Order to bank to pay 50% of assessee’s huge demand is not justified when appeal is pending before CIT (A)

Issue before court:

• Whether revenue is right in passing order giving instruction to bank to pay 50% of the demand raised against assessee when appeal against the assessment order was pending before CIT (A).

Brief facts:

• Assessment of the Petitioner for the AY 2011-12 was completed at Rs. 4,39,71,545/-. Whilst doing so the AO added a sum of Rs.3,25,50,000/- under Section 68 of the Act, after holding that the explanation furnished by the assessee was unacceptable.
• The assessee/writ petitioner preferred an appeal to the CIT (A) on 07.04.2014, which is pending.
• During the pendency of the appeal, the AO issued demand under Section 156 of the Act claiming the tax dues. The assessee sought for stay of the demand under Section 220(6) which was rejected by AO.
• On petitioner’s failure AO issued a letter to the bank, in which assessee is holding an account, requiring him to release 50% of the demand raised u/s 226 (3).

Contention of the revenue:

• An appeal against the assessment order is pending before CIT (A). Demand may kindly be stayed till the disposal of appeal.
• Recovery of tax demand will cause undue hardship on assessee.

Held by the court:

• If any order is made, the assessee/petitioner is likely to suffer irreparable loss.
• Revenue id required to vacate the garnishee order demanding 50% of the total tax and issue an another letter for the same purpose.

Conclusion;

Hon’ble court has observed that garnishee order will cause undue hardship on the assessee and petitioner is likely to cause irreparable loss.