P R COMBINES vs. ASSISTANT COMMISSIONER OF INCOME TAX
What did the High Court hold?
The High Court disposed of the writ appeal by modifying the interim directions of the writ court. Recognizing the appellant's inability to operate their bank accounts while awaiting the deadline for the 20% deposit, the Court accepted an alternative security arrangement. The appellant was directed to provide an intimation, countersigned by its partner, Sri. K.N. Gopalakrishnan, to the 5th respondent bank (with copies to the 4th respondent bank and the 3rd respondent Assistant Commissioner). This intimation would state that three fixed deposit accounts in the partner's name with Punjab National Bank, totaling ₹28,25,000, would not be operated pending disposal of the appellant's appeals. The Court held that these fixed deposits would serve as the security for the 20% assessed tax amount. Upon compliance, the appellant would be free to operate other bank accounts. The 2nd respondent (Commissioner of Income Tax Appeals) was directed to condone the delay of 433 days in filing the appeals and decide them expeditiously on merits. The fate of the garnishee orders would be determined by the outcome of these appeals.
What were the facts?
The appellant, M/s. P R Combines, filed a writ petition challenging recovery steps initiated by the Assistant Commissioner of Income Tax (3rd respondent) for assessment years 2015-2016 to 2018-2019. Garnishee proceedings were initiated against the appellant's bank accounts with Vijaya Bank (now Bank of Baroda) and Punjab National Bank (4th and 5th respondents), preventing operation. The appellant sought to lift these proceedings pending statutory appeals. The writ court directed the appellant to deposit 20% of the assessed tax within one month, after which the garnishee orders would be kept in abeyance pending disposal of the appeals. The appellant appealed this judgment, stating that while they had a month to deposit, the banks had not lifted the attachment, hindering their ability to operate accounts and make the deposit.
What were the issues?
1. Whether the garnishee proceedings initiated by the 3rd respondent for recovery of disputed income and interest for assessment years 2015-2016 to 2018-2019 should be lifted pending disposal of the appellant's statutory appeals. Assessee's Contention: The appellant argued that the garnishee proceedings prevented them from operating their bank accounts, which was necessary to make the 20% deposit directed by the writ court. They sought the lifting of these proceedings. Revenue's Contention: The revenue, through the Assistant Commissioner, initiated recovery steps, including garnishee proceedings, to realize the disputed tax demand. The judgment does not explicitly record the revenue's specific arguments regarding the garnishee proceedings in the writ appeal, but their action implies a stance against lifting them without adequate security. 2. Whether the condition of depositing 20% of the assessed tax amount, as directed by the writ court, could be secured by alternative means other than immediate cash deposit, to allow operation of bank accounts.
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Cause title — parties, addresses and appearances
J U D G M E N T Dr. A.K.Jayasankaran Nambiar, J
This appeal impugns the judgment dated 5.9.2023 in W.P. (C).No. 28145 of 2023. 2. The brief facts necessary for the disposal of the writ appeal are as follows: The appellant had approached the writ court through the writ petition aforementioned aggrieved by the recovery steps pursued by the 3rd respondent for realisation of the disputed income and interest pertaining to the assessment years 2015-2016, 2016-2017, 2017-2018 and 2018-2019. It would appear that, as part of the recovery steps initiated by the 3rd respondent, garnishee proceedings were initiated against the bank accounts maintained by the appellant with the 4th and 5th respondent banks. Inasmuch as the appellant was prevented from operating the said bank accounts, it approached the writ court with a prayer for lifting the garnishee proceedings, pending disposal of the statutory appeals preferred by it against the order of the 3rd respondent.
The learned Single Judge who considered the matter recorded the submission of the learned counsel for the appellant that it was willing to deposit 20% of the assessed tax amount subject to the final outcome of the appeals and as a condition for refraining from enforcing the garnishee orders. The writ petition was therefore disposed of with a direction to the appellant to deposit 20% of the assessed amount in Exts. P1 to P4 assessment orders, within a period of one month, making it clear that on such deposit, the appellate authority could proceed with the hearing of the applications for condoning delay and the appeals expeditiously and decide the same in accordance with law. It was also made clear that till disposal of the appeals, Exts. P5 to P8 demand notices and Exts.P17 and P18 recovery-cum-garnishee orders would be kept in abeyance.
In the appeal before us, the submission of the learned counsel for the appellant Sri. Jaikrishna R. is that while the appellant has a month's time to make the deposit of 20% of the assessed amount, the 4th and 5th respondent banks have not lifted the attachment over the bank accounts pursuant to the garnishee orders received by them and hence, the appellant is unable to operate those bank accounts during the one month that it has to make the payments directed by the learned Single Judge.
On a consideration of the said submission of the learned counsel for the appellant, we find that the stand taken by the 4th and 5th respondent cannot be said to be unreasonable since there is always a danger that if the appellant is permitted to operate the bank account during the period of one month granted to him to make the deposit of 20% of the assessed tax, he may deplete the said accounts and thereby render the whole exercise of tax recovery futile. Confronted with the said situation, the learned counsel for the appellant sought time to get instructions as to whether alternative security could be offered to the Income Tax Department, through the 4th and 5th respondent banks, to secure the amounts demanded by the Department. When the matter was taken up today, it is brought to our notice by the learned counsel for the appellant that there are three fixed deposit accounts in the name of Sri.K.N. Gopalakrishnan, the partner of the appellant firm, and the amounts in those deposits are as follows: Punjab National Bank (5th Respondent)-Fixed Deposit Details FD Account No. Amount 427400P200000203 Rs 22,55,000/- 427400P200001411 Rs 3,00,000/- 427400P00001952 Rs 2,70,000/- TOTAL Rs 28,25,000/- 6. Finding that the total amount of ₹28,25,000/- covered by the three fixed deposit accounts aforementioned would approximate to the 20% of assessed tax amount directed to be deposited by the learned Single Judge, we dispose of this writ appeal with the following directions: 1) The appellant shall intimate the 5th respondent bank with a copy to the 4th respondent bank and the 3rd respondent, that the fixed deposit accounts standing in the name of its partner with the 5th respondent bank shall not be operated by the account holder pending disposal of the appeals of the appellant by the 2nd respondent. The said intimation letter issued by the appellant shall be counter signed by Sri.K.N. Gopalakrishnan, its partner in whose personal name the fixed deposits aforementioned stand. The said Sri.K.N. Gopalakrishnan shall also ensure that the fixed deposit accounts aforementioned are kept alive during the pendency of the appeals aforementioned. 2) On receipt of the said intimation from the appellant/Sri.K.N. Gopalakrishnan, the 4th and 5th respondent banks, as also the 3rd respondent Assistant Commissioner of Income Tax, shall treat the amount covered by the aforementioned fixed deposit accounts as the security directed to be deposited by the learned Single Judge in the judgment impugned in this writ appeal. 3) On the appellant complying with the condition '1' above, it shall be free to operate all other bank accounts standing in its name with the 4th and 5th respondents. The 2nd respondent shall thereafter proceed to consider the appeals preferred by the appellant on merits, after condoning the delay of 433 days occasioned in filing the same. 4) The fate of the garnishee orders issued by the 3rd respondent shall be determined by the outcome of the appeals aforementioned. DR. A.K.JAYASANKARAN NAMBIAR JUDGE DR. KAUSER EDAPPAGATH JUDGE kp
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