2018 (5) TMI 1442 - HC - Income Tax

High Court overturns dismissal of appeal, stresses fair process, cautions against unilateral fund withdrawals

The High Court set aside the ex parte dismissal of the petitioner's appeal by the Appellate Commissioner due to lack of proper notice. The Court directed ... Ex parte disposal of appeal without notice - duty to hear before passing appellate order - stay of recovery on deposit of percentage of disputed tax - coercive recovery by withdrawal from bank account - return of wrongfully recovered amountsEx parte disposal of appeal without notice - duty to hear before passing appellate order - Appellate order passed without service of notice was set aside and the appeal was restored for fresh disposal after hearing the petitioner. - HELD THAT: - The Court ascertained that the Appellate Commissioner had dismissed the petitioner's appeal without serving notice of hearing and the Revenue could not dispute that fact. An ex parte appellate order passed in the absence of service of notice to the appellant cannot stand. The appellate order was therefore set aside and the appeal was directed to be placed back before the Appellate Commissioner for fresh disposal in accordance with law after hearing the petitioner. The Court directed that the petitioner appear before the Appellate Commissioner on a specified date to obviate further service requirements, while permitting the Appellate Commissioner to re adjust the hearing date as convenient.Appeal set aside and restored for fresh hearing after notice to and hearing of the petitioner.Stay of recovery on deposit of percentage of disputed tax - coercive recovery by withdrawal from bank account - return of wrongfully recovered amounts - Amount withdrawn by the Department from the petitioner's bank account must be returned because the petitioner had complied with the pre deposit condition for stay and the appellate order was being set aside and revived. - HELD THAT: - The Assessing Officer had granted stay of recovery on condition of deposit of 15% of the disputed tax and the petitioner had paid the demanded instalments (the balance being paid subsequently). Notwithstanding these facts and while proceedings were pending, the Department directly wrote to the petitioner's bank and withdrew funds from the account. The Court observed that direct withdrawal from a taxpayer's bank account is a drastic exercise of power that must be used sparingly and with circumspection. In the specific factual matrix - where the appellate order was quashed and the appeal revived and the pre deposit condition had been complied with - the amounts recovered from the petitioner's bank account were to be returned forthwith and within a time fixed by the Court.Amounts withdrawn from the petitioner's bank account ordered to be returned to the petitioner by the date specified by the Court.Final Conclusion: The appellate order passed ex parte was set aside and the appeal restored for fresh disposal after hearing; the sums withdrawn from the petitioner's bank account were ordered to be returned forthwith (by the deadline fixed by the Court). Issues:Challenge to the Commissioner of Income-tax's dismissal of the petitioner's appeal without a hearing and the subsequent recovery of a sum from the petitioner's bank account by Revenue authorities.Analysis:The petitioner challenged the action of the Commissioner of Income-tax for dismissing the appeal without a hearing and the recovery of a substantial sum from the petitioner's bank account. The petitioner's return for AY 2013-2014 was assessed by the Assessing Officer, resulting in an order assessing the total income at a higher amount than the returned income. The petitioner appealed this assessment before the Appellate Commissioner and requested a stay on the recovery of tax dues, which was partially granted with a condition to deposit 15% of the disputed tax in installments. The petitioner complied with this condition by depositing a significant amount within the specified timeframe. However, the Appellate Commissioner dismissed the appeal ex parte without serving notice to the petitioner, leading to further complications.The Revenue authorities directly contacted the petitioner's bank and withdrew a substantial sum from the petitioner's account on 27th February 2018, causing distress to the petitioner. The High Court found that the petitioner's contention regarding the disposal of the appeal without proper notice was accurate, and therefore, the appellate order was set aside. The Court directed the appeal to be reconsidered by the Appellate Commissioner after hearing the petitioner, with the petitioner required to appear before the Commissioner on a specified date to avoid the need for formal notice.The Court expressed concern over the Revenue authorities' unilateral withdrawal of funds from the petitioner's bank account, emphasizing that such actions should be exercised with caution due to their severe impact on the assessee. While acknowledging the statutory powers of the Department for coercive recovery, the Court stressed the need for circumspection and rare use of such powers, suggesting that attachment of assets could be a more suitable approach. In this specific case, the Court ordered the immediate return of the amount withdrawn from the petitioner's bank account, highlighting the need for fairness and adherence to legal procedures. The petition was disposed of with instructions for the return of the withdrawn amount by a specified date.