MANAMBOOR SERVICE CO-OPERATIVE BANK LIMITED vs. THE INCOME TAX OFFICER

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WP(C)/21380/2019HC KeralaKLHC01054758201904 November 2019Author: HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR6 pages
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What did the High Court hold?

The High Court disposed of the writ petition by directing the 2nd respondent (Commissioner of Income Tax (Appeals)) to pass final orders on the petitioner's appeal within four months. Crucially, further proceedings for recovery of amounts confirmed against the petitioner were ordered to be kept in abeyance until the appeal is decided and the order is communicated. This stay is conditional upon the petitioner paying an amount equivalent to 1% of the tax demanded on the additions made under Section 68 of the Income Tax Act within one month. The attachment over the petitioner's accounts was ordered to be lifted forthwith upon this deposit. The Court did not explicitly decide on the merits of the Section 68 additions or the Section 80P deduction, focusing instead on the interim arrangement for recovery pending appeal.

What were the facts?

The petitioner, Manamboor Service Co-operative Bank Limited, challenged assessment orders under the Income Tax Act. They filed an appeal before the Commissioner of Income Tax (Appeals) (2nd respondent). The 2nd respondent, in a stay application, directed the petitioner to pay the demand confirmed under Section 68 of the Income Tax Act as a condition for staying the demand related to the disallowance of deduction under Section 80P. Dissatisfied, the petitioner approached the Assessing Authority and then the Principal Commissioner under Section 220(6) of the Income Tax Act. These proceedings resulted in orders directing the petitioner to pay 20% of the disputed demand. The petitioner impugned these orders, seeking to pay only 1% of the tax demanded on additions under Section 68, pending appeal disposal, citing a High Court decision in a similar matter.

What were the issues?

1. Whether the condition imposed by the Appellate Authority for stay of demand, requiring payment of the full demand under Section 68 of the Income Tax Act, pending appeal on Section 80P deduction, is justified? 2. Whether the petitioner is entitled to a stay of recovery proceedings upon payment of 1% of the tax demanded on additions made under Section 68, pending disposal of their appeal? Assessee's Contentions: The petitioner contended that in similar matters, relying on the decision in Mavilayi Service Co-operative Bank Limited v. Commissioner of Income Tax, and directions from a Division Bench in Writ Appeals, only 1% of the tax amount confirmed under Section 68 should be deposited pending appeal disposal. They sought to set aside the impugned orders on this condition. Revenue's Contentions: The judgment records that the learned Standing Counsel appearing for the Income Tax Department was heard, but their specific contentions are not detailed.

Which sections of the Income-tax Act were involved?

Section 68,Section 80P,Section 220(6)

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 A.K.JAYASANKARAN NAMBIAR MONDAY, THE 04TH DAY OF NOVEMBER 2019/13TH KARTHIKA, 1941 W.P(C).No.21380 OF 2019(V) PETITIONER: MANAMBOOR SERVICE CO-OPERATIVE BANK LIMITED NO.2825, REPRESENTED BY ITS SECRETARY SHRI R. SAILENDRAKUMAR, AGED 55 YEARS, MANAMBOOR P.O., THIRUVANANTHAPURAM DISTRICT, KERALA, PIN-695 605. BY ADV. SRI.C.A.JOJO RESPONDENTS: 1 THE INCOME TAX OFFICER WARD-2(2) KOWDIAR, TRIVANDRUM-695 003. 2 THE COMMISSIONER OF INCOME TAX (APPEALS)-1, OFFICE OF THE COMMISSIONER OF INCOME TAX (APPEALS), TRIVANDRUM-695 003. 3 THE PRINCIPAL COMMISSIONER OF INCOME TAX, OFFICE OF THE PRL.COMMISSIONER OF INCOME TAX, TRIVANDRUM-695 003. 4 THE GENERALA MANAGER, TRIVANDRUM DISTRICT CO-OPERATIVE BANK LTD, HEAD OFFICE, TRIVANDRUM-695 001. R1 TO R3 BY CHRISTOPHER ABRAHAM, SC R4 BY SRI.THOMAS ABRAHAM SC THIRUVANANTHAPURAM DIST. CO.OP BANK THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 04.11.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C).No.21380/2019 : 2 :

