TaxTMI 
TaxTMI 
TaxTMI 
2014 (6) TMI 1042
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....n an earlier writ petition, the latter of which was disposed off by Exh. P4. Exhibit P4 was concerned with the recovery proceedings for two asst. yRs. 2005-06 and 2006-07; when statutory appeals with stay petitions were pending. This Court directed consideration of the stay applications within a period of one month and coercive steps were kept in abeyance till then. 3. With respect to both the assessment years, the first appellate authority passed Exh. P5, wherein it was recorded that the assessee had agreed to pay an amount of Rs. 50 lakhs for each of the assessment years for every month till the disposal of the appeal. The appeal was posted to 31st Oct., 2013 and the AO was directed to monitor the payment and submit a report before the said date. Subsequently, the demand made for the asst. yr. 2005-06 was stayed by a Division Bench of this Court in Exh. P6. Admittedly the condition imposed by Exh. P5 was not complied with for the asst. yr. 2006-07. Only an amount of Rs. 10 lakhs was paid on 14th Sept., 2013. Subsequently, on 30th Oct., 2013, the appeal was again taken up for consideration and it was further directed to continue the payment of Rs. 50 lakhs each month from the mon....
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....t before Court, and on a specific query made by the Court, through the learned standing counsel for Government of India Taxes, it was admitted that the proceedings issued under s. 226(3) of the IT Act were not entered in the despatch register. Hence, a detailed order was passed on 27th May, 2014, again directing the 3rd respondent to file an affidavit in explanation and the matter was posted to 3rd June, 2014. The 3rd respondent was also directed to be present before Court on 3rd June, 2014. 7. The 3rd respondent was present on 3rd June, 2014 and had placed on record an affidavit dt. 31st May, 2014; but did not produce the despatch register. On a specific query being put to the 3rd respondent as to whether the petitioner was issued notice as provided in sub-cl. (3) of s. 226 of the IT Act, the 3rd respondent feigned ignorance and wanted time to verify the files. The matter was hence posted to 4th June, 2014 for production of the despatch register and the personal appearance of the 3rd respondent was dispensed with. On 4th June, 2014, the despatch register was produced and the learned standing counsel, on behalf of the 3rd respondent, submitted that neither was a notice to the peti....
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....ategorically admits that the officers of the petitioner met the CIT as also the 3rd respondent. Obviously on being made aware of the stay of recovery for 2005-06, the 3rd respondent issued Exh. R4(d), wherein the demand for the year 2005-06 was deleted and the notice was rectified, insofar as demanding an amount of Rs. 13,60,14,720. The additional 4th respondent-bank has submitted, on affidavit, that they were coerced, with threats of penalty and prosecution; into taking the demand draft on 26th March, 2014 itself and the same was handed over to the office of the 3rd respondent on 27th March, 2014. The acknowledgement is produced by the additional 4th respondent as Exh. R4(h), in which receipt endorsed by the Income-tax Inspector; is as on 26th March, 2014. 10. The learned counsel for the petitioner places reliance on two decisions of the High Court of Bombay. UTI Mutual Fund v. ITO [2012] 345 ITR 71 and Director of IT (Exemption) v. ITAT [2014] 361 ITR 469 (Bom.) to urge refund of the amounts withdrawn under s. 226(3). 11. In UTI Mutual Fund (supra), notice of demand under the Act was issued against the petitioner therein, one of the beneficiaries of a trust, deeming the trust t....
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....onditional order of stay, thus making the recovery well within the bounds of the statute. The conduct of the petitioner herein is also not above board, is the argument. Two orders passed by the first appellate authority were not complied with and were not challenged. Exhibit P4 is a challenge made against the demand made, with respect to the years 2005-06 and 2006-07 on the ground that appeals and stay petitions were pending. Obviously, as indicated from Exhibit P6 order, the reopening under s. 147, was agitated in an earlier writ petition, numbered as Writ Petn. (Civil) No. 7863 of 2013. That writ petition stood dismissed on 12th April, 2013 and certified copy of the judgment was received on 22nd May, 2013. Writ Petn. (Civil) No. 17127 of 2013 was filed against the demand raised; on reopening, for the asst. yRs. 2005-06 and 2006-07. By Exhibit P4 this Court directed consideration of the stay application within a period of one month of receipt of the judgment, and till such time ordered to keep in abeyance the coercive steps of recovery, if any, initiated. After having suffered that judgment which was also with respect to the year 2005-06, the petitioner again filed a writ appeal f....
