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2014 Supreme(Bom) 255
High Court of Judicature at Bombay
MR. MOHIT S. SHAH & M.S. SANKLECHA, JJ.
The Director of Income Tax (Exemption)
Versus
The Income Tax Appellate Tribunal Mumbai Branch B, represented by the Assistant Registrar & Another
Writ Petition (L) No. 3174 of 2013
Decided On : 04-02-2014
For the Petitioner:Vimal Gupta Sr. Advocate along with Ms. Padma Divakar, Advocates.
For the Respondents:R1, Pradeep Jetaly, M.S. Bhardwaj, Vinod Joshi, R2, S.E. Dastur, Sr. Advocate with Nishant Thakkar i/by Mint & Conferer, Advocates.
The main legal point established in the judgment is the importance of following the rule of law and the binding nature of the High Court's decisions on the authorities.
Headnote:
Income Tax - Refund - Income Tax Act, 1961, Section 11, Section 2(15), Section 156, Section 220(6), Section 226(3), Section 254(2A) - The court discussed the provisions of the Income Tax Act, 1961, including Section 11, Section 2(15), Section 156, Section 220(6), Section 226(3), and Section 254(2A). The court emphasized the guidelines for effecting recovery of dues as laid down in UTI Mutual Funds vs. ITO and highlighted the importance of following the rule of law in the actions of the revenue and the Assessing Officer.
Fact of the Case:
The petitioner, a Director of Income Tax (Exemption), challenged the order directing the refund of an amount under the Income Tax Act, 1961. The respondent, a statutory corporation, filed a return of income for assessment year 2010-11 claiming exemption under Section 11. The Assessing Officer denied the exemption, issued a demand notice, and granted a conditional stay of the demand. The respondent filed appeals and stay applications, but the revenue attached and withdrew the demanded amount before the expiry of the appeal filing period.
Finding of the Court:
The court found that the revenue's actions were in defiance of the directions of the High Court and were contrary to the rule of law. It emphasized the importance of following the guidelines for recovery of dues and highlighted the binding nature of the High Court's decisions on the authorities. The court dismissed the petition and directed the Tribunal to pass further orders as deemed fit.
Issues: The issues involved the denial of exemption under Section 11, the grant of conditional stay, the timing of recovery actions by the revenue, and the jurisdiction of the Tribunal to grant a refund.
Ratio Decidendi: The court held that the revenue's actions were against the elementary principles of the rule of law and emphasized the importance of following the guidelines for recovery of dues as laid down by the High Court. It also clarified the jurisdiction of the Tribunal to grant a refund in the absence of a stay.
Final Decision: The petition was dismissed, and the Tribunal was left open to pass further orders after hearing the parties.
C.A.V. Judgment: (M.S. Sanklecha, J.)
At the request of the parties, the petition is taken up for final disposal at the stage of admission.
2) This petition by the revenue challenges the order dated 25 November 2013 passed by the Income Tax Appellate Tribunal (“the Tribunal”) directing the petitioner revenue to refund an amount of Rs.159,84,03,720/- (rounded of to Rs.159.84 crores for this order) within 10 days from the receipt of the impugned order. The impugned order directing refund has been passed in a pending appeal before the Tribunal which is fixed for final hearing on 4 February 2014.
2) Brief facts leading to this petition are as under:
a) The petitioner is a Director of Income Tax (Exemption) having jurisdiction over the respondent No.2 assessee under the Income Tax Act, 1961 (“the Act”).The respondent No.1 is the final authority under the Act dealing with appellable orders passed by authorities under the Act. The respondent No.2 assessee is a statutory corporation established under the Maharashtra Area Housing and Development Act, 1976. The respondent No.2 is engaged in the activity of constructing and providing accommodations to economically weaker sections of the society.
b) On 30 September 2010, respondent No.2 filed its return of income for assessment year 2010-11 showing its taxable income as Nil. This was based on a claim for exemption under Section 11 of the Act.
c) On 18 March 2013, the Assessing Officer passed an assessment order for assessment year 2010-11 denying the respondent No.2 assessee the exemption under Section 11 of the Act as the activities of respondent No.2-assessee did not satisfy the amended definition of charitable purpose under Section 2(15) of the Act. Pursuant to the above assessment order dated 18 March 2013 a demand notice under Section 156 of the Act for Rs.199.82 crores (Rs.146.91 crores of tax and Rs.52.88 crores of interest) was issued on 18 March 2013 itself to respondent No.2.
d) Being aggrieved by the assessment order dated 18 March 2013 of the Assessing Officer an appeal was filed on 18 April 2013 to Commissioner of Income Tax (Appeals) (CIT)(A). At about the same time on 19 April 2013 the petitioner filed an application under Section 220(6) of the Act with the Assessing officer seeking a stay of the demand consequent to assessment order dated 18 March 2013 for A.Y. 2010-11. The Assessing Officer by order dated 23 July 2013 granted a conditional stay of the demand on the respondent No.2assessee paying the entire demand of Rs.199.82 crores in nine equal monthly instalments of Rs.22.20 crores. Respondent No.2-assessee did pay the first instalment of Rs.22.20 crores on 30 July 2013 in accordance with order dated 23 July 2013. However, before the time to pay the second instalment arrived, respondent No.2-assessee filed an application on 12 August 2013 before the Commissioner of Income Tax as the administrative head seeking a complete stay of the demand of Rs.199.82 crores.
e) On 4 September 2013, the Commissioner of Income Tax modified the terms of the stay granted by the Assessing Officer and and directed respondent No.2-assessee to pay the outstanding balance aggregate demand in 10equal instalments of Rs.17.76 crores beginning with 15 September 2013. Respondent No.2 paid the first instalment on 15 September 2013. Therefore, respondent No.2 had in the aggregate paid an amount of Rs.39.96 crores out of total demand of Rs.199.80 crores (Rs.146.91 crores tax and Rs.12.88 crores as interest).
f) Thereafter, before the second instalment became due, respondent No.2-assessee on 10 October 2013 filed Writ Petition No.2544 of 2013 in this Court seeking stay of demand and the quashing of orders dated 23 July 2013 of the Assessing Officer and 4 September 2013 of the Commissioner of Income Tax. No orders were obtained by respondent No.2 in its Writ Petition No. 2544 of 2013 filed in this Court. However, the Commissioner of Income Tax (Appeals) did hear respondent No.2 assess