J U D G M E N T Against Exts.P1 and P2 assessment orders under the Income Tax Act, the petitioner preferred Ext.P3 appeal before the 2nd respondent. In the stay application preferred along with the appeal, the 2nd respondent passed Ext.P12 order directing the petitioner to pay the demand confirmed against him under Section 68 of the Income Tax Act, as a condition for stay of the demand attributable to the disallowance of deduction under Section 80P of the Income Tax Act. Apparently dissatisfied with the said order of the Appellate Authority, the petitioner approached the Assessing Authority and thereafter the Principal Commissioner by invoking the provisions of Section 220(6) of the Income Tax Act. The said proceedings culminated in Exts.P4 and P7 orders directing the petitioner to pay 20% of the disputed demand within ten days of receipt of the latter order. In the writ petition, the petitioner impugns Exts.P4, P7 and P9 orders inter alia on the contention that, in similar matters, by placing reliance on the decision of this Court in Mavilayi Service Co-operative Bank Limited v. Commissioner of Income Tax – [2019 (2) KHC 287 [FB]], in the context of the deduction claimed under Section 80P of the Income Tax Act, as also the directions

W.P.(C).No.21380/2019 : 3 : stated to have been issued by a Division Bench in Writ Appeals, that only 1% of the tax amount confirmed against the assessees under Section 68 of the Income Tax Act, needs to be deposited, pending disposal of the appeals by the First Appellate Authority, the impugned orders ought to be set aside on condition that the petitioner pays 1% of the tax demanded on the additions made under Section 68 of the Income Tax Act, pending disposal of the appeal by the Appellate Authority.

2.

I have heard the learned counsel appearing for the petitioner and also the learned Standing Counsel appearing for the Income Tax Department. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I dispose the writ petition by directing the 2nd respondent to consider and pass final orders on Ext.P3 appeal pending before him, within an outer time limit of four months from the date of receipt of a copy of this judgment, after hearing the petitioner. It is made clear that till such time as orders are passed by the 2nd respondent in the appeal as directed, and the order communicated to the petitioner, further proceedings including those pursuant to Exts.P4, P7, P9 and P12 communications, for recovery of amounts confirmed against the W.P.(C).No.21380/2019 : 4 : petitioner shall be kept in abeyance on condition that the petitioner pays an amount equivalent to 1% of the tax demanded on the additions made in the assessment order under Section 68 of the Income Tax Act, within one month from today. It is made clear that the attachment over the accounts of the petitioner, as contemplated in Ext.P9 notice, shall stand lifted forthwith on the petitioner depositing the aforementioned 1% amount with the respondents. A.K.JAYASANKARAN NAMBIAR JUDGE prp/4/11/19

W.P.(C).No.21380/2019 : 5 :

Appendix — schedule of exhibits
APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 A TRUE COPY OF THE ASSESSMENT ORDER FOR AY 2016-17 DATED 24.12.2018 ISSUED BY THE FIRST RESPONDENT EXHIBIT P2 A TRUE COPY OF THE DEMAND NOTICE DATED 24.12.2018 ISSUED BY THE FIRST RESPONDENT EXHIBIT P3 A TRUE COPY OF THE E-FILED APPEAL FOR AY 2016-17 DATED 25.12.2018 FILED BEFORE THE 2ND RESPONDENT EXHIBIT P4 A TRUE COPY OF THE DEMAND NOTICE DATED 12.3.2019 ISSUED BY THE FIRST RESPONDENT EXHIBIT P5 A TRUE COPY OF THE REVIEW PETITION DATED 15.3.2019 BEFORE THE 3RD RESPONDENT EXHIBIT P6 A TRUE COPY OF THE JUDGMENT IN WPC NO 8197/2019 DATED 18.3.2019 EXHIBIT P7 A TRUE COPY OF THE ORDER ON REVIEW PETITION DATED 16.7.2019 ISSUED BY THE 3RD RESPONDENT EXHIBIT P8 A TRUE COPY OF THE STATUTORY STAY PETITION DATED 25.3.2019 BEFORE THE 1ST RESPONDENT EXHIBIT P9 A TRUE COPY OF THE ACCOUNT FREEZING NOTICE DATED 1.8.2019 ISSUED BY THE 1ST RESPONDENT W.P.(C).No.21380/2019 : 6 : EXHIBIT P10 A TRUE COPY OF THE JUDGMENT IN WPC NO 13851/2019 DATED 17.5.2019 EXHIBIT P11 A TRUE COPY OF THE JUDGMENT IN WA NO 1536/2019 DATED 1.7.2019 EXHIBIT P12 RESPONDENTS EXHIBITS: A TRUE COPY OF THE STAY ORDER DATED 08.03.2019 ISSUED BY THE 2ND RESPONDENT. NIL. //TRUE COPY// P.S. TO JUDGE

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