GOUTAM ROY VS COMMISSIONER OF INCOME-TAX
2001 P T D 143
[238 I T R 1010]
[Calcutta High Court (India)]
Before Y.R. Meena, J
GOUTAM ROY
versus
COMMISSIONER OF INCOME‑TAX
Writ Petition No. 1617 of 1995, decided on 15/09/1998.
Income‑tax‑‑‑
‑‑‑‑Recovery of tax‑‑Garnishee proceedings‑‑‑Attachment of rent of building belonging to assessee‑‑‑Assessment of income on the basis of search‑‑Appeal against assessment pending‑‑‑No application for stay‑ of demand or recovery proceedings‑‑‑Recovery proceedings were valid‑‑Indian Income Tax Act, 1961, Ss. 132 & 226:
There was a search at the premises of the petitioner. The search and seizure was challenged before the High Court. The High Court upheld the validity of the search and on the basis of the materials found during the search, assessments were made for the assessment years 1982‑83, 1983‑84 and 1984‑85: By the order under section 226(3) of the Income Tax Act, 1961, dated February 19, 1995, the Assessing Officer attached the rent of the building of the assessee for recovery of tax relevant to the assessment years 1983‑84, 1984‑85, f990‑91 and. 1991‑92. On a writ petition against the attachment:
Held, (i) that for the assessment year 1990‑91, the assessment order had been set aside in appeal and' the matter had been remanded. No fresh assessment had been made and so there was no justification for recovery of tax for the assessment year 1990-91.
(ii) That if the petitioner had any case, he could move a stay application even before the Commissioner (Appeals) with whom the matter was pending for the assessment years 1983‑84 and 1984‑85. The Income‑tax Officer had already informed the petitioner that the petitioner had no sound ground for stay of tax recoveries. For the assessment years 1982‑83, 1983‑84 and 1984‑85 the tax demand had been shown in the show‑cause notice under section 226, dated January 3, 1995. The additions had been made on the basis of the materials seized on search. The assessments were valid and the Tax Recovery Officer could proceed with the recovery of outstanding tax due from the assessees.
(iii) That for the assessment year 1991‑92, the petitioner stated that he had paid tax to the tune of Rs.11,436, but the case of the respondents was that tax for 1991‑92 was Rs.31,441. In view of these facts, the Department could recover only the balance amount on the basis of the demand notice issued for the assessment year 1991‑92.
Mani Goyal (R.) (Mrs.) v. CIT (1996)217 ITR 641 (All.) ref.
JUDGMENT
Y.R. MEENA, J.‑‑‑By this writ petition, the petitioner has challenged the notice, dated February 17, 1995, and prayed that the same be quashed.
The petitioner is a regular assessee since the assessment year 1971‑72 and he submitted his income‑tax returns regularly. There was a search on June 29, 1983, at the residence of the petitioner. In the assessments for the years 1982‑83, 1983‑84 and 1984‑85, the income shown by the assessee has not been accepted and on the basis of the seized materials the income assessed for 1983‑84 was Rs.4,18,877 and for 1984‑85 it was Rs.1,33,432. The petitioner has challenged the search which was conducted by the Department, but this Court has upheld the action of the Department and the search conducted at the premises of .the petitioner. In the demand notice, the Assessing Officer has attached the rent of building of the assessee for recovery of tax relevant to the assessment years 1983‑84, 1984‑85, 1990‑91 and 1991‑92.
The case of the petitioner is that the petitioner has paid the entire income‑tax for the assessment year 1991‑92. Assessment order for 1990‑91 was challenged before the appellate authority and the appellate authority has set aside the assessment order and restored the matter back to the Assessing Officer. Therefore, so far as the assessment years 1990‑91 and 1991‑92 are concerned, no demand exists. For the assessment years 1983‑84 and 1984‑85, counsel for the petitioner submits that though there was an application for stay of recovery under section 220(6) of the Income Tax Act, 1961, but that has not been disposed of and when the Recovery Officer is sitting tight over the application, he has no right to take steps for recovery of the income‑tax demand and even the appeal has not been disposed of. Therefore, the attachment order should be quashed.
