High Court sets aside garnishee orders for tax arrears due to pending appeals and financial hardship

The High Court set aside garnishee orders for recovering tax arrears totaling Rs. 57,26,285 for assessment years 2003-04 to 2007-08 due to pending tax case appeals and financial hardship faced by the petitioner. However, for the assessment year 2008-09, the petitioner was directed to pay Rs. 15,00,000 within four weeks. Failure to comply would result in automatic restoration of orders.

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Issues involved:
1. Challenge to garnishee orders issued under Section 226(3) of the Income Tax Act, 1961 for arrears of tax amounts.
2. Validity of garnishee orders in light of pending tax case appeals.
3. Financial hardship faced by the assessee due to the impugned orders.

Analysis:
1. The petitioner challenged two garnishee orders issued under Section 226(3) of the Income Tax Act, 1961, one against an individual and another against a government entity, for recovery of arrears totaling Rs. 1,35,02,995.
2. The assessment years in question were 2003-04 to 2008-09, with pending Tax Case Appeals and an appeal before the First Appellate Authority. The revenue claimed outstanding tax amounts and penalties against the petitioner.
3. The petitioner argued that the garnishee orders were premature as the tax case appeals were pending, questioning the liability. The revenue contended that no stay was granted for the appeal related to the assessment year 2008-09.
4. The High Court noted the financial hardship faced by the petitioner and the disputed tax amounts. It found that the impugned orders could not be justified when the liability was under appeal and reserved for orders.
5. The Court held that the garnishee orders for recovering Rs. 57,26,285 for assessment years 2003-04 to 2007-08 were not sustainable. However, for the assessment year 2008-09, the petitioner was directed to pay Rs. 15,00,000 within four weeks, without prejudice to their appeal before the First Appellate Authority.
6. The judgment allowed the writ petitions, setting aside the impugned orders subject to the petitioner making the specified payment within the stipulated time. Failure to comply would result in the automatic restoration of the orders without further reference to the Court.

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