Coercive tax recovery during pending appeal was held impermissible, with refund and interest ordered for wrongful retention.

Coercive recovery of disputed tax by attachment of a bank account was impermissible while the assessee's appeal and stay application were pending, particularly after the directed predeposit of 20% had been made; the court treated the recovery as arbitrary and ineffective against the statutory appellate remedy. The amount already recovered was therefore directed to be refunded with interest from the date of recovery, as continued retention was unjustified. The writ petition accordingly succeeded and the respondents were required to restore the wrongly recovered amount within the time granted.

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Issues: (i) whether recovery of the disputed tax by attachment of the bank account under section 44 was permissible when the appeal and stay application against the assessment were pending; (ii) whether the amount recovered was liable to be refunded with interest.

Issue (i): whether recovery of the disputed tax by attachment of the bank account under section 44 was permissible when the appeal and stay application against the assessment were pending.

Analysis: The disputed demand had been carried in appeal and the stay application was pending when recovery was pursued. The appellate authority had already directed deposit of 20% of the disputed amount as a precondition for stay, and that amount had been deposited. In these circumstances, coercive recovery by attaching the bank account was treated as high-handed and arbitrary, since the assessee's statutory remedy in appeal could not be rendered ineffective by immediate recovery of the full disputed demand.

Conclusion: The coercive recovery was impermissible and was not justified against the assessee.

Issue (ii): whether the amount recovered was liable to be refunded with interest.

Analysis: Since the recovery was made while the appeal and stay proceedings were pending and after the prescribed predeposit had been made, retention of the recovered amount was not justified. The Court therefore directed refund of the amount, and awarded interest from the date of recovery to compensate for the wrongful retention.

Conclusion: The recovered amount was directed to be refunded with interest in favour of the assessee.

Final Conclusion: The writ petition succeeded, and the respondents were required to restore the wrongly recovered amount with interest within the time granted by the Court.

Ratio Decidendi: In the absence of exceptional circumstances, coercive recovery of disputed tax should not be pursued when the assessee's appeal and stay application are pending and the required predeposit has been made.

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