Court sets aside provisional attachment, grants unconditional stay, orders refunds, criticizes Revenue Officers, and awards costs.

The court allowed the petition, setting aside the provisional attachment of the petitioner's bank accounts under Section 281B as the Revenue failed to justify its actions. Notices issued under Section 226(3) were set aside for being premature. Rejection of stay applications under Section 220(6) was deemed unsustainable, granting an unconditional stay. Refunds adjusted without proper intimation were directed to be refunded. The court criticized Revenue Officers for unfair conduct, ordering them to pay costs to the petitioner.

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Issues Involved:
1. Provisional attachment under Section 281B of the Income Tax Act.
2. Issuance of notices under Section 226(3) of the Income Tax Act.
3. Rejection of applications for stay on recoveries under Section 220(6) of the Income Tax Act.
4. Adjustment of refunds against outstanding demand under Section 245 of the Income Tax Act.
5. Conduct of the Revenue Officers.

Issue-wise Detailed Analysis:

1. Provisional Attachment under Section 281B:
The petitioner challenged the order dated 18th December 2018, which provisionally attached its bank accounts under Section 281B of the Income Tax Act. The court found that the order was issued just two days before the assessment order and did not mention any basis for the apprehension of the Revenue. The affidavit filed by the Assessing Officer also failed to provide reasons supporting the action. Consequently, the court set aside the order dated 18th December 2018, under Section 281B, as the Revenue could not justify its apprehension that the petitioner’s assets needed attachment to protect the Revenue’s interest.

2. Issuance of Notices under Section 226(3):
The petitioner contested the notices dated 19th December 2018, issued under Section 226(3) to its bankers, which demanded payment of amounts lying in the petitioner’s bank accounts. The court noted that these notices were issued when no amount was due from the petitioner to the Revenue. The issuance of such notices was found to be in defiance of Section 226(3), which allows such action only when an amount is due. Therefore, the court set aside the notices and directed the Revenue to redeposit the withdrawn amount of Rs. 14.62 crores along with appropriate interest into the petitioner’s bank account within three weeks.

3. Rejection of Stay Applications under Section 220(6):
The petitioner’s applications for a stay on recoveries were rejected by the Assessing Officer and the Principal Commissioner of Income Tax (Pr. CIT). The court observed that both the orders failed to follow the binding directions of the court on how stay applications should be disposed of. The orders did not briefly set out the issues involved or the petitioner’s submissions, and the decisions were made without considering the petitioner’s contention that the issue of eligibility under Section 10(23FB) was already concluded in its favor by appellate authorities for earlier assessment years. The court found the rejection of the stay applications to be unsustainable and granted an unconditional stay of the demand for Assessment Year 2015-16 until the petitioner’s appeal is disposed of by the CIT(A).

4. Adjustment of Refunds under Section 245:
The petitioner objected to the adjustment of refunds for Assessment Years 2012-13 and 2014-15 against the outstanding demand for Assessment Year 2016-17. The court noted that the adjustment was made without proper intimation to the petitioner, in defiance of the law laid down in Hindustan Unilever Ltd. vs. DCIT, which mandates that the Revenue must provide intimation and consider objections before making such adjustments. The court set aside the notices dated 15th February 2019 and directed the refund of Rs. 60.46 lakhs and Rs. 12.42 crores to the petitioner.

5. Conduct of the Revenue Officers:
The court expressed dismay at the conduct of the Revenue Officers, noting that their actions were high-handed and manifestly unfair. The officers ignored statutory provisions and binding decisions of the court, displaying a planned attempt to make it impossible for the petitioner to challenge their actions. The court emphasized that the state must apply the law equally and not be overzealous in revenue collection at the expense of the rule of law. Consequently, the court directed the Revenue to pay costs of Rs. 50,000 to the petitioner for the unnecessary harassment.

Order:
The court allowed the petition, setting aside the impugned orders and notices, granting an unconditional stay on the demand, directing the redeposit of withdrawn amounts with interest, and ordering the refund of adjusted amounts. The Revenue was also directed to pay costs to the petitioner.

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