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M/s Maharashtra Housing & Area Development Authority, Office of the finance Controller Griha Nirman Bhavan, 4th Floor, Bandra(E) Mumbai-400051 Vs Addl. DIT(E) I (1), Piramal Chambers, Lalbaug, Parel Mumbai
November, 27th 2013
      IN THE INCOME TAX APPELLATE TRIBUNAL
                 MUMBAI `B' BENCH
              MUMBAI BENCHES, MUMBAI
BEFORE SHRI VIJAY PAL RAO, JM & SHRI N. K. BILLAIYA, AM
                 STAY APPLICATION No. 293/Mum/2013
          (Arising out of ITA No.6678/M/2013 Asst Year 2010-11)

M/s Maharashtra Housing & Area Vs       Addl. DIT(E) I (1),
Development Authority, Office of        Piramal Chambers,         Lalbaug,
the finance Controller Griha            Parel
Nirman    Bhavan,   4th   Floor,        Mumbai
Bandra(E)
Mumbai-400051
           (Applicant )                           (Respondent )

            PAN No.          AAAJM0344H
     Assessee by             Shri S. E. Dastur & Shri Nishant
                             Thakkar
     Revenue by              Shri B. P. K. Panda
     Date of hearing         22nd November 2013
     Date of pronouncement   25th November 2013


                                ORDER
PER VIJAY PAL RAO, JM

     By way of this Stay Application the assessee is seeking stay

against the demand of ` 159,84,03,717 arising from the assessment u/s

143(3) of Income Tax Act for the assessment year 2010-11.


2    We have heard the Mr. S. E. Dastur, Ld. Senior Counsel for the

assessment as well as Mr. B. P. K. Panda, Ld. D.R and carefully perused

the relevant record. The Ld. Senior Counsel has submitted that the

impugned order of the CIT(A) has been received by the assessee on

16.11.2013 and the assessee has filed the appeal before this Tribunal

on 18.11.2013 which is the next working day. However, the A.O has

recovered the entire outstanding tax from bank account of the assessee
                                     2
                                                               SA No. 293/Mum/2013
                                   Maharashtra Housing & Area Development Authority

by taking a coercive action u/s 226(3) of the Income Tax Act without

waiting for the outcome of the Stay Application filed by the assessee

before this Tribunal which was listed for today i.e. 22.11.2013. Thus, the

A.O has taken the action which is in derogation and contravention of

the various decisions of Hon'ble Jurisdiction High Court because the

action of the A.O contradicts the basic principles laid down in the

decisions viz. i) that the A.O has taken the coercive action before the

expiry of time of filing the appeal against the order of the CIT(A) ii) the

action was taken even prior to the disposal of the Stay Application of

the assessee iii) no prior notice was given to the assessee before taking

the recovery action u/s 226(3). The Ld. Senior Counsel has contended

that the assessee is a authority setup under Maharashtra Housing and

Area Development Act with view to solve the acute shortage of housing

problem in the State. He has referred Section 1A of the Maharashtra

