Court quashes tax demands, grants relief on interest and exemptions.

The court ruled in favor of the petitioner, quashing the provisional attachment orders and notices of demand for certain assessment years. The petitioner was granted relief regarding interest on fixed deposits, tax exemption under specific sections of the Income-tax Act, rejection of an application by the Assistant Commissioner, and notices for recovery of tax dues. The court directed the petitioner not to withdraw a specific amount from fixed deposits, expedite appeal hearings, and quash the recovery notices issued to banks. No costs were awarded, and the judgment was to be sent to the Commissioner of Income-tax (Appeals).

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Issues Involved:
1. Validity of provisional attachment orders and reassessment notices.
2. Entitlement to interest on fixed deposits during the period of encashment.
3. Entitlement to tax exemption under section 10(23C)(iv) and (v) of the Income-tax Act.
4. Validity of the Assistant Commissioner's order rejecting the application under section 220(6) of the Income-tax Act.
5. Validity of notices under section 226(3) of the Income-tax Act for recovery of tax dues.

Detailed Analysis:

1. Validity of Provisional Attachment Orders and Reassessment Notices:
The Bhubaneswar Stock Exchange challenged the provisional attachment orders issued by the Assistant Commissioner of Income-tax for various assessment years, arguing that its income was exempt from tax. The court quashed the notices of demand for the assessment years 1996-97 and 1997-98, noting that the petitioner should have been allowed the full period of thirty days to make the payment since its accounts were frozen by provisional attachment orders.

2. Entitlement to Interest on Fixed Deposits During the Period of Encashment:
The petitioner claimed interest on the fixed deposits for the period from March 28, 2003, to July 4, 2003, arguing that the banks had created fresh fixed deposits at a lower interest rate, resulting in a loss. The court found no specific direction in its previous order for the Income-tax Department or the banks to pay interest for any period. Therefore, the petitioner's claim for interest was not supported.

3. Entitlement to Tax Exemption Under Section 10(23C)(iv) and (v) of the Income-tax Act:
The petitioner argued that it was entitled to tax exemption as a charitable institution under section 10(23C)(iv) and (v) and cited a previous order by the Commissioner of Income-tax (Appeals) for the assessment year 1992-93, which held that the petitioner was a public utility and its income was exempt under section 11. The court noted that the Assistant Commissioner should have considered this previous decision and treated the petitioner as not being in default for the disputed tax demands.

4. Validity of the Assistant Commissioner's Order Rejecting the Application Under Section 220(6) of the Income-tax Act:
The court quashed the Assistant Commissioner's order rejecting the petitioner's application under section 220(6) of the Act, which sought to treat the petitioner as not being in default pending the disposal of its appeals. The court emphasized that the Central Board of Direct Taxes' instructions required the Assessing Officer to exercise discretion in favor of the petitioner, considering the previous appellate decision in its favor.

5. Validity of Notices Under Section 226(3) of the Income-tax Act for Recovery of Tax Dues:
The court quashed the notices issued by the Assistant Commissioner under section 226(3) to various banks for the recovery of tax dues, as the petitioner had a strong prima facie case for exemption and the Assistant Commissioner had not followed the instructions of the Central Board of Direct Taxes.

Conclusion:
The court directed that the petitioner should not withdraw the amount of Rs. 4,71,05,427 kept in fixed deposits but could operate other accounts. The Commissioner of Income-tax (Appeals) was instructed to expedite the hearing and dispose of the appeals by February 28, 2004. The court also quashed the notices under section 226(3) issued to the banks. No costs were ordered, and a copy of the judgment was to be sent to the Commissioner of Income-tax (Appeals) by special messenger.

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