Kerala HC Stays Income Tax Recovery Against Pulikkal Medical Foundation

Pulikkal Medical Foundation Vs ITO (TDS) (Kerala High Court)

The Kerala High Court addressed a petition filed by Pulikkal Medical Foundation, a trust running a multi-specialty hospital, concerning income tax orders issued under Section 201 of the Income Tax Act. The trust had received orders for assessment years 2018-19 to 2021-22, resulting in substantial tax liabilities. The trust filed appeals against these orders, which are currently pending. However, recovery proceedings were initiated before the appeals could be resolved, prompting the trust to seek intervention from the High Court. The trust argued that the appeals were nearing resolution, with a formal hearing scheduled, and that recovery proceedings at this stage would cause undue prejudice. The High Court, after hearing the arguments, acknowledged the pending appeals and the advanced stage of the appellate process. Recognizing the potential for unfairness in initiating recovery before the appeals are decided, the court decided to stay the recovery proceedings.

The High Court’s decision focused on maintaining procedural fairness and preventing unnecessary hardship to the medical trust. The court noted that the appeals were ripe for hearing and should be disposed of promptly. Therefore, it directed that the recovery proceedings initiated under the Section 201 orders be kept in abeyance until the appeals were resolved. The court also instructed the appellate authority to expedite the disposal of the appeals, setting an outer time limit of six months from the date of the judgment. This decision highlights the court’s role in ensuring that recovery actions are not taken prematurely, especially when appeals are pending and nearing resolution. By staying the recovery, the court provided the trust with an opportunity to have its appeals heard and decided without the immediate pressure of enforcement. This action underscores the importance of allowing taxpayers to pursue their appellate rights without facing immediate coercive measures.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

Petitioner is a Trust registered under Section 12A of the Income Tax Act, 1961 (for short, ‘the Act’). Petitioner runs a multi-speciality hospital in Ernakulam. For the assessment year 2018-19 to 2021-22, it was issued with orders under Section 201 of the Act creating a huge liability. Appeals have been filed by the petitioner, which are pending. Petitioner challenges the orders issued under Section 201 of the Act. Though petitioner seeks to quash Ext.P2 to Ext.P2(c) and Ext.P7 to Ext.P7(c) orders, during the course of hearing, Sri. Joseph Markos, the learned Senior counsel, appearing on behalf of the petitioner, as instructed by Sri. V. Abraham Markos, learned counsel submitted that petitioner is confining the relief to a stay of recovery proceedings pending the appeals already filed.

2. Petitioner contends that pursuant to Ext.P5, and P5(a) notices issued under Section 250 of the Act, an objection has been filed and all what remains for disposing the appeal filed by the petitioner is only a formal hearing for which a date has already been provided by the Appellate Authority. However, in the meantime, the proceedings for recovery of the amounts imposed in Ext.P7 to Ext.P7(c) series have been initiated which causes prejudice.

3. I have heard Sri. P. G. Jayashankar, the learned Standing Counsel also.

4. Taking note of the peculiar circumstances arising in the instant case, especially since the appeals filed by the petitioner as Ext.P3 series are pending consideration and is about to be heard apart from the notices under Section 250 having been issued already in the year 2024, I am of the view that recovery proceedings when the appeals are about to be disposed of is unnecessary. Accordingly, it is appropriate that the recovery proceedings are kept in abeyance for a short period till the appeal is disposed of. In fact, the appeals have become ripe for hearing, ought to be disposed of in a time bound manner.

5. Accordingly, the recovery proceedings pursuant to Ext.P2 to Ext.P2(c) orders shall be kept in abeyance till the appeals filed as Ext.P3 to Ext.P3(c) are disposed of. Needless to mention, the 2nd respondent shall take appropriate steps to dispose of the aforesaid appeals in a time bound manner, at any rate, within an outer time limit of six months from the date of receipt of a copy of this judgment, after granting an opportunity of hearing to the petitioner.

The writ petition is disposed of as above.