2022 (8) TMI 460 - HC - Income Tax

High Court stays garnishee order under Income Tax Act, emphasizing review process and procedural fairness.

M/s. China Construction Sausum India Pvt. Ltd. Versus Deputy Commissioner Of Income Tax Central Circle-17, Delhi & Ors.

The High Court stayed the garnishee order under the Income Tax Act, directing ICBC Bank of China to remit funds to the revenue. The petitioner's request ... Garnishee order issued u/s 226(3) - garnishee order directs the bank to remit sum to the respondents/revenue - HELD THAT:- It is not in dispute that the aforementioned garnishee order rides on the back of the order dated 20.07.2022 issued by the Assistant Commissioner of Income Tax, Central Circle 17, Delhi. ACIT via the aforesaid order, evidently, has rejected the application preferred by the petitioner, seeking stay of recovery proceedings.This application was moved by the petitioner under Section 220(6) of the Act. It is also not disputed that the petitioner has moved an application for review of the aforesaid order, which is pending consideration with respondent no. 2 i.e., Principal Commissioner of Income Tax [in short, ‘PCIT’]. This step has been taken in consonance with the provisions of Office Memorandum dated 29.02.2016. Although the expression ‘review’ has been used in the memorandum, it is more in the nature of a revisional power, as the order which is sought to be reviewed has been passed by ACIT. We are also informed (and something which is not disputed), that appeals against the separate orders of even date i.e., 31.05.2022, have been preferred concerning Assessment Years (AYs) 2019-20 to 2021-22, with the Commissioner of Appeals.These appeals, we are told are pending consideration. Given the aforesaid position, the operation of the impugned garnishee order dated 25.07.2022 shall remain stayed till such time the PCIT i.e., respondent no. 2 disposes of the application for review/revision pending before it. In case the decision of the PCIT/respondent no. 2 is adverse to the interests of the petitioner, no effect will be given to the same for one week from the date of service of order. Issues:Challenge to garnishee order under Income Tax Act, 1961.Analysis:The High Court heard a writ petition challenging a garnishee order dated 25.07.2022 issued under section 226(3) of the Income Tax Act, 1961. The order directed ICBC Bank of China to remit a substantial amount to the respondents/revenue. The petitioner had earlier applied for a stay of recovery proceedings under Section 220(6) of the Act, which was rejected by the Assistant Commissioner of Income Tax. The petitioner subsequently sought a review of this order, pending consideration with the Principal Commissioner of Income Tax. The Court noted that the term 'review' in this context was akin to a revisional power. Additionally, appeals against separate orders for Assessment Years 2019-20 to 2021-22 were pending before the Commissioner of Appeals.The Court decided to stay the operation of the garnishee order until the Principal Commissioner of Income Tax disposed of the review/revision application. If the PCIT's decision was adverse to the petitioner, its effect would be stayed for one week from the date of service of the order. The writ petition was disposed of with these directions, and the pending application was to be closed. The parties were instructed to act based on the digitally signed copy of the order.This judgment showcases the Court's role in interpreting and applying provisions of the Income Tax Act, particularly regarding garnishee orders and stay of recovery proceedings. It emphasizes the importance of due process and the right to seek review or revision of decisions made by tax authorities. The Court's decision to stay the garnishee order reflects a balance between the interests of the revenue authorities and the petitioner, ensuring fairness and procedural justice in tax matters.