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1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 25TH DAY OF JUNE, 2013 BEFORE THE HON’BLE MR. JUSTICE ARAVIND KUMAR WRIT PETITION NO.25845/2013 (T-IT)
BETWEEN: Smt Joshna Rajendra Aged about 53 years No.674, 4th C Main Road, OMBR Layout, Bhuvanagiri, Banaswadi, Bangalore-560 043
…PETITIONER
(By Sri Ashok Kulkarni for M/s. K.R. Prasad, Advocate)
AND:
The Commissioner of Income-Tax (Appeals)-V HMT Bahavan Ganganagar, Bellary Road, Bangalore-560 032
The Income Tax Officer Ward – 13 (3) South Wing, 3rd Floor, HMT Bhavan, Bellary Road, Ganganagar, Bangalore-560 032
…RESPONDENTS
(By Sri K.V.Aravind, Adv.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA WITH A PRAYER TO QUASH THE ORDER OF THE SECOND RESPONDENT DATED 23.04.2013 VIDE ANNEXURE-E.
THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY THE COURT MADE THE FOLLOWING:
ORDER
This writ petition by the assessee is directed against an order dated 23.04.2013, Annexure-E, whereunder 2nd respondent in exercise of power under Sub-Section (6) of Section 220 of the Income Tax Act, 1961 (hereinafter referred to as “the Act, 1961” for short) has rejected the application for stay of the demand made pursuant to the assessment order dated 19.03.2013 for the assessment year 2009-10. Petitioner is also seeking for a direction to 1st respondent to dispose of the stay application, Annexure-F within a time frame.
Heard Sri Ashok Kulkarni, learned counsel appearing for petitioner/assessee and Sri K.V.Aravind, learned counsel appearing for respondent-revenue.
It is the contention of Sri Ashok Kulkarni, learned counsel appearing for petitioner that pursuant to assessment order passed by 2nd respondent on 19.03.2013, which was communicated to the assessee on 25.03.2013, immediately
3 thereafter an appeal came to be filed on 01.04.2013 and in the meanwhile, 2nd respondent was contemplating to initiate recovery proceedings against assessee and as such, an application under Section 220 (6) of the Act, 1961 was filed on 28.03.2013 vide Annexure-D for stay of the demand, contending interalia that an appeal is proposed to be filed against an order of assessment dated 19.03.2013, Annexure- B and till then stay of collection be granted. Assessee also sought for personal hearing before 2nd respondent. 2nd respondent by order dated 23.04.2013 disposed of the said application by directing the assessee to pay taxes within 5 days from the date of receipt of said communication and also fixed the date of hearing as 30.04.2013 insofar as penalty proceedings are concerned. It is this order dated 23.04.2013 which is impugned in the present writ petition contending interalia that opportunity has not been granted, by relying upon the following judgments: 1) (1998) 233 ITR 27: PAWAN KUMAR VS. INCOME-TAX OFFICER
2) 2010 350 ITR 349 (Bom): RAJASTHANI SAMMELAN SARVODAY BALIKA VIDYALAYA AND ANOTHER V. ASSISTANT DIRECTOR OF INCOME-TAX (EXEMPTION) AND OTHERS
Per contra, Sri K.V. Aravind, learned counsel appearing for respondent – revenue would support the order passed by 2nd respondent and would contend that in view of assessee having subsequently filed an appeal before the Commissioner of Income-tax (Appeals) (hereinafter referred to as “CIT (Appeals)” for short) and an application for stay also having been filed, he would submit that same would be expeditiously considered and as such, he prays for dismissal of the writ petition or suitable directions being issued to the CIT (Appeals).
Having heard the learned Advocates appearing for the parties and on perusal of case papers, it is noticed that subsequent to order of assessment being passed on 19.03.2013, assessee filed an application before 2nd respondent on 28.03.2013, Annexure-D, praying for stay of demand made pursuant to assessment order, which was to the tune of Rs.22,97,950/-. It has been contended that in the said application an appeal is being filed on the grounds stated therein. Reason assigned for staying the demand was on account of such appeal proposed to be filed by relying
5 upon the circular dated 21.08.1969. Assessee had also sought for a personal hearing before the Assessing Officer.
It has been consistently held by Courts that Income Tax Officer is required to afford an opportunity of hearing to the assessee and pass a speaking order while exercising power under Section 220 (6) of the Act, 1961. In the two judgments relied upon by the learned counsel appearing for the petitioner, it has been held as under:
1) (1998) 233 ITR 27: PAWAN KUMAR VS. INCOME-TAX OFFICER
“In view of the law laid down in Kuku Rice Mills’ case (1992) 196 ITR 326 (P & H) and Aggarwal Rice and General Mills’ case (1993) 204 ITR 480 (P & H), the order, annexure P-5, is liable to be quashed being violative of the principles of natural justice as the petitioner was not afforded an opportunity of hearing before passing the impugned order and the Income- tax Officer had also not supported the order by recording reasons for rejecting the application filed by the petitioner.”
2) 2010 350 ITR 349 (Bom): RAJASTHANI SAMMELAN SARVODAY BALIKA VIDYALAYA AND ANOTHER V. ASSISTANT DIRECTOR OF INCOME-TAX (EXEMPTION) AND OTHERS
“In the present case, as in several cases which have come up before this court and particularly in the month of March, it is evident that the
6 Assessing Officer and the Director of Income- tax have both had scant regard tot eh parameters which have been laid down by this court for disposal of stay applications. No reasons are indicated. The orders do not contain a prima facie evaluation of the issues which would arise in appeal. In UTI Mutual Fund (since reported in (2012) 345 ITR 71 (Bom), this court was constrained to issue a cautionary observation to the effect that Assessing Officers and appellate authorities, when they dispose of applications for stay, act as quasi-judicial authorities and not merely as tax gatherers of the Revenue.”
