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2003 Supreme(Cal) 198
High Court Of Calcutta
Bhaskar Bhattacharya
GOLAM MOMEN - Appellant
Versus
ASSISTANT COMMISSIONER OF INCOME-TAX AND ORS. - Respondent
W. P. 540 Of 2003
Decided On : 04/24/2003
1. Filing an appeal and stay application before the appellate authority does not automatically stay recovery proceedings unless a specific order granting stay is passed by the authority. 2. Notice to the assessee under Section 226 (3) (iii) of the Income-tax Act, 1961 is not mandatory before initiating recovery proceedings, as its purpose is only to inform the assessee about the recovery.
Headnote:
INCOME TAX - Recovery of Tax - Stay of Recovery - Automatic Stay - Notice under Section 226 (3) - Mandatory Service upon Assessee - Interpretation of Section 226 (3) of the Income-tax Act, 1961 - Automatic Stay of Recovery Proceedings upon Filing Stay Application before Appellate Authority - Necessity of Notice to Assessee before Recovery under Section 226 (3).
Fact of the Case:
The petitioner, an assessee under the Income-tax Act, 1961, challenged the notices issued by the Income-tax authorities under Section 226 (3) of the Act, seeking to recover the demanded amount from various persons holding money for or on account of the petitioner. The petitioner contended that filing a stay application before the appellate authority automatically stayed the recovery proceedings and that the authorities were required to serve a notice under Section 226 (3) (iii) of the Act upon the assessee before initiating recovery proceedings.
Finding of the Court:
The court held that mere filing of an appeal and stay application before the appellate authority did not ipso facto stay the recovery proceedings. The court further held that it was not mandatory to issue notice upon the assessee and hear him before passing an order under Section 226 (3) of the Act, as the purpose of such notice was only to inform the assessee that the amount had been recovered by virtue of a proceeding under Section 226 (3) of the Act.
Issues: 1. Whether the filing of an appeal before the appellate authority and further filing of a stay application in such appeal affords automatic stay of recovery proceedings till the disposal of the stay application before the appellate authority. 2. Whether it is mandatory to issue notice upon the assessee and hear him before passing an order under Section 226 (3) of the Act.
Ratio Decidendi: 1. The court held that the mere filing of an appeal and stay application before the appellate authority did not constitute a stay of the demand, unless a specific order granting stay of recovery was passed by the appellate authority during the pendency of the appeal. 2. The court held that it was not mandatory to issue notice upon the assessee and hear him before passing an order under Section 226 (3) of the Act, as the purpose of such notice was only to inform the assessee that the amount had been recovered by virtue of a proceeding under Section 226 (3) of the Act.
Final Decision: The court dismissed the writ petition, holding that the recovery of the amount by giving notice under Section 226 (3) of the Act from the State Bank of India was not vitiated in any way. The court, however, directed the appellate authority to dispose of the appeal itself positively within a month from the date if the entire amount had been realized, or to dispose of the stay application within a fortnight, during which time the petitioner was restrained from withdrawing the amount from the bank to the extent of the demanded amount.
( 1 ) BY this writ application, the writ petitioner has prayed for setting aside notice dated January 16, 2003, under Section 226 (3) of the Income-tax Act, 1961 (the "act"), issued by respondent No. 1 for realisation of the demanded amount from the different persons who are holding money for or on account of the petitioner.
( 2 ) THE petitioner is an assessee under the Act. The petitioner received a notice dated February 15, 2000, under Section 158bc of the Act from the office of the Joint Commissioner of Income-tax, Special Range-8, directing the petitioner to submit a return for the block period, viz. , 1989--December 2, 1999. Pursuant to such notice, the petitioner submitted a return on March 30, 2000, under protest.
( 3 ) ULTIMATELY, the petitioner was assessed and on December 31, 2000, a demand of Rs. 2,29,50,263 was raised. Subsequently, the petitioner came to know from his bankers that respondent No. 1 had issued purported notices under Section 226 (3) of the Act asking the various banks to pay money deposited in the petitioner's account to the said respondent pursuant to the demand against the petitioner. The petitioner challenged those notices before this court under article 226 of the Constitution of India and Dilip Kumar Seth J. , by order dated May 10, 2002, quashed those garnishee notices and directed the respondents to repay the amount debited from the petitioner's account.
( 4 ) IN the meantime, an order dated December 9, 2000, passed by the Commissioner of Income-tax (Appeals) Central-I, Kolkata, in Appeal No. 360/cc-III/ CIT (A), C-I of 2001-2002, preferred by the petitioner against the block assessments, partly went against him. Being dissatisfied, the petitioner preferred an appeal on December 24, 2002, before the Income-tax Appellate Tribunal and the said appeal is pending.
( 5 ) ON December 19, 2002, the petitioner received a letter issued by respondent No. 1 dated December 17, 2002, demanding purported arrears of Rs. 2,25,47,840 within 15 days from the receipt of such letter.
( 6 ) IMMEDIATELY after receiving the letter, the petitioner wrote to respondent No. 1 stating that he would prefer an appeal before the Income-tax Appellate Tribunal and would also pray for stay of the aforesaid order passed by the Commissioner of Income-tax (Appeals ).
( 7 ) ON the aforesaid ground, the petitioner requested that the proceeding for realisation of tax should be kept in abeyance for three months.
( 8 ) SUBSEQUENTLY, the petitioner came to know that by various garnishee notices under Section 226 (3) of the Income-tax Act dated January 17, 2003, respondent No. 1 has asked the petitioner's bankers to pay the amount in terms of those notices.
( 9 ) ON February 5, 2003, the petitioner filed a stay application before the Income-tax Appellate Tribunal praying for stay of the order impugned passed by the Commissioner of Income-tax (Appeals), Central-I, Kolkata, and after filing such application the petitioner served a copy of the said application upon one of the bankers, viz. , the State Bank of India, La Martiniere Branch, Kolkata. By a forwarding letter, the petitioner requested the bank to hold payment of the amount demanded by the Assistant Commissioner of Income-tax till the disposal of the case by the Income-tax Appellate Tribunal.
( 10 ) RESPONDENT No. 1 in answering the letter dated February 7, 2003, written by the bank informed that there was nothing on record regarding stay of collection of demand in the case of the petitioner by any competent authority and the stay petition filed by the petitioner had nothing to do with recovery proceedings initiated under Section 226 (3) of the Income-tax Act. By the said letter the bank was requested to make payment of the amount lying to the credit of the petitioner forthwith.
( 11 ) BEING dissatisfied the petitioner has come up with the instant writ application.
( 12 ) MR. Bhattacherjee, learned senior counsel appearing on behalf of the pet
