and recoveries, which was uncontested by the respondent's counsel. As a result, the Court quashed the notices issued to the banks under Section 226(3) for the mentioned Assessment Years, thereby ruling in favor of the petitioner.