M/S MAVILAYI SERVICE CO OPERATIVE BANK LTD. vs. THE INCOME TAX OFFICER

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WP(C)/7825/2020HC KeralaKLHC01020543202013 March 2020Author: HONOURABLE MR.JUSTICE V.G.ARUN5 pages
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What did the High Court hold?

The High Court held that the insistence on payment of 20% of the tax assessed as a condition for granting a stay pending appeal is not legally sustainable. The Court referred to its own Division Bench judgment in W.A.No. 1529 of 2019 and connected cases, which considered all relevant aspects and the Full Bench decision in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut [2019 (2) KHC 287]. Based on these precedents, the Division Bench had previously held that demanding a proportion of the tax demand as a condition for stay was improper. Consequently, the High Court quashed Ext.P4, which imposed the 20% payment demand. The writ petition was disposed of with a direction to the third respondent (Commissioner of Income Tax (Appeals)) to consider Ext.P2 appeal within three months of receiving the judgment. Coercive steps based on Ext.P4 were ordered to be kept in abeyance.

What were the facts?

The petitioner, M/s Mavilayi Service Co-operative Bank Ltd., a Primary Agricultural Credit Society, filed a writ petition before the High Court of Kerala. The petitioner sought the expeditious disposal of an appeal (Ext.P2) filed against an assessment order (Ext.P1). Additionally, the petitioner was aggrieved by the condition imposed under Ext.P4, which required payment of 20% of the tax assessed as a prerequisite for considering the appeal. The Income Tax Department was represented by its Standing Counsel. The High Court considered the legality of the 20% tax payment condition.

What were the issues?

1. Whether the insistence on payment of 20% of the tax assessed as a condition for granting a stay pending appeal is legally sustainable? The assessee contended that the condition of paying 20% of the tax assessed was illegal and unsustainable. The assessee relied on the decision of the Division Bench of the High Court in W.A.No. 1529 of 2019 and connected cases, as well as the Full Bench decision in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut [2019 (2) KHC 287]. The revenue, represented by the Standing Counsel, did not present any specific arguments against the assessee's contentions regarding the 20% payment condition, but their presence indicates their opposition to the writ petition.

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.7825 OF 2020(C) PETITIONER/S: M/S MAVILAYI SERVICE CO OPERATIVE BANK LTD. MAVILAYIL P.O.KANNUR-670 622, REPRESENTED BY ITS SECRETARY KINCE VARGHESE. BY ADV. SRI.S.ARUN RAJ RESPONDENT/S: 1 THE INCOME TAX OFFICER WARD-1, AND TPS, KANNUR RANGE, KANNUR-670 006. 2 THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, KOZHIKODE-673 001. 3 THE COMMISSIONER OF INCOME TAX (APPEALS), AAYAKER BHAVAN, MANANCHIRA, KOZHIKODE-673 001. OTHER PRESENT: SC CHRISTOPHER ABRAHAM 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.7825 of 2020 2 Dated this the 13th day of March, 2020

JUDGMENT The petitioner, a Primary Agricultural Credit Society, seeks expeditious disposal of Ext.P2 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.P2 appeal filed against Ext.P1 assessment order.

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 and accordingly, Ext.P4 is quashed. The writ petition is disposed of, directing the third respondent to consider Ext.P2 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. V.G.ARUN JUDGE Scl/13.03.2020

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 19.12.2016 PASSED BY THE 1ST RESPONDENT UNDER SECTION 143(3) OF THE ACT FOR THE AY 2014-15 EXHIBIT P2 TRUE COPY OF THE FIRST APPEAL FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT FOR THE AY 2014-15 EXHIBIT P3 TRUE COPY OF THE STAY APPLICATION DATED FILED BEFORE THE 1ST RESPONDENT FOR THE AY 2014-15 EXHIBIT P4 TRUE COPY OF THE ORDER DATED 26.2.2020 PASSED BY THE 3RD RESPONDENT ON THE STAY APPLICATION W.P.(C) No.7825 of 2020 5

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