KALAVOOR SERVICE CO-OPERATIVE BANK LTD NO. 1497 vs. INCOME TAX OFFICER,

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WP(C)/7924/2020HC KeralaKLHC01020701202013 March 2020Author: HONOURABLE MR.JUSTICE V.G.ARUN4 pages
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What did the High Court hold?

The High Court held that the insistence for payment of a proportion of the demand as a condition for granting a stay pending appeal is unsustainable. This decision was based on the Division Bench's consideration of relevant aspects and the Full Bench judgment in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut. Consequently, the demand for remittance of 20% of the tax assessed pending the appeal could not be sustained. The Court directed the second respondent (Commissioner of Income Tax (Appeals)) to consider the petitioner's appeal within three months. All coercive steps based on the demand order (Ext.P4) were ordered to be kept in abeyance, and the order freezing the petitioner's account was to be lifted forthwith, allowing the petitioner to operate its accounts.

What were the facts?

The petitioner, Kalavoor Service Co-operative Bank Ltd., filed an appeal (Ext.P3) against an assessment order (Ext.P1). The Income Tax Officer (respondent 1) issued a demand for payment of 20% of the assessed tax (Ext.P4) pending the appeal. Alleging non-compliance with this demand, the petitioner's bank account was frozen, hindering its operations. The petitioner filed a writ petition seeking expeditious disposal of its appeal and challenging the condition of paying 20% of the tax assessed.

What were the issues?

1. Whether the insistence for remittance of 20% of the tax assessed as a condition for granting a stay pending appeal is legally sustainable? (Question of law, turning on principles of natural justice and statutory provisions governing appeals and stay orders). Assessee's Contention: The petitioner argued that the demand for 20% of the assessed tax was illegal and that the freezing of its account due to non-compliance was causing severe operational difficulties. The petitioner relied on the Division Bench judgment in W.A.No. 1529 of 2019 and connected cases, and the Full Bench decision in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut [2019 (2) KHC 287]. Revenue's Contention: The judgment records that the learned Standing Counsel for the Income Tax Department was heard, but it does not detail the specific arguments presented by the revenue.

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 V.G.ARUN FRIDAY, THE 13TH DAY OF MARCH 2020 / 23RD PHALGUNA, 1941 WP(C).No.7924 OF 2020(M) PETITIONER/S: KALAVOOR SERVICE CO-OPERATIVE BANK LTD NO. 1497 KALAVOOR P.O, ALAPPUZHA, PIN 688 522 REPRESENTED BY ITS SECRETARY IN CHARGE BY ADVS. SRI.C.A.JOJO SRI.C.A.JOJO SRI.B.ARUN RESPONDENT/S: 1 INCOME TAX OFFICER, WARD-5, ALAPPUZHA, A N PURAM P.O, ALAPPUZHA 688 011 2 COMMISSIONER OF INCOME TAX (APPEALS), OFFICE OF THE COMMISSIONER OF INCOME TAX, PUBLIC LIBRARY BUILDING, KOTTAYAM TOWN P.O 686 002 3 THE BRANCH MANAGER, ALAPPUZHA DISTRICT CENTRAL C-OPERATIVE BANK, KALAVOOR MAIN BRANCH, KALAVOOR P.O, PIN 690 106 OTHER PRESENT: SC JOSE JOSEPH THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.03.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) No.7924 of 2020 2 Dated this the 13th day of March, 2020

JUDGMENT The petitioner, a Co-operative Society, seeks expeditious disposal of Ext.P3 appeal. The petitioner is also aggrieved by the condition of payment of 20% of the tax assessed, imposed under Ext.P4, pending consideration of Ext.P3 appeal filed against Ext.P1 assessment order. It is submitted that pursuant to Ext.P4; alleging non- compliance of the direction in Ext.P4, the account of the petitioner has been frozen and the Society is not in a position to continue its activities.

2.

Heard the learned Standing Counsel for the Income Tax Department also.

3.

The legality of the insistence for remittance of 20% of the tax assessed was considered and decided by the Division Bench of this Court and as per the judgment in W.A.No. 1529 of 2019 and connected cases. After taking note of all relevant aspects and the decision of the Full Bench in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut [2019 (2) KHC 287], the Division Bench held the insistence for payment of proportion of the demand as a condition for grant of stay to be bad. In such circumstances, the demand for remittance of 20% of the tax assessed pending consideration of the appeal, cannot be sustained. The writ petition is disposed of, directing the second respondent to consider Ext.P3 appeal filed by the petitioner within a period of three months from the date of receipt of a copy of this judgment. In the meanwhile, all coercive steps based on Ext.P4 shall be kept in abeyance. The order freezing the petitioner's account shall be lifted forthwith and the petitioner permitted to operate its accounts.

V.G.ARUN JUDGE Scl/13.03.2020

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 A TRUE COPY OF THE ASSESSMENT ORDER FOR AY 2017-18 DATED 23-12-2019 ISSUED BY THE FIRST RESPONDENT. EXHIBIT P2 A TRUE COPY OF THE DEMAND NOTICE U/S 156 DATED 23-12-2019 ISSUED BY THE FIRST RESPONDENT EXHIBIT P3 A TRUE COPY OF THE APPEAL FOR AY 2017- 18 BEFORE THE 2ND RESPONDENT DATED 01- 20-2020 EXHIBIT P4 A TRUE COPY OF THE LETTER OF DEMAND FOR 20% OF TAX DATED 10-02-2020 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P5 A TRUE COPY OF THE NOTICE U/S. 226(3) OF THE INCOME TAX ACT FOR ATTACHMENT OF BANK ACCOUNT DATED 26-02-2020 FOR RS. 7,60,80,412/- ISSUED BY THE FIRST RESPONDENT.

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