M/S.KARAKULAM SERVICE CO-OPERATIVE BANK LTD., vs. THE INCOME TAX OFFICER

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WP(C)/10371/2019HC KeralaKLHC01025950201903 April 2019Author: HONOURABLE MR.JUSTICE S.V.BHATTI6 pages
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What did the High Court hold?

The High Court held that the reasons provided by the CIT(A) for refusing the stay petitions touched upon the merits of the appeals, indicating that the stay petitions were not given due consideration. To balance the claims of the assessee and the revenue and ensure timely disposal of appeals, the Court disposed of the writ petition with the following directions: (a) Stay of recovery of the demand for AY 2011-2012 was granted, subject to the petitioner depositing 20% of the tax demanded (Rs. 1,12,81,740) within four weeks. Failure to comply would render the stay ineffective. (b) For AY 2014-2015, since 20% of the tax demanded had already been paid, a stay of further recovery was granted, and the appeal was directed to be disposed of. (c) The appeals for both AYs were to be disposed of expeditiously, preferably within three months.

What were the facts?

The petitioner, M/s. Karakulam Service Co-operative Bank Ltd., filed a writ petition challenging the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] refusing to grant stay pending appeals. The appeals were against assessment orders for Assessment Year (AY) 2011-2012 and AY 2014-2015. The petitioner argued that the CIT(A) arbitrarily denied stay without proper reasons. The assessment order for AY 2011-2012 demanded Rs. 1,12,81,740. The petitioner had already deposited 20% of the tax demanded for AY 2014-2015. The petitioner sought a stay of recovery pending disposal of their appeals.

What were the issues?

1. Whether the orders refusing to grant stay pending appeal for AY 2011-2012 and AY 2014-2015 are illegal and arbitrary, violating principles of natural justice, as argued by the petitioner? 2. Whether the CIT(A) erred in touching upon the merits of the appeal while deciding the stay petition, thereby not giving due consideration to the interlocutory application, as contended by the petitioner? Assessee's Contentions: The petitioner argued that the reasons provided by the CIT(A) for refusing stay were arbitrary and touched upon the merits of the appeal, indicating a lack of due consideration. They contended that substantial grounds existed for their appeals and sufficient grounds for granting stay. The petitioner also highlighted that 20% of the tax demand for AY 2014-2015 had already been deposited. Revenue's Contentions: The revenue contended that the assessment orders were made following applicable provisions and that the appellate authority rightly declined to grant stay as no case was made out. Alternatively, the revenue suggested that if the assessee deposited 20% of the tax demanded, the court could consider granting stay and directing the disposal of the appeals.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI WEDNESDAY,THE 03RD DAY OF APRIL 2019 / 13TH CHAITHRA, 1941 WP(C).No. 10371 of 2019 PETITIONER/S: M/S.KARAKULAM SERVICE CO-OPERATIVE BANK LTD., KP-1/382, KARAKULAM-P.O, NEDUMANGAD, TRIVANDRUM- 695564, REPRESENTED BY ITS SECRETARY, SHRI.K. PADMAKUMAR. BY ADVS. SRI.T.M.SREEDHARAN (SR.) SMT.DIVYA RAVINDRAN SMT.NISHA JOHN SRI.R.BHASKARA KRISHNAN SRI.V.P.NARAYANAN RESPONDENT/S: 1 THE INCOME TAX OFFICER WARD 2(3), THIRUVANANTHAPURAM-695003. 2 THE COMMISSIONER OF INCOME TAX(APPEALS) 2ND FLOOR, AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695003. SR. CHRISTOPHER ABRAHAM-SC, SRI. O.P. JOS WINSON THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 03.04.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C)No.10371/19 2

JUDGMENT Heard Sri.V.P.Narayanan, the learned counsel for the petitioner and Sri.Christopher Abraham, the learned Standing Counsel for the respondents.

2.

The petitioner challenges the orders refusing to grant stay pending appeal in Exts.P6 and P10 as completely illegal and the orders did not record reasons for denying the relief of stay of recovery pending appeals. Ext.P5 appeal is filed aggreived by the Assessment Order dated 27.11.2018. Ext.P5 deals with the assessment year 2011-2012. Ext.P9 appeal is filed challenging order of assessment for the year 2014-2015. The orders impugned in the writ petition are identical for convenience the order in Ext.P6 is excerpted hereunder:- “ The Appellant had filed a stay petition along with Appeal for Ay 2011-12. The Appellant's petition for stay of demand of Rs.1,12,81,740 was posted for hearing on 14.03.2019. In response to the notice the Authorized Representative of the Appellant attended the case and discussed.

The appeal has been filed against the order giving effect to the CIT(A)'s order dated 27.11.2018. The learned AR has argued that the Assessing Officer has wrongly denied exemption u/s 80P. On perusal of the records, prima facie, it appears that the Assessing Officer has correctly followed the directions given by appellate authorities in this order giving effect to the said order. Therefore, there is no prima facie case for stay of demand.