Counsel for the respondents submits that for the said assessment years the income has been assessed on the basis of the materials. seized during the search. The search was conducted at the place of the petitioner. A reasonable opportunity was given to the petitioner but he did not turn up when he was called. Even show‑cause notice was issued before this demand notice, but he did not avail of that opportunity. Counsel for the petitioner in the counter submits that the notices were not served on the petitioner. Admittedly, he stayed at the same address where the search was conducted.
In this background of the case, I proceed to see whether the impugned attachment order which is a mode of recovery under section 226(3) of the Income Tax Act, 1961, is justified? Admittedly, there was a search at the premises of the petitioner. The search and seizure were challenged, before this Court. This Court has upheld the validity of the search and on the basis of the materials found during the search, assessments were made for the assessment years 1982‑83, 1983‑84 and 1984‑85.
Chapter XVII of the Act provides for collection and recovery of tax.
Section 156 of the Act provides when any tax, penalty, fine or interest is payable by any assessee, in consequence of any order under the Act, the Recovery Officer can serve the notice of demand on that assessee.
Section 220 of the Act provides that if the assessee fails to pay tax within 30 days from the date of service of the notice, he be treated as defaulter.
Section 221 of the Act provides that if the assessee fails to pay the tax within 30 days he is liable to pay penalty.
It is pertinent to note that show‑cause notice under section 221 has already been issued on January 3, 1995. That stage comes when the assessee failed to pay tax within 30 days from the date of service of the notice.
The notice under section 221 of the Act reads as under:
"It appears that the following potential demands, among others, are outstanding as per our records.
| Assessment year | Amount (Rs.).?? | Nature of demand |
| 1982‑83 | 1,59,434????????? | I.T. demand |
| 1983‑84 | 4,18,877????????? | ‑‑do‑? |
| 1984‑85 | 1,33,432????????? | ‑‑do‑? |
| 1990‑91 | 15,397???????????? | ‑‑do‑‑ |
| 1991‑92 | ?31,441 | ‑‑do‑‑ |
It also appears from your said letter that appeals are pending in respect of the said assessment years. Your petition praying for blank stay of recovery measures on the plea of pendency of appeal cannot be granted unless some bona fide grounds are established by you. In your said letter nothing has been proposed as to how you proceed to liquidate the demands. Instalment scheme can also be availed of by you. but you have not hinted anything about it. There may be certain grievances about those assessments as per tone of your said letter. You have also referred to legal recourse taken by you in the learned High Court in respect of one or two assessment years as per your said letter. It is put for your record that disposal of appeal may take its own course. However, by this time, if appeals in the above cases are disposed of, you are requested to furnish a copy of the said orders so that necessary revision of demand may be carried out at this end. Also if there is any restraint order obtained by you from the learned High Court in respect of the above assessment years, you are requested to furnish a copy of the same for perusal so that recovery proceedings are not initiated in respect of the outstanding demands of those assessment years. You may appear personally or through your authorised representative on January 24, 1995, at 11.00 a.m. to furnish these documents/proposals for my consideration. But please note that non-?production of these documents/proposals will entail me to consider that your plea is not genuine and recovery measures will be resorted to without any further information to you which may please be noted again.?
The impugned order under section 226(3), dated February 19, 1995, was issued when the petitioner failed to pay tax which is in consequence of orders under the Act. His conduct shows that he is only trying to avoid/delay the payment of tax.
The petitioner has not disputed the fact that when the petitioner is in default, demand notice can be issued under subsection (3) of section 226. The fact is not in dispute that the taxes referred to above were assessed as tax payable by the assessee. His limited grievance is that when the assessment order was set aside, no demand survives and if some tax has been paid, that should be accounted for and thirdly, when there was an application for stay of tax recovery, that should be disposed of. The petitioner has moved an application, dated April 25, 1986, being Annexure B to the petition for stay of recovery of income‑tax for the assessment year 1983‑84, but that has not been disposed of. The petitioner also submits that he has moved an application for stay of recovery for, the assessment year 1984‑85, ‑but he could not place that on record.
