CA Sandeep Kanoi
Recently Delhi High Court has in the case of Sony India Pvt. Ltd vs. ACIT held that It is expected of from Assessing Officer, having rejected the stay application, to wait for a reasonable period before he takes coercive steps to recover the amounts since the petitioner, faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments.
Section 156 of the Act provides for the service of the notice of demand in the prescribed form pursuant to the framing of the assessment. This section does not provide for the period of 30 days within which tax is to be paid, failing which steps for recovery of the same can be taken. The period of 30 days is prescribed in section 220(1). The proviso to section 220(1) empowers the assessing officer, for sufficient reasons, to curtail the period of 30 days, if in his opinion the grant of 30 days will be detrimental to the revenue. Sub-section (3) of Section 220 empowers the assessing officer, on an application made by the assessee before the expiry of the due date under sub-section (1), to extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case. Sub-section (4) says that if the tax demand is not paid within the period of 30 days or within the extended period, the assessee shall be deemed to be in default. Sub-section (6) confers a discretion upon the assessing officer to be exercised subject to such conditions as he may think fit to impose in the circumstances of the case, to treat the assessee as not being in default in respect of the amount in dispute in the appeal, if an appeal has been presented by the assessee under Section 246/ 246A even though the time for payment has expired; the discretion can be exercised by the assessing officer as long as the appeal remains undisposed of.
Technically section 220(3) requires an application for extension of time to pay the tax demanded or for permission to pay the same in instalments to be filed before the expiry of the due date for payment. In the present case, the petitioners filed the applications under Section 220(3) before the assessing officer on 14.02.2014, which satisfies the sub-section. This is not disputed. 14.02.2014 happened to be a Friday, and 15.02.20 14 and 16.02.20 14 were Saturday and Sunday. The next working day therefore was only 17.02.20 14 and it was on this day that the assessing officer rejected the applications. The same day, he issued the garnishee order under Section 226(3) to the Citi Bank. It was on 17.02.2014 that Sony Mobile submitted a stay petition before the Tribunal seeking stay of the disputed tax demand in the appeal filed in ITA No.836/Del/2014 on 13.02.2014. Sony India Pvt. Ltd. seems to have filed an appeal before the Tribunal on 13.02.2014 in ITA No.837/Del/2014 but the stay application was filed before the Tribunal on 18.02.2014. At least in the case of Sony India Pvt. Ltd., the respondent could not have known that a stay application would be filed before the Tribunal on the next day. In the case of Sony Mobile, it is a moot question whether the assessing officer, at the time of passing the garnishee order and rejecting the stay application on 17.2.2014, was aware of the stay application filed by the petitioner on that day. His letter dated 17.2.2014 in this case states that mere filing of an appeal with the Tribunal is not good ground for the stay of the recovery proceedings.
Having said that this is a case in which technically no fault could be found with the assessing officer, we feel that there was an element of impropriety in his action in issuing the garnishee order under section 226(3) on 17.2.20 14, the very day on which he rejected the stay application filed by the petitioner under section 220(3). It is expected of him, having rejected the stay application, to wait for a reasonable period before he takes coercive steps to recover the amounts since the petitioner, faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments. That opportunity was not afforded by the assessing officer in the present cases. The assessing officer is a prospector of the revenue and he is no doubt expected to protect the interests of the revenue zealously, but such zeal has to be tempered with the rules of fair play and an anxiety to ensure that a opportunity is not lost to the assessee to make alternative arrangements for clearing the tax dues, once the stay applications filed under section 220(3) are rejected. Taking away the amount of Rs.43.87 crores from the bank account of the petitioner may perhaps not be legally faulted, but taking into account the haste with which the assessing officer acted in the present case it seems to us that there was an element of arbitrariness in the action of the assessing officer. In our opinion, since the stay applications filed by the petitioners are pending before the Tribunal, the more appropriate course would be to issue the following directions :
a) the assessing officer shall reverse the amount of Rs.43.87 crores recovered from the bank account in Citi Bank and credit the same in the account of the petitioner;
b) the petitioner however will not be entitled to draw from the said bank account any amount that may reduce the balance in the account to an amount below Rs.43.87 crores – in other words the petitioner shall maintain a balance of Rs.43 .87 crores in the said account;
c) the Income Tax Appellate Tribunal, Delhi Bench before which the appeals and stay applications are pending is directed to hear the stay applications on 28.2.2014 (Friday) and pass such orders thereon as it may think fit after hearing both the sides;
d) the parties shall abide by the orders passed by the Tribunal; and
e) the respondents shall not take any coercive steps to recover the tax till the Tribunal disposes of the stay applications;
f) the appeals filed by the assessee before the Tribunal shall be disposed of as expeditiously as possible.
The writ petitions are disposed of in the above terms with no order as to costs.