Court quashes Income Tax letter imposing payment conditions lacking reasoning, directs reassessment

The court set aside and quashed a letter issued by the Deputy Commissioner of Income Tax, which imposed payment conditions on releasing a bank account. The court found the conditions lacked reasoning and justification as per CBDT instructions, directing the Assessing Officer to reconsider the matter promptly with valid reasons and compliance with guidelines. The Assessing Officer was instructed to complete this process within a fortnight to three weeks upon receiving the court's order.

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Issues:
Challenge to letter dated 12th September, 2019 issued by Deputy Commissioner of Income Tax regarding release of bank account.

Analysis:
The judgment involves a challenge to a letter dated 12th September, 2019, issued by the Deputy Commissioner of Income Tax, Central Circle, Meerut, to the Principal Officer/Director of a company, setting conditions for releasing a bank account. The petitioner argued that the letter was contrary to CBDT circular Instruction No. 1914 related to tax collection and recovery. The Revenue's advocate referred to an Office Memorandum dated 31st July, 2017, modifying Instruction No. 1914 regarding guidelines for stay of demand at the first appeal stage.

The impugned letter required an upfront payment of Rs. 20 lacs by 15th September, 2019, and subsequent monthly instalments of Rs. 7 lacs from October, 2019 for 12 months or until the First Appeal decision. The court examined if the Deputy Commissioner provided justifiable reasons for these payment conditions as per CBDT instructions. It was found that the conditions lacked reasoning and justification, making the letter unsustainable in law. Consequently, the letter was set aside and quashed.

The Assessing Officer was directed to reconsider the matter, taking into account the petitioner's letter dated 22nd August, 2019. The new decision should be supported by valid reasons and comply with CBDT instructions. The Assessing Officer was instructed to complete this process promptly, preferably within a fortnight or a maximum of three weeks from the date of receiving a certified copy of the court's order. The application was disposed of accordingly.

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