SAPTASHRUNGI SWITCHGEARS vs. THE ASSISTANT COMMISSIONER OF INCOME TAX AND ORS

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WP/2102/2011HC BombayHCBM01009609201115 March 2011Author: HON'BLE SHRI JUSTICE J.P. DEVADHAR,HON'BLE SMT. JUSTICE R.S. DALVI2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the attachment of the Petitioner's bank accounts was premature and set aside the same. The Court directed the Commissioner of Income Tax (CIT) to dispose of the stay application filed by the Petitioner on March 8, 2011, in accordance with the law. The reasoning was based on the fact that the Petitioner had a pending stay application before the CIT, and the Assessing Officer had proceeded with coercive recovery measures, including attachment of bank accounts, before a decision on the stay application was made. The Court did not decide on the merits of the deemed dividend computation under Section 2(22)(e) but focused on the procedural aspect of recovery proceedings.

What were the facts?

The Petitioner, M/s. Saptashrungi Switchgears, Nashik, filed a writ petition before the Bombay High Court seeking a stay on demands for assessment year 2008-09. These demands arose from an assessment order dated November 20, 2010, rectified by an order dated February 4, 2011, under Section 154 of the Income Tax Act, 1961. The Petitioner had appealed the assessment order and filed a stay application with the CIT on March 8, 2011. The Petitioner argued that the Assessing Officer incorrectly computed deemed dividend under Section 2(22)(e) on gross total income instead of accumulated profits. Despite the pending stay application, the Assessing Officer attached the Petitioner's bank accounts through letters dated February 8, 2011, and February 15, 2011. The High Court heard the petition by consent.

What were the issues?

1. Whether the Petitioner is entitled to a stay of the demands for assessment year 2008-09 pending the disposal of their stay application before the CIT, considering the alleged miscomputation of deemed dividend under Section 2(22)(e)? (Question of law and fact, concerning Section 2(22)(e) and Section 154 of the Income Tax Act, 1961). Assessee's Contention: The Petitioner contended that the Assessing Officer erred in computing the deemed dividend under Section 2(22)(e) on the gross total income, whereas it should have been limited to the accumulated profits of the lending company. They also pointed out that the Assessing Officer initiated recovery proceedings by attaching bank accounts even before the disposal of their pending stay application before the CIT. Revenue's Contention: The judgment records no specific contentions from the revenue regarding the issues raised by the Petitioner.

Which sections of the Income-tax Act were involved?

Section 2(22)(e),Section 154

AI-generated summary — verify with the full judgment below

1 (931) WP 2102/11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE CIVIL JURISDICTION Amk WRIT PETITION NO. 2102 OF 2011 M/s. Saptashrungi Switchgears, Nashik .. Petitioner Vs. The Assistant Commissioner of Income Tax & Ors. .. Respondents Mr. S. N. Inamdar and Mr. Mihir Naniwadekar for the Petitioner. Mr. Vimal Gupta for the Respondents. CORAM : J. P. DEVADHAR & MRS. ROSHAN DALVI, JJ. Date : 15th March, 2011. P.C. 1. Rule returnable forthwith. By consent, the Petition is taken up for final hearing. 2. By this Petition, the Petitioner seeks stay of demands raised for the assessment year 2008-09 pursuant to the assessment order dated 20th November, 2010 as rectified by order dated 04.02.2011 under Section 154 of the Income Tax Act, 1961. Admittedly the Petitioner has filed an Appeal against the assessment order and has also filed a stay application before CIT on 8th March, 2011. In the said stay application the Petitioner has specifically pleaded that under Section 2(22)(e) of the Income Tax Act deemed dividend can be computed to the extent of accumulated profit of the lending company, however, in the present case the Assessing Officer has computed the deemed dividend on gross total income. Admittedly, the stay application filed by the Petitioner

2 (931) WP 2102/11 is pending before the CIT. Even before the disposal of the stay application, the Assessing Officer has attached the bank accounts of the Petitioner by his letters dated 8th February, 2011, 15th February, 2011 & 15th February, 2011 being Exhibit H-1 to H-3. Hence the attachment of the bank accounts are set aside and the CIT is directed to dispose of the stay application dated 8th March, 2011 in accordance with law. (ROSHAN DALVI, J.) (J.P. DEVADHAR, J.)

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