W.P.(C)No.10371/19 3 Hence, no stay is granted on the demand raised by the Assessing Officer.”

3.

Sri.V.P.Narayanan, contends that the reasons assigned in Ext.P6 show the arbitrary manner in which the jurisdiction is exercised by the 2nd respondent. The petitioner has made out substantial grounds in appeals against the respective orders of assessment and also sufficient grounds for granting stay pending appeal. For the assessment year 2014- 2015 as per Ext.P5 the petitioner has already deposited 20% of the tax demanded and there is no reason why the request for stay made in the appeal pending in Ext.P9 is also refused. He prays for stay of recovery pending Exts.P5 and P9 appeals.

4.

The learned Standing Counsel contends that the order of assessment is made by following the applicable provisions in this behalf and the appellate authority since satisfied that no case is made out for granting stay declined to exercise the jurisdiction rightly, he prays for dismissing the writ petition. He alternatively submits that the assessee if could deposit 20% of the tax demanded by the respective assessment orders, this Court can consider granting stay of recovery pending appeals and direct disposal of Exts.P5 and P9 appeals.

5.

The reasons given by the 2nd respondent for refusing the prayer for stay and touch the merits of the appeal. Thus, the petition for stay is W.P.(C)No.10371/19 4 not given due consideration while disposing of interlocutory applications. The appeals in Exts.P5 and P9 since are pending and to balance the claims of assessee on one hand and the revenue on another hand and also to ensure timely disposal of the appeals the writ petition is disposed of by this order:- (a) there shall be stay of recovery of amount demanded for the Assessment Year 2011-2012 subject to the petitioner depositing 20 % of the tax demanded i.e, Rs.1,12,81,740/- within four weeks from today. In default of complying with the condition the stay granted by this order ceases to be effective. (b) for the assessment year 2014-2015, the petitioner has paid 20% of the tax demanded therefore by granting stay of further recovery of the tax demanded for the assessment year 2014-2015, the appeal is directed to be disposed of. (c) the appeals in Exts.P5 and P9, hence are disposed of as expeditiously as possible preferably within three months from today. S.V.BHATTI JUDGE Ac

W.P.(C)No.10371/19 5

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE CERTIFICATE OF REGISTRATION NO.E 17/2013 DATED 14.02.2013 GRANTED BY THE ASSISTANT REGISTRAR (GENERAL)NEDUMANGAD, UNDER THE KERALA CO- OPERATIVE SOCIETIES ACT. EXHIBIT P2 A TRUE COPY OF THE ASST.ORDER 23.10.2016 ALONG WITH DEMAND NOTICE AND COMPUTATION OF INCOME PASSED BY THE 1ST RESPONDENT U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT. EXHIBIT P3 TRUE COPY OF THE ORDER OF THE SECOND RESPONDENT IN ITA NO.91/EF/TVM/CIT(A)/TVM/2017-18 DATED 27.11.2018. EXHIBIT P4 TRUE COPY OF MODIFIED ORDER DATED 18.12.2018 FOR THE ASST. YEAR 2011-12 ALONG WITH DEMAND NOTICE. EXHIBIT P5 TRUE COPY MEMORANDUM OF APPEAL E-FILED ON 22.2.2019 BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P5 A TRUE COPY STAY PETITION DATED 22.2.2019 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P5 B TRUE COPY PETITION FOR CONDONATION OF DELAY DATED 22.2.2019 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P6 TRUE COPY OF STAY ORDER IN ITA NO.684/EF/TVM/2018-19 DATED 25.03.2019 PASSED BY THE 2ND RESPONDENT FOR THE ASST. YEAR 2011-12. EXHIBIT P7 TRUE COPY OF OFFICE MEMORANDUM F.NO.404/72/93-ITCC DATED 31.7.2017 ISSUED BY CENTRAL BOARD OD DIRECT TAXES. EXHIBIT P8 TRUE COPY OF MODIFIED ORDER DATED 14.11.2018 ALONG WITH DEMAND NOTICE AND COMPUTATION FROM PASSED BY THE 1ST RESPONDENT FOR THE ASST.YEAR 2014-15. W.P.(C)No.10371/19 6 EXHIBIT P9 TRUE COPY OF MEMORANDUM OF APPEAL E-FILED ON 7.1.2019 BY THE PETITIONER BEFORE THE 2ND RESPONDENT FOR THE ASST. YEAR 2014-15. EXHIBIT P9 A TRUE COPY OF STAY PETITION DATED 7.12.2018 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT FOR THE ASST.YEAR 2014-15. EXHIBIT P10 TRUE COPY OF STAY ORDER IN ITA NO.314/EF/TVM/2018-19 DATED 25.03.2019 PASSED BY THE 2ND RESPONDENT FOR THE ASST.YEAR 2014-15. RESPONDENT'S/S EXHIBITS: NIL //TRUE COPY// Sd/- PA TO JUDGE

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