THE HON’BLE SRI JUSTICE V.V.S.RAO
THE HON’BLE SRI JUSTICE SANJAY KUMAR
DATED 2ND NOVEMBER, 2011
The Commercial Tax Officer,
Ward 6(3), I.T.Towers,
A.C.Guards, Hyderabad and others.
THE HON’BLE SRI JUSTICE V.V.S.RAO
THE HON’BLE SRI JUSTICE SANJAY KUMAR
WRIT PETITION NO.29209 OF 2011
ORDER: (Per SK,J)
The Income Tax Officer (ITO), Ward-6(3), Hyderabad, exercising powers under Section 271(1)(c) of the Income Tax Act, 1961 (for brevity, ‘the Act’) levied a penalty on the petitioner, an individual assessee, by order dated 23.12.2010. Notice of Demand under Section 156 of the Act was issued by the Assessing Officer on the same day calling upon the petitioner to pay the penalty amount within 30 days. The penalty levied was to the tune of Rs.66,17,573/- and pertained to the Assessment Year 2005-06. It was the case of the Revenue that the petitioner had furnished inaccurate particulars and concealed her long-term capital gains, thereby attracting the provisions of Section 271(1)(c) of the Act.
Aggrieved by the levy of penalty, the petitioner preferred an appeal under Section 246A(1)(j) of the Act to the Commissioner of Income Tax (Appeals)-IV, Hyderabad. Simultaneously, she addressed letter dated 31.01.2011 to the Assessing Officer, the ITO, Ward-6(3), Hyderabad, to keep the collection of penalty in abeyance till her appeal was decided. However, the Assessing Officer by his communication dated 15.07.2011 informed the petitioner that the application filed before the Commissioner of Income Tax-III, Hyderabad, for stay was rejected under the letter of the ITO (Headquarters) in F.No.128/CIT-III/Hyd/Stay/2011-12 dated 12.07.2011. He therefore called upon her to pay the entire amount immediately with interest failing which coercive recovery proceedings were threatened.
Perusal of the ITO (Headquarters) letter dated 12.07.2011 reflects that the petitioner was requested thereunder to approach the Assessing Officer to whom necessary instructions had been given with regard to her stay application.
Thereupon, the petitioner submitted a representation to the Chief Commissioner of Income Tax-III, Hyderabad, to direct the Assessing Officer to keep the collection of the penalty amount in abeyance. By order dated 12.09.2011, the Chief Commissioner of Income Tax-III, Hyderabad, opined that the levy of penalty was justified and that he did not find any merits to interfere with the decision of the Commissioner of Income Tax-III, Hyderabad, on the stay application. The petitioner assails the order dated 12.09.2011 in the present writ petition.
The aforestated facts indicate that the petitioner’s appeal against the levy of penalty is yet to be decided on merits. At this stage, only collection of the penalty amount pending the appeal is in issue.
As the Notice of Demand under Section 156 of the Act in respect of this amount had already been issued by the Assessing Officer, the petitioner made an application to him on 31.01.2011 to keep the collection of the penalty in abeyance till her appeal was decided. This application invoked the powers of the Assessing Officer under Section 220(6) of the Act, which reads as under:
“When tax payable and when assessee deemed in default.
(6) Where an assessee has presented an appeal under Section 246 or Section 246A the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of.
Once the Assessing Officer exercised his discretion under the above provision, an assessee who would otherwise be an ‘assessee deemed in default’ would escape the stigma of such status and the consequential coercive measures attached thereto and would, in effect, enjoy a stay in respect of the collection of the disputed amount pending disposal of the appeal.
In so far as the present case is concerned, it is clear that the Assessing Officer, the ITO, Ward-6(3), Hyderabad, did not himself exercise powers under this provision. His communication dated 15.07.2011 manifests that the petitioner’s stay application dated 31.01.2011 was dealt with by the Commissioner of Income Tax-III, Hyderabad, and for reasons which remained undisclosed in the correspondence dated 15.07.2011 and 12.07.2011, the petitioner’s stay application was rejected. The petitioner’s further entreaty to the Chief Commissioner of Income Tax-III, Hyderabad, to interfere in the matter met with failure as is evident from the impugned order dated 12.09.2011. Surprisingly, the Chief Commissioner of Income Tax-III, Hyderabad, went to the extent of holding that the levy of penalty was justified as a reason for not interfering with the decision of the Commissioner of Income Tax-III, Hyderabad, on the petitioner’s stay application!
Section 250 of the Act deals with the procedure to be followed in appeals arising under Section 246A of the Act. Thereunder, even the Commissioner (Appeals), the appellate authority, is not empowered to grant stay of collection of the disputed amount pending the appeal. Once Notice of Demand under Section 156 of the Act is issued in respect of such disputed amount, it is only the Assessing Officer who is entitled to exercise discretion under Section 220(6) of the Act for keeping in abeyance the collection of such disputed amount pending disposal of the appeal. Involvement of the officers of the rank of Commissioners is not envisaged at this stage under the scheme of the Act. It was therefore for the Assessing Officer in this case – the ITO, Ward-6(3), Hyderabad, to independently apply his mind and exercise discretion as to whether it was a fit case for staying the collection of the disputed penalty amount pending the disposal of the petitioner’s appeal. Demonstrably and admittedly, this exercise was not undertaken and the Commissioner of Income-III, Hyderabad, appears to have issued instructions to the Assessing Officer as to how to deal with the petitioner’s stay application. This constitutes a clear case of abdication of the discretion statutorily conferred on him by the Assessing Officer. Rejection of the petitioner’s stay application under the communications dated 15.07.2011 and 12.07.2011 being contrary to the statutory scheme, involvement of the Chief Commissioner of Income Tax-III, Hyderabad, further compounded the matter. Under the impugned order dated 12.09.2011, the Chief Commissioner practically decided the petitioner’s appeal itself by holding that the levy of penalty was justified. Significantly, the petitioner’s appeal was not pending before the Chief Commissioner for him to have expressed such an opinion. Having knelled the death of the petitioner’s very appeal, the Chief Commissioner fatuously observed that he did not find merits to interfere with the decision of the Commissioner on the petitioner’s stay application!
Conceived in an atmosphere bereft of legal authority, the orders of the Commissioner and the Chief Commissioner of Income Tax upon the petitioner’s stay application do not have any legal consequence. As the Assessing Officer, the ITO, Ward-6(3), Hyderabad, failed to exercise the powers specifically conferred on him under Section 220(6) of the Act, we are of the opinion that it would be fit and proper to give him an opportunity to do so at least at this stage.
The Writ Petition is accordingly dismissed leaving it open to the petitioner to apply to the Assessing Officer, the ITO, Ward-6(3), Hyderabad, under Section 220(6) of the Act and if such application is made, the same shall be dealt with by the said officer in accordance with law and in the light of the observations made hereinabove. In the circumstances, there shall be no order as to costs.
SANJAY KUMAR, J.
2ND NOVEMBER, 2011.