Counsel for the respondents submits that they sent a letter to the petitioner for recovery of tax for the assessment years 1982‑83, 1983‑84, 1984‑85, 1990‑91 and 1991‑92. In that letter it was made clear that the petitioner has no strong grounds for stay of recovery of income‑tax. However, an opportunity was given to the petitioner and he was directed to appear before him on August 25, 1986, at 11.30 a.m. in his office. The petitioner failed to appear before the Recovery Officer. Again a show‑cause notice was issued to the petitioner in 1995 being Annexure A to the affidavit-?in‑opposition before issue of the demand notice indicating therein the income‑tax outstanding against the petitioner for the assessment years 1982‑83, 1983‑84, 1984‑85, 1990‑91 and 1991‑92. The relevant portion of the said letter, dated January 3, 1995, has already been quoted earlier in this judgment.
Whether opportunity was given to the petitioner before rejecting his application, the case of the petitioner is that those notices were not served. The case of the Department is that notice was sent to the address of the petitioners given to the Department and all correspondence between the Department and the petitioner is made at the same address and after 1986 no prayer has been made or any step taken to find out whether any stay has been granted or not and when no stay has been granted and no strong ground has been shown even before me for stay of recovery of demands, the petitioner that way has only tried to delay the payment of tax. Not only that, after the assessment of 1983‑84 and 1984‑85 the matter is pending before the Commissioner of Income‑tax (Appeals). No application has been moved before the Commissioner of Income‑tax (Appeals) for stay of operation of the assessment orders.
If the petitioner had any case, he could move the, stay application even before the Commissioner of Income‑tax (appeals) with whom the matter is pending for the assessment years 1983‑84 and 1984‑95. The Income‑tax Officer has already informed the petitioner that the petitioner has no sound ground for stay of tax recoveries.
Considering the facts and circumstances of this case, there is no justification now to quash the notice under section 226(3) of the Act for tax due from 1982‑83, 1983‑84, 1984‑85 and 1990‑91. No explanation has been given why he has not moved the application before the Commissioner of Income‑tax (Appeals) which is a normal course for stay of demand or for stay of tax recovery proceedings.
Counsel for the petitioner further submits that there was a nominal income shown by the petitioner for the assessment years 1983‑84 and 19,84‑85, but huge additions were made. In such cases the demand should be stayed. He placed reliance on the decision of the Allahabad High Court in Mrs. R. Mani Goyal v. CIT (1996) 217 ITR 641. The facts of that case are not akin to the facts of this case. In the case in hand, huge additions were made on the basis of the materials seized during the search; but before the Allahabad High Court there may not be sufficient material for such addition. Therefore, that case is of no assistance to the petitioner.
To sum up, considering the facts and circumstances of the case, there is no case for quashing of the impugned notice. The Recovery Officer can go ahead for recovery, in pursuance of the notice. Moreover, it is made clear that for the assessment year 1990‑91 when the assessment order has been set aside in appeal and the matter is restored back and no fresh assessment has been made. In such circumstances there is no justification for recovery of tax on the basis of the assessment order for 1990‑91 which is no more in existence. (2) For assessment year 1991‑92 the case of the petitioner is that the petitioner has paid tax to the tune of Rs.11,436, but the case of the respondent is that tax for 1991‑92 is Rs. 31,441. In view of these facts, the Department can recover only the balance amount on the basis of the demand notice issued for the assessment year 1991‑92. (3) For the assessment years 1982‑83, 1983‑84 and 1984‑85 the tax demand has already been shown in the notice, dated January 3, 1995, being Annexure A to the affidavit‑in‑opposition, that tax amount has not been disputed except as referred above. In view of these undisputed facts the Tax Recovery Officer can proceed with the recovery of outstanding tax due from the assessee.
In the result, I found no merit in the petition and the same is dismissed.
All parties are to act on the xeroxed copy of the judgment signed by the Assistant Registrar of this Court, on the usual undertakings.
M.B.A./184/FC??????????
Petition dismissed.