Court Grants Interim Protection, Stays Tax Notice

The court granted interim protection to the petitioner, staying the notice issued under section 226(3) of the Income Tax Act, 1961. The petitioner was allowed to file an appeal with the Income Tax Appellate Tribunal (ITAT) regarding the disallowance of additional depreciation on certain assets. The court directed the petitioner to pay 20% of the disputed tax within a week as a condition for the stay. Failure to comply would nullify the benefits of the court order. The ITAT was instructed to consider the payment when deciding on any stay petition from the petitioner. The writ petition was disposed of without costs, and connected miscellaneous petitions were closed.

---

---

Issues:
Challenge to notice under section 226(3) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged a notice issued under section 226(3) of the Income Tax Act, 1961, by the 1st respondent, claiming a due amount of Rs. 6,82,18,782. The petitioner contended that the notice was issued prematurely, as they had not yet filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the order passed by the Commissioner of Income Tax (Appeals)-III, Coimbatore. The petitioner argued that the notice should be set aside based on the timeline for filing an appeal and cited a previous judgment in support of their contention.

The Standing Counsel for the 1st respondent argued that the notice was valid, as the petitioner had been informed that only by filing an appeal to the Tribunal could a stay be considered. The petitioner had filed a petition for rectification under section 154 of the Income Tax Act, 1961, after a communication on this matter. The Standing Counsel maintained that there was no error in issuing the notice under section 226(3).

The main issue for consideration in the writ petition was whether the 1st respondent was justified in issuing the notice under section 226(3) of the Income Tax Act, 1961. The court noted that the petitioner had not yet filed an appeal with the ITAT against the order of the Commissioner of Income Tax (Appeals)-III, Coimbatore, as the deadline for filing the appeal was still pending. The court acknowledged that in some cases, individuals may choose not to file an appeal and accept the Appellate Authority's decision. However, in this case, the petitioner intended to appeal, particularly regarding the disallowance of additional depreciation on certain assets. Consequently, the court granted interim protection to the petitioner until they file an appeal with the ITAT, subject to a condition of paying 20% of the disputed tax within a week.

In conclusion, the court stayed the impugned notice on the condition that the petitioner makes the specified payment. The petitioner was allowed to file an appeal with the ITAT, and failure to comply with the conditions would nullify the benefits of the court order. The ITAT was directed to consider the payment while deciding on any stay petition from the petitioner. The writ petition was disposed of with no costs, and connected miscellaneous petitions were closed.

---