Case Note & Summary
The petitioner, Bidar Nirmiti Kendra, an agency of the State Government, filed writ petitions under Articles 226 and 227 of the Constitution of India challenging the recovery of tax by the Income Tax Officer (ITO), Ward-1, Bidar. The ITO had issued letters dated 28.03.2018 and 07.04.2018 to the petitioner's bank, Axis Bank Limited, Bidar Branch, directing recovery of a total sum of Rs.16,95,48,869/- from the petitioner's account for assessment years 2010-11, 2011-12, 2012-13, 2013-14, and 2015-16. The petitioner had filed appeals against the assessment orders before the Commissioner of Income Tax (Appeals) under Section 253 of the Income Tax Act, 1961. The petitioner contended that the recovery exceeded the 20% upper limit permissible under Section 220(6) of the Act, which allows recovery of only 20% of the disputed tax pending appeal. The court examined the brief facts and found that the recovery was in excess of the statutory limit. The court held that the ITO's action was contrary to Section 220(6) and quashed the impugned letters. The court directed the respondents to refund the amount recovered in excess of 20% of the disputed tax demand. The petitions were allowed with the above directions.
Headnote
A) Income Tax - Recovery of Tax Pending Appeal - Section 220(6) of Income Tax Act, 1961 - Stay of Recovery - The petitioner, a State Government agency, challenged the recovery of Rs.16,95,48,869/- by the Income Tax Officer for assessment years 2010-11 to 2015-16, contending that the recovery exceeded the 20% upper limit permissible under Section 220(6) of the Act when appeals are pending before the Commissioner of Income Tax (Appeals). The court held that the recovery order was contrary to the statutory provision and quashed the letters dated 28.03.2018 and 07.04.2018, directing the respondents to refund the excess amount recovered beyond 20% of the disputed tax. (Paras 1-3) B) Income Tax - Natural Justice - Section 220(6) of Income Tax Act, 1961 - Recovery Without Hearing - The court observed that the recovery was made without affording the petitioner an opportunity of being heard, violating principles of natural justice. The court held that the Income Tax Officer must consider the assessee's application for stay and cannot mechanically recover amounts in excess of the statutory limit. (Paras 2-3)
Issue of Consideration
Whether the Income Tax Officer can recover more than 20% of the disputed tax demand pending appeal under Section 220(6) of the Income Tax Act, 1961, without granting a stay or hearing the assessee.
Final Decision
The writ petitions are allowed. The letters dated 28.03.2018 and 07.04.2018 issued by the third respondent are quashed. The respondents are directed to refund the amount recovered in excess of 20% of the disputed tax demand to the petitioner.
Law Points
- Section 220(6) of Income Tax Act
- 1961
- recovery of tax pending appeal
- 20% upper limit
- stay of recovery
- natural justice