The above proposition of law would support the claim of assessee. 2nd respondent is a quasi-judicial authority. It is not doubt true that they are required to protect the interest of Revenue and under the said guise the hardship that would be faced by the assessee cannot be ignored by such officers while exercising the power under Section 220(6) of the Act. A balancing act requires to be done by them. It is because of this precise reason that board by suppressing all its earlier circulars and obviously the circular dated 21.08.1969 also has issued a circular dated 02.12.1993 on the ground that there was a need for comprehensive instructions to be issued on the subject of recovery of tax demand in order to streamline the recovery
7 proceedings. In this regard, stay petitions that would be filed before the Assessing Officers under Section 220 (6) of the Act, 1961, which has been adverted to in the said circular have a bearing to the facts of the present case and they are extracted herein below:
“B. Stay Petitions: i. Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the tax- payer. The assessee must be intimated of the decision without delay.
ii. Where stay petitions are made to the authorities higher than the Assessing Officer (DC/CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately.
iii. The decision in the matter of stay of demand should normally be taken by Assessing Officer/TRO and his immediate superior. A higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances; e.g., where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee. The higher authorities should discourage the assessee from filing review
8 petitions before them as a matter of routine or in a frivolous manner to gain time for withholding payment of taxes.
The guidelines have also been issued under said circular and it has been made clear that mere filing of an appeal against the assessment order will not be sufficient reason to stay the recovery of demand and it is further clarified that stay may be granted only in respect of the amount attributable at such disputed points. The said illustration is not exhaustive and only illustrative. Thus, it boils down to the fact that it is subjective satisfaction of the Assessing Officer, which would govern a given case to grant a stay in exercise of power under Section 220 (6) of the Act, 1961. Hence, such order should be explicit, clear and a Speaking order.
In the instant case, though Sri Ashok Kulkarni, learned counsel appearing for petitioner would contend that in the application for stay – Annexure-D filed before second respondent, several grounds had been urged and it has not been considered in proper perspective does not merit acceptance in its totality, inasmuch as the order of the
9 second respondent dated 23.04.2013 – Annexure-E would indicate that second respondent has taken into consideration the plea putforward in the application for stay. There cannot be any dispute with regard to the proposition of law that the second respondent while examining an application for stay under section 220(6) of Income Tax Act, 1961 is required to pass a speaking order and if personal hearing is sought for, the same has to be extended. In the instant case, the petitioner – assessee in the application for stay – Annexure-D has sought for personal hearing which undisputedly has not been afforded by second respondent. It is for this reason a conclusion has to be arrived that second respondent has failed to extend an opportunity of personal hearing to the petitioner – assessee. On this short ground itself, the matter has to be remitted back to second respondent for adjudication afresh on this issue. It is to be noticed that on rejection of the application for stay, the Bank accounts of the assessee have been attached to by the second respondent in order to safeguard the interest of Revenue. I am of the considered view that it would suffice if a direction is issued to the second respondent to dispose of the application for stay –
10 Annexure-D filed by the assessee to be disposed of within an outer limit of four weeks and till then, the said order of attachment is continued no hardship whatsoever would be caused to the petitioner-assessee. 10. However, at this stage it requires to be noticed that assessing officer has not granted personal hearing to the assessee while adjudicating said application as sought for by the assessee. On this short ground alone, matter has to be remitted back to 2nd respondent for adjudication afresh on this issue. To ensure that interest of Revenue is protected and safe guarded. Assessing Officer has attached the accounts of the assessee as per notice dated 10.06.2013, Annexure-H and H1 and same requires to be continued for a further period of four weeks, within such time the assessing officer would dispose of the application filed by assessee under Section 220(6), as it would meet the ends of justice.
It is also to be noticed that CIT (Appeals) before whom an appeal has been filed against the order of assessment dated 19.03.2013 is seized of the matter as also the application filed by the assessee praying for stay of the demand made pursuant to said assessment order. The CIT
11 (Appeals) requires to be directed to dispose of the stay application within a time frame. Hence, the following order: ORDER 1. Writ petition is allowed in part. 2. Endorsement / communication / order dated 23.04.2013, Annexure-E, is hereby quashed. 3. 2nd respondent shall hear the petitioner / assessee on the application – Annexure-D and pass orders under Section 220 (6) of the Income Tax Act, 1961, within an outer limit of 10 days from today and without waiting for any further notice or copy of this order. 4. Petitioner / assessee shall appear before 2nd respondent on 26.06.2013 at 3.00 p.m. 5. 1st respondent - CIT (Appeals) shall dispose of the application for stay – Annexure-F dated 26.04.2013, within an outer limit of four weeks from today. 6. It is also made clear that order of attachment passed on 10.06.2013, Annexure-H and H1 shall be in force and shall continue till disposal
12 of application for stay – Annexure-D or Annexure-F whichever is earlier and it would be subject to the outcome of the decision or orders that would be passed by 2nd respondent or order that may be passed by 1st respondent - CIT (Appeals). 7. No order as to costs.
Sd/- JUDGE