Metro Tunneling Group, vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL , MUMBAI

SA No./ रोक आवेदन No. 24 /Mum/2015 आयकर अपील सं./ Arising out of I.T.A. No.564/Mum/2015 ( िनधा रण वष / Assessment Year : 2009-10)

M/s. Metro बनाम/ बनाम Jt. CIT-Cir. 17(3) Tunnelling Group Vs. Mumbai. Mumbai-400 013. थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAAAM 8269 Q (Applicant / आवेदक ) .. ( यथ / Respondent)

अपीलाथ ओर से / Appellant by : Shri Farrokh V. Irani यथ क ओर से/Respondent by : Shri Akhilendra P. Yadav

INTERIM ORDER

Dt. 30/01/2015

By way of this application assessee is seeking stay of demand arising from the assessment order passed u/s.143(3) r.w.s. 144(c) of the assessment year 2009-10.

2. We have heard the ld. AR and the ld. DR and considered the relevant material on record. The ld. AR has submitted that the total demand in this case is Rs.10,22,73,100/- inclusive of interest of Rs.2,03,16,870/-. Out of this total demand the assessee already paid a sum of Rs.7,13,92,394/- and the outstanding amount was only Rs.3,08,80,706/- against which the assessee intended to file the stay application. However, in the meantime the AO issued a letter dated 13/01/2015 whereby asked the assessee to make payment of outstanding demand of Rs.3,08,80,706/- within seven (07) days of receipt of said letter failing which the recovery will be effected by coercive mode . The ld. AR then pointed out that subsequent to the said letter the AO also issued another letter dated 15/01/2015 and asked the assessee to make the payment of outstanding demand of Rs.3.08 crores on or before 21/01/2015 failing which the AO contemplated to take coercive action for recovery. The letter dated 13/01/2015 was received by the 2 SA No.24/M/2015

assessee on 19/01/2015 and the assessee submitted its reply dated 21/01/2015 requesting the AO not to take any coercive action for recovery before the appeal of the assessee is filed. The assessee pointed out that the assessee is in the process of filing the appeal within next seven working days before this Tribunal and therefore, the AO was requested to desist from taking any action for recovery of the balance demand. In support of the submissions the assessee relied upon the decision of Hon'ble High Court in the case of Mahindra & Mahindra Ltd. vs. Union of India 1992 (59) E.L.T. 505 (Bom.) as well as in the case of KEC International vs. B.R. Balakrishnan (251 ITR 158). The ld. AR has submitted that ignoring the reply of the assessee as well as the binding decision of Hon'ble High Court the AO proceeded to recover the balance outstanding demand of Rs.3,08,80,706/- crores by attaching the bank account of the a on 23/01/2015. Thus, the AO has recovered the entire demand by misusing the provisions of law. The ld. AR has vehemently contended that the AO may be directed to refund the amount.

3. On the other hand the ld. DR has submitted that the AO has acted within his jurisdiction and under the provisions of the Act and recovered the entire outstanding demand. Therefore, the present stay application becomes infructuous. He has vehemently opposed the direction for refund of the amount recovered by attaching bank account.

4. Having considered the rival submissions as well as relevant material on record we note that out of the total demand of Rs.10,22,73,100/- arising from the assessment for the assessment year under consideration the assessee had already paid a sum of Rs.7,13,92,394/-. We further note that on 13/01/2015 the AO issued a letter whereby asked the assessee to make payment of entire outstanding demand of Rs.3,08,80,706/- within seven days of receipt of the letter. The relevant part of the letter dated 13/01/2015 of the AO is as under :-

"You are, therefore, requested to make the payment of the outstanding demand of Rs.3,08,80,706/- as per column no.(5) within seven days of the receipt of this letter, failing which will attract coercive modes of arrear recovery as enshrined in the Income tax Act, 1961."

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4.1 The assessee stated to have been received the said letter on 19/01/2015. Therefore, as per the time given in the said demand letter the assessee was required to make the payment up to 26/01/2015. The AO again issued letter dated 15/01/2015 demanding the outstanding amount to be paid on or before 21/01/2015 as under :-

"You are, therefore, requested to make the payment of the outstanding demand of Rs.3,08,80,706/- as per column no.(5) on or before 21st January 2015, failing which will attract coercive modes of arrear recovery as enshrined in the Income tax Act, 1961."

