SHEEJA PILLAI vs. THE INCOME TAX OFFICER

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WP(C)/10614/2020HC KeralaKLHC01027461202002 June 2020Author: HONOURABLE MR. JUSTICE AMIT RAWAL6 pages
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What did the High Court hold?

The High Court observed that the petitioner was not properly advised in seeking a stay of the demand by submitting an application to the Assessing Officer (Ext.P3 dated March 18, 2020), as this was filed after the garnishee notice (dated March 6, 2020). The Court noted that a stay application or a simple prayer for stay should have been preferred along with the pending appeal before the Commissioner of Income Tax (Appeals). Despite this procedural lapse, considering the lockdown due to the COVID-19 pandemic, the Court granted the petitioner three weeks to file the stay application before the 2nd respondent (CIT(A)). The Court directed the 2nd respondent to decide the stay application within one month thereafter, after affording an opportunity of hearing to the parties and in accordance with law. The garnishee notice (Ext.P5) was ordered to be kept in abeyance until the disposal of the stay application. The interim stay granted is only till the disposal of the interim application, not beyond.

What were the facts?

The petitioner, Sheeja Pillai, proprietress of V For U, filed her income tax return for Assessment Year 2017-18. The Income Tax Officer (ITO), Ward-3, rejected the return, estimated her income at Rs. 37,84,262/-, and raised a demand of Rs. 47,35,787/-. The assessment order, dated 3.12.2019, was rectified by an order dated 3.12.2019 (Ext.P1 and Ext.P1(a)). The petitioner appealed this order to the Commissioner of Income Tax (Appeals) (CIT(A)). As no amount was deposited, the ITO invoked Section 226(3) of the Income Tax Act, issuing a garnishee notice on March 6, 2020 (Ext.P5). The petitioner filed a writ petition before the High Court of Kerala seeking time to file a stay application.

What were the issues?

1. Whether the petitioner was appropriately advised to seek a stay of the demand by filing an application before the Assessing Officer after the issuance of a garnishee notice, rather than directly with the appellate authority? Assessee's Contention: The petitioner argued that while she should have filed a stay application with the pending appeal, the necessity to file an application under Section 226 before the Assessing Officer became futile after the garnishee notice. She sought sufficient time to file a stay application before the appellate authority. Revenue's Contention: The revenue contended that the garnishee notice was issued because the petitioner neither filed a return nor provided an explanation for the deposit, and the government's revenue needed to be recovered.

Which sections of the Income-tax Act were involved?

Section 226(3),Section 142(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE AMIT RAWAL TUE AY, THE 02ND DAY OF JUNE 2020 / 12TH JYAISHTA, 1942 WP(C).No.10614 OF 2020(B) PETITIONER/S: SHEEJA PILLAI PROPRIETRESS, V FOR U, VII/738-C, AYLARA P. O., YEROOR, KOLLAM DISTRICT, PIN - 691 306. BY ADV. SRI.S.ANIL KUMAR (TRIVANDRUM) RESPONDENT/S: 1 THE INCOME TAX OFFICER WARD -3, INCOME TAX OFFICE, AAYAKAR BHAVAN, NEAR KARBALA JN., RAILWAY STATION ROAD, KOLLAM, PIN - 691001. 2 THE COMMISSIONER OF INCOME TAX (APPEALS) KOWDIAR, THIRUVANANTHAPURAM - 695 003. OTHER PRESENT: SRI CHRISTOPHER ABRAHAM SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 02.06.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C).No.10614 OF 2020(B) 2 JUDGMENT Dated this the 2nd day of June 2020 The petitioner, who is an assessee under the Income Tax Act filed income tax return for the assessment year 2017-18. The 1st respondent, however assessed the petitioner under the Act by rejecting the return and estimated the income as Rs.37,84,262/- and raised a demand of Rs.47,35,787/-. The petitioner was also served with a notice under Section 142(1) by the 1st respondent ie., the assessment order, Ext.P1 dated 3.12.2019. Aggrieved by Ext.P1 order, as rectified by Ext.P1(a), the petitioner preferred an appeal, Ext.P2 before the respondent, Commissioner of Income Tax (Appeals), Kowdiar, Thiruvananthapuram. Section 226 of the Income Tax Act empowers the assessing officer to stay the demand. Since the petitioner did not deposit any amount, provisions of sub section (3) of Section 226 of the 1962 Act was invoked by issuing a communication of garnishee vide Ext.P5 dated 6th of March 2020. WP(C).No.10614 OF 2020(B) 3

2.

Mr. S.Anilkumar, learned counsel appearing on behalf of the petitioner submits that though the petitioner should have been advised to prefer a stay application in a pending appeal as the necessity to file the application under Section 226 before the Assessing Officer has become futile on account of the garnishee notice Ext.P5, the petitioner may be granted sufficient time to file a stay application enabling him to press for the stay before the appellate authority, in accordance with law.

3.

Mr. Christopher Abraham, learned counsel appearing on behalf of the Income Tax Department submits that the necessity to issue garnishee notice was on account of the fact that the petitioner neither filed the return nor gave an explanation with regard to deposit and the Government's revenue had to be recovered in the manner as noticed above in case the assessee fails to pay off the same.

WP(C).No.10614 OF 2020(B) 4

4.

Having heard the learned counsel for the parties and appraised the paper book, I am of the view that the petitioner was not advised properly in seeking stay of the demand by submitting an application Ext.P3 dated 18th of March 2020 as it is post the issuance of garnishee notice dated 6th of March 2020. In fact, an application for stay or simple prayer for stay along with the pending appeal ought to have been preferred before the 2nd respondent. Be that as it may, the petitioner has undertaken to file the application for stay and as there is lock down owing to the COVID 19, pandemic, I grant three weeks time to the petitioner to file the application for stay before the 2nd respondent. In case such application is filed, the 2nd respondent would decide the application for stay within one month thereafter, after affording an opportunity of hearing to the parties and in accordance with law. Till such time, notice Ext.P5 dated 6th of March 2020 is ordered to be kept in abeyance. It is made clear that the WP(C).No.10614 OF 2020(B) 5 interim stay is till the disposal of the interim application and not beyond. The writ petition stands stands disposed of. AMIT RAWAL sab JUDGE

WP(C).No.10614 OF 2020(B) 6

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 COPY OF ASSESSMENT ORDER DATED 3.12.2019 ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2017-18. EXHIBIT P1 (a) COPY OF RECTIFICATION ORDER DATED 27.02.2020 ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2017-18. EXHIBIT P2 COPY OF APPEAL MEMORANDUM AGAINST EXT.P1 FILED BEFORE THE 2ND RESPONDENT. EXHIBIT P3 COPY OF STAY PETITION FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. EXHIBIT P4 COPY OF NOTICE DATED 22.01.2020 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P5 COPY OF NOTICE DATED 6.03.2020 ISSUED BY THE 1ST RESPONDENT.

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