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....the petitioner about the proceedings under s. 226(3) of the IT Act; which definitely prompted the assessee to approach this Court with a writ petition. 16. The professed action of the quasi judicial authority, however, is found to be not in compliance with s. 226 of the IT Act. The recovery proceedings initiated by way of garnishee proceedings under s. 226 of the IT Act has to be notified to the assessee also, as provided under s. 226(3)(iii), which reads as under : "Sec. 226(3)(iii) A copy of the notice shall be forwarded to the assessee at his last address known to the AO or TRO, and in the case of a joint account to all the joint holders at their last addresses known to the AO or TRO". 17. Though the said provision does not postulate a hearing, definitely there is a mandate that a copy of the notice issued to the garnishee should be forwarded to the assessee. A learned Single Judge of the Calcutta High Court in Purnima Das v. Union of India [2010] 329 ITR 278 (Cal.) found that it was not proper on the part of the AO to attach and debit a sum, under s. 226(3), without serving a copy of the notice of attachment on the assessee as mandated under s. 226(3)(iii). This Court is in....
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.... The ITO should apply his mind to the facts and circumstances of the case relevant to the exercise of the discretion, in all its aspects. He is bound to apply his mind to relevant factors and circumstances like the assessment history of the assessee, his conduct and co-operation in relation to the Department, points raised in the appeal, chances of recovery in case the appeal is dismissed, the hardship to the assessee by inconsistence on immediate payment and the like. He has also to remember that he is not the final arbiter of the disputes involved but only the first amongst the statutory authorities. Questions of fact and of law are open for decision before the two appellate authorities both of whom possess plenary powers. In exercising his power, the ITO should not act as a mere tax-gatherer but as a quasi-judicial authority vested with the power of mitigating hardship to the assessee". 20. Immediately on coming to know of the recovery steps, the petitioner was before the 3rd respondent, with a request to stay recovery till the High Court is moved. The aforecited decision of this Court was quoted with approval in UTI Mutual Fund (supra). Apposite are the guidelines laid down by....
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....ed only on 27th March, 2014, the petitioner had apprised the 3rd respondent as also the CIT(A) about the filing of a writ petition under Art. 226 of the Constitution. 22. The encashment attempted to have been done immediately on production of the demand draft has to be viewed in that context. The power conferred under s. 226(3) is to be exercised with greatest caution and the provision is to be construed strictly. The power to attach and recover amounts from a third party is to be invoked sparingly; in the event of the assessee having deliberately evaded recovery as also when the assessee is found to be indulging in activities which would eventually defeat the recovery. In the instant case, immediately on service of the order under s. 226(3), the branch manager informed the AO that the operation in the account has been frozen. Definitely the AO could have called for the details of the amounts remaining in the account of the assessee, from the banker. There being sufficient amounts, available in the account, to satisfy the recovery, the attachment could have been continued, without recovery. The withdrawal of the amounts demanded could have been kept in abeyance, especially when th....
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....226(3) of the Act, was definitely secured by the operations in the account having been frozen. The 3rd respondent, however, thought it fit to follow up; with threat of penalty and prosecution, with discernible intent. 25. This Court finds that the 3rd respondent has overreached the statutory power and breached the limits of reasonableness and fairness that should always temper exercise of quasi-judicial power. Filling the coffers of the Revenue should not be the only aim of a recovery officer conferred with statutory powers; all with the avowed object of taking the nation forward, but not at the detriment of a citizen and without following the rule of law. An exercise of statutory power though properly conferred by statute, on facts and on implementation can be found to be arbitrary for reason of the dictates of reasonableness and fairness having not been employed in its true measure and as contemplated by well established principles, strengthened further by judicial precedents 26. Obviously the recovery which laid dormant despite a conditional order being passed by the appellate authority, acquired an unholy velocity on the 25th of March, 2014, apparently due to the close of the....
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....any overreach by the legislature or abuse by the executive. Our own Supreme Court; a Constitution Bench, "numerically expanded, almost to a breaking point" (sic), dealing with forfeiture of amounts collected as tax had this to say : "38. . . . There is a tendency for valiant tax executives clothed with judicial powers to remember their former capacity at the expense of the latter. In a welfare State and in appreciation of the nature of the judicial process, such an attitude, motivated by various reasons cannot be commended. The penalty for deviance from these norms is the peril to the order passed. The effect of mala fides on exercise of administrative power is well established." [STO v. Ajit Mills Ltd. (1977) 4 SCC 98]" 30. On such deliberate consideration, this Court is led to the irrefutable conclusion that the act of withdrawal of the amount after having validly attached the amounts, without any real presumable cause for suspecting delay or impediment in such recovery, was a clear abuse, especially since there was no notice to the assessee, which is the mandate of due process of law. The Department acted without deliberation or due cause and the unavoidable consequence is a ....