4.2 In response to the demand raised by the AO vide letter dated 13/01/2015 and 15/01/2015 the assessee submitted letter dated 21.01.2015 and requested the AO not to take any coercive action for recovery before the assessee exhausted the remedy available under law. In support of its submissions the assessee also placed reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Mahindra & Mahindra Ltd. vs. Union of India 1992 (59) E.L.T. 505 (Bom.) as well as in the case of KEC International vs. B.R. Balakrishnan (251 ITR 158) (supra). The AO without waiting for the time given in the letter dated 13/01/2015 as well as the outcome of the appeal and the stay application, purported to be filed by the assessee before this Tribunal against the impugned order, proceeded to recover the balance outstanding demand of Rs.3,08,80,706/- by attaching the bank account No.007010200050193 of the assessee with Axis Bank. This conduct of the AO taking the coercive action for recovery of balance outstanding demand, in the facts and circumstances of the case where 80% of the demand was already paid by the assessee and the assessee was in the process of filing the appeal and to exhaust the remedy available under law, is highly improper and condemnable. The Hon'ble High Court in case of Mahindra & Mahindra Ltd. vs. Union of India ,( supra), while dealing with an identical situation has observed in para -4 as under :-

"In our opinion, it was highly improper on the part of the Collector and Assistant Collector to encash the bank guarantees before expiry of the statutory period of three months and in particular when petitioners had specifically informed that the stay application is fixed for hearing on 17th February 1992. Be that as it may, we accordingly direct Respondents Nos. 2 and 3 to pay entire amount 4 SA No.24/M/2015

recovered by encashing bank guarantees to the petitioners within 10 days from today. On receipt of the said amount by the petitioners, they shall execute bank guarantee in favour of the Collector of Central Excise within two weeks thereafter. It is also made clear that until disposal of the stay application bank guarantee will continue and in the event if the Tribunal rejects the application for stay, the said order shall not be executed for a period of two weeks from the date of its service on the petitioners."

4.3 Thus, it is clear that the coercive action taken by Collector was fond to be highly improper and the Hon'ble High Court directed the respondent to pay the entire amount recovered by enchashing bank guarantee to the petitioner within 10 days from the date of the order. Similarly in the case of KEC International vs. B.R. Balakrishnan (supra), the Hon'ble High Court laid down the parmeters as under :-

" Parameters:

(a) While considering the stay application, the authority concerned will at least briefly set out the case of the assessee.

(b)ln cases where the assessed income under the impugned order far exceeds returned income, the authority will consider whether the assessee has made out a case for unconditional stay. If not, whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order.

(c)ln cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit.

(d)The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order, and

(e)We clarify that if the authority concerned complies with the above parameters while passing orders on the stay application, then the authorities on the administrative side of the department like respondent No. 2 herein need not once again give reasoned order."

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Thus, before taking any coercive measure the authority concerned ought to have examined whether the time to prefer an appeal has expired and whether the assessee is liable to defeat the demand.

4.4 In the case in hand 80% of the demand was already paid by the assessee and there is no fact and circumstance to indicate that the assessee is going to defeat the demand. Therefore, by taking the coercive action before the assessee filed its appeal against the impugned order, the AO has shown an undue haste which clearly manifests the motive and intention of the AO to defeat the legal remedy available with the assessee against the demand in question. We further note that an identical issue came before this Tribunal in the case of MHADA vs. ADIT (Exemp) (66 SOT 66) wherein the Tribunal found that the AO took a coercive action by ignoring a basic rule of law and the directions and guidelines issued by the Hon'ble Jurisdictional High Court in the case of UTI Mutual Fund vs. ITO (345 ITR 71) as well as in the case of KEC International vs. B.R. Balakrishnan (supra). The Hon'ble High Court has confirmed the Tribunal order in the case of MHADA vs ADIT (361 ITR 469). In view of the guidelines and directions issued by the Hon'ble High Court in number of cases in the identical situations of recovery by taking coercive action the AO is not supposed to take a coercive action before expiry of time limit for filing the appeal and before disposal of stay application if any moved by the assessee and for a reasonable period thereafter to enable the assessee to move a higher forum. The coercive steps may however be adopted where the authority has reason to believe that the assessee may defeat the demand in which brief reasons may be recorded. In the case in hand as we have discussed above the AO has not indicated any reason or circumstance for taking the coercive action before expiry of time limit and despite the fact that the assessee requested the AO not to take any coercive action till the assessee file the appeal before this Tribunal and exhausted the legal remedy available. The conduct of the AO is clearly a gross defiance and violation of the directions of the Hon'ble High Court issued in the above mentioned decisions as well as against basic rule of law and principle of natural justice. The AO has misused its power by ignoring all norms and rules of law to have been followed by quasi 6 SA No.24/M/2015

judicial authority. Accordingly we direct the AO to refund the entire amount which has been recovered by attaching the bank account of the assessee on or before 6/2/2015. The stay application of the assessee is fixed for further hearing on 6/2/2015. The AO is directed to appear in person on 6.2.2015 along with report on compliance of the directions. The directions were given in the open court in the presence of both parties.

Sd/- Sd/- (N.K.Billaiya) ( Vijay Pal Rao ) लेखा सद य /ACCOUNTANT MEMBER याियक सद य / JUDICIAL MEMBER

मुंबई Mumbai; दनांक Dated 30/ 01/2015 व.िन.स./ Jv, Sr. PS