CHEMMARUTHY SERVICE CO-OPERATIVE BANK LTD.NO.T 328, vs. THE INCOME TAX OFFICER

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WP(C)/9628/2020HC KeralaKLHC01024660202030 April 2020Author: HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS4 pages
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What did the High Court hold?

The High Court of Kerala found merit in the petitioner's contention that proceeding with coercive steps while the statutory appeal is pending would render the appeal redundant. The Court held that such actions would cause severe difficulties to the petitioner. Consequently, the writ petition was disposed of with a direction to the respondents not to proceed with coercive steps against the petitioner pending the disposal of the appeal (Ext.P3). The Court also directed the second respondent (Commissioner of Income Tax (Appeals)) to consider and dispose of the appeal within a period of 6 months without insisting on the payment of the demanded tax. The ratio is that coercive recovery actions should be stayed when a statutory appeal is pending, to preserve the efficacy of the appellate process and avoid undue hardship to the assessee.

What were the facts?

The petitioner, Chemmaruthy Service Co-operative Bank Ltd., is an income tax assessee. For the assessment year 2017-2018, the Income Tax Officer (ITO), the first respondent, disallowed the petitioner's claim for deduction under Section 80P of the Income Tax Act. This resulted in a demand of Rs. 1,10,32,515/- towards tax and interest. The petitioner filed an appeal (Ext.P3) before the Commissioner of Income Tax (Appeals), the second respondent, challenging the disallowance. While the appeal was pending, the respondents initiated recovery proceedings. The petitioner filed a writ petition before the High Court of Kerala seeking to prevent coercive steps during the pendency of the appeal.

What were the issues?

1. Whether the respondents can initiate coercive recovery proceedings against the petitioner for the demand raised by the Income Tax Officer while the petitioner's statutory appeal against the disallowance of deduction under Section 80P is pending before the Commissioner of Income Tax (Appeals)? (Question of law and fact, concerning the procedural fairness and the efficacy of the appellate process). Assessee's Contention: The petitioner argued that initiating coercive steps pending the disposal of the statutory appeal would render the appeal redundant and cause severe difficulties. They relied on the principle that appellate remedies should not be frustrated by pre-emptive recovery actions. Revenue's Contention: The judgment does not record specific contentions from the revenue regarding the initiation of recovery proceedings during the pendency of the appeal. However, the revenue was represented and heard.

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 BECHU KURIAN THOMAS THURSDAY, THE 30TH DAY OF APRIL, 2020 /10TH VAISAKHA, 1942 W.P.(C).No.9628 OF 2020 PETITIONER: CHEMMARUTHY SERVICE CO-OPERATIVE BANK LTD. NO.T 328, REPRESENTED BY ITS SECRETARY, PANAYARA P.O, VARKALA, THIRUVANANTHAPURAM DISTRICT-695 145. BY ADVS T.R.HARIKUMAR & SRI ARJUN RAGHAVAN RESPONDENTS:- 1.THE INCOME TAX OFFICER, WARD-2 (5), OFFICE OF THE INCOME TAX OFFICER, AAYAKAR BHAVAN, KOWDIAR P.O, THIRUVANANTHAPURAM DISTRICT-695 003. 2.THE COMMISSIONER OF INCOME TAX (APPEALS) AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695 003. 3.THE KERALA STATE CO-OPERATIVE BANK (FORMERLY KNOWN AS THIRUVANANTHAPURAM DISTRICT CO-OPERATIVE BANK),THIRUVANANTHAPURAM DISTRICT OFFICE, EAST FORT, THIRUVANANTHAPURAM-PIN-695 001, REPRESENTED BY ITS GENERAL MANAGER-IN-CHARGE. BY SRI. SRI.JOSE JOSEPH, SC THIS WRIT PETITION (CIVIL) TMP HAVING COME UP FOR ADMISSION ON 30/04/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- WPC. NO. 9628/2020 2

JUDGMENT I have heard the counsel for the petitioner through video conferencing. I have also heard the learned Standing Counsel for Income Tax who has taken notice on behalf of respondents. In the facts and circumstances of the case, I deem it fit that this writ petition be disposed of.

2.

Petitioner is an income tax assessee and the issue relates to the assessment year 2017-2018. By Ext.P1, the 1st respondent disallowed petitioner's claim for deduction under Section 80P of the Income Tax Act and demanded an amount of Rs.1,10,32,515/- as tax and interest.

3.

Challenging the said assessment, petitioner has preferred Ext.P3 appeal contending that the reason for disallowing petitioner's claim for deduction under Section 80P is not tenable. While the appeal is pending, the respondents have initiated recovery proceedings to recover the tax allegedly due.

4.

I find force in the contention of the counsel for the petitioner that if the respondents proceed with coercive steps pending consideration of the statutory appeal, the same will be rendered redundant and petitioner will be put to severe difficulties. In such circumstances, I dispose of the writ petition by directing the respondents not to proceed with coercive steps against the petitioner pending disposal of Ext.P3 appeal. I also direct the 2nd respondent to consider and dispose of Ext.P3 appeal within a period of 6 months without insisting on payment of the tax demanded. BECHU KURIAN THOMAS

JUDGE BNG

Appendix — schedule of exhibits
APPENDIX PETITIONER’S EXHIBITS :- Exhibit-P1 A true copy of the assessment order for the year 2017-2018 dated 18-12-2019. Exhibit-P2 A true copy of the notice issued under Section 156 of the Income Tax Act dated 18-12-2019. Exhibit-P3 A true copy of the online appeal dated 21-02-2020, filed against Ext-P1 assessment order, before the 2nd respondent. Exhibit-P4 A true copy of the stay petition filed by the petitioner in Ext-P3 appeal dated 10-03-2020. Exhibit-P5 A true copy of the judgment dated 19-07-2019 in W.A No.1639 of 2019. Exhibit-P6 A true copy of the judgment dated 17-02-2020 in WP(C) No.4433 of 2020.

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