Case Note & Summary
The petitioner, Siolim Urban Co-op. Credit Society Ltd., challenged the attachment of its bank accounts by the Income Tax Department for recovery of tax demand for Assessment Year 2017-18. The petitioner had already filed an appeal against the assessment order before the Commissioner (Appeals). The petitioner had earlier succeeded in a similar appeal for Assessment Year 2014-15, where the Commissioner had accepted its contentions and interfered with the assessment. Despite this, the Assessing Officer passed a similar assessment order for 2017-18, and the Department issued garnishee notices to Karnataka Bank and Corporation Bank to seize the petitioner's accounts. The petitioner had also deposited 20% of the assessed amount (approx. Rs. 4.5 lakhs) for the earlier year and sought its refund. The Court found that the recovery proceedings were initiated while the appeal was pending, which was improper. The Court held that the Department should not have taken coercive steps during the pendency of the statutory appeal. It directed the respondents to release the attached amounts and not to insist on further recovery until the appeal is disposed of. The Court also noted the principle of consistency, as the same issue had been decided in favour of the petitioner for a previous assessment year.
Headnote
A) Income Tax - Recovery Proceedings - Attachment of Bank Accounts - Section 220(6) of Income Tax Act, 1961 - The assessee had appealed against the assessment order for Assessment Year 2017-18 and the appeal was pending. Despite this, the Department issued garnishee notices to banks to seize the assessee's accounts. The Court held that recovery proceedings should not be pursued during the pendency of a statutory appeal, especially when the assessee had a favourable appellate order for a similar earlier assessment year. The Court directed the Department to release the attached amounts and not to take coercive steps pending disposal of the appeal. (Paras 3-10) B) Income Tax - Principle of Consistency - Assessment Years - The Assessing Officer made an assessment order for Assessment Year 2017-18 contrary to the order of the Commissioner (Appeals) for Assessment Year 2014-15 on the same issue. The Court noted that the Department should have awaited the appellate decision before enforcing recovery. (Paras 4-5)
Issue of Consideration
Whether the Income Tax Department can recover tax dues by attaching bank accounts when the assessee has already filed an appeal against the assessment order and the appeal is pending.
Final Decision
The Court allowed the writ petition, directing the respondents to release the attached amounts and not to take any coercive steps for recovery of the tax demand for Assessment Year 2017-18 until the appeal filed by the petitioner is disposed of by the Commissioner (Appeals). Rule made absolute.
Law Points
- Recovery proceedings during pendency of appeal
- Attachment of bank accounts
- Interim relief
- Principle of consistency in assessment years
- Section 220(6) Income Tax Act
- 1961
