Court affirms Income Tax Department's garnish notice legality against ICICI Bank for non-compliance.

The Court upheld the legality of the garnish notice issued by the Income Tax Department to ICICI Bank, as the petitioner failed to deposit 20% of its own outstanding demand. The petitioner's non-compliance with CBDT circulars led to the validation of the demand raised by the Income Tax Department. The Court clarified the separate legal entities' tax liabilities and permitted actions against ICICI Bank for unfreezing the account without seeking clarification. Ultimately, the Court dismissed the writ petitions, affirming the Income Tax Department's actions and allowing further steps against ICICI Bank.

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Issues Involved:
1. Legality of the garnish notice issued by the Income Tax Department.
2. Compliance with CBDT circulars regarding the stay of demand.
3. Validity of the demand raised by the Income Tax Department.
4. Separate legal entities and their tax liabilities.
5. Actions of ICICI Bank in response to the legal notice.

Issue-wise Detailed Analysis:

1. Legality of the Garnish Notice Issued by the Income Tax Department:
The petitioner, Madhya Pradesh Audyogik Kendra Vikas Nigam Limited, challenged the garnish notice dated 04/10/2017 issued by the Income Tax Department to ICICI Bank. The petitioner argued that they had already deposited more than the required 20% of the outstanding demand, making the garnish notice unlawful. The Court noted that the petitioner had indeed deposited Rs. 12 Crores but this was against a different entity, SEZ Indore Ltd., and not the petitioner itself. Therefore, the garnish notice was deemed lawful as the petitioner had not fulfilled the requirement of depositing 20% of its own outstanding demand.

2. Compliance with CBDT Circulars Regarding the Stay of Demand:
The petitioner sought relief based on CBDT circulars dated 29/02/2016 and 31/07/2017, which allow for a stay of demand upon payment of 20% of the disputed amount. The Court highlighted that the petitioner did not comply with this requirement. The assessment order dated 28/04/2017 raised a demand of Rs. 48,71,99,640/-, and the petitioner failed to pay the 20% of this demand. Consequently, the Income Tax Department's actions were in compliance with the CBDT circulars.

3. Validity of the Demand Raised by the Income Tax Department:
The assessment order under Section 143(3) of the Income Tax Act assessed the petitioner's income at Rs. 1,26,99,79,660/- against the declared income of Rs. 57,01,03,020/-. The petitioner contested this assessment, but the Court found that the petitioner had not paid any amount towards the demand raised. The Court upheld the validity of the demand, stating that the petitioner had not met the obligation to pay 20% of the outstanding dues as required by the CBDT circulars.

4. Separate Legal Entities and Their Tax Liabilities:
The Court emphasized that M.P. Audyogik Kendra Vikas Nigam Limited and SEZ Indore Ltd. are separate legal entities with distinct tax liabilities. The Rs. 12 Crores deposited by MPAKVN could not be credited towards the tax liability of SEZ Indore Ltd. The Court found that the petitioner had misrepresented facts by claiming that the amount paid by MPAKVN should be considered for SEZ Indore Ltd.'s tax liability.

5. Actions of ICICI Bank in Response to the Legal Notice:
ICICI Bank's intervention was allowed, and the Court addressed the actions taken by the bank following a legal notice from the petitioner's counsel. The bank had unfrozen the account to avoid contempt of court, but the Court noted that the bank should have sought clarification from the Court regarding the interim order. The Court allowed the Income Tax Department to take appropriate steps against ICICI Bank in accordance with the law.

Conclusion:
The Court dismissed the writ petitions, concluding that the petitioner had not complied with the requirement to deposit 20% of the outstanding demand, and the actions of the Income Tax Department were justified. The Court also allowed the Income Tax Department to take action against ICICI Bank for permitting transactions in the frozen account. The judgments in both the connected writ petitions were governed by the same reasoning and outcome.

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