Kerala HC Stays Income Tax Recovery Pending ITAT Appeal

SML Finance Limited VS DCIT (Kerala High Court)

Kerala High Court addressed a petition filed by SML Finance Limited, challenging an assessment order for the year 2012-13 and the subsequent appellate order. During the hearing, the petitioner’s counsel focused on obtaining a stay on the recovery proceedings initiated based on these orders. The petitioner informed the court that their appeal before the Income Tax Appellate Tribunal (ITAT) had already been heard on October 1, 2024, but the order was pending, with the tribunal seeking further clarifications. The petitioner anticipated a prompt resolution of the appeal. Considering the arguments presented by both the petitioner’s counsel and the respondent’s counsel, the court determined that a stay on the recovery proceedings was justified. The court acknowledged that the petitioner’s appeal had been heard, and the ITAT’s order was awaited, making immediate recovery actions potentially prejudicial.

The High Court’s decision centered on preventing undue hardship to the petitioner while their appeal was under consideration. The court recognized that initiating recovery proceedings when the ITAT was close to delivering its order could cause significant prejudice. Therefore, it directed that the recovery proceedings related to the 2012-13 assessment year be stayed until the ITAT disposed of the pending appeal. This decision reflects the court’s commitment to ensuring that taxpayers are not subjected to coercive measures before the resolution of their appeals. By staying the recovery, the court provided the petitioner with an opportunity to have their appeal decided without the immediate pressure of enforcement. This action underscores the importance of allowing taxpayers to pursue their appellate rights without facing premature recovery actions.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

Petitioner challenges an order of assessment for the year 2012-13 as well as the order in appeal, which are produced as Exhibit-P1 and Exhibit-P6. During the course of arguments, the learned Senior Counsel appearing for the petitioner confined his submissions for a direction to keep in abeyance the recovery proceedings initiated pursuant to the aforesaid orders. It was also submitted that, the appeal preferred by the petitioner before the Tribunal was already heard on 01.10.2024 but the order has not yet been delivered and certain clarifications have now been sought for by the Tribunal. According to the petitioner, the appeal is expected to be disposed of soon.

2. Having heard the learned Senior Counsel for the petitioner as well as the learned Standing Counsel for the respondents, I am of the view that this writ petition can be disposed of with a direction.

3. Since the appeal filed by the petitioner against the orders relating to the assessment year 2012-13 concededly heard already by the Tribunal, I am of the view that, resorting to recovery proceedings, at this juncture would cause serious prejudice to the petitioner. Interests of justice demand that the recovery proceedings be kept in abeyance till the appeal is disposed of by the 3^rd respondent.

4. Accordingly, since the appeal filed against the order of assessment for the year 2012-13 is under consideration before the 3rd respondent and already hearing of the appeal has been concluded with orders awaited, the recovery proceedings pursuant to the aforesaid order of assessment shall be kept in abeyance till the above referred appeal is disposed of.

The writ petition is disposed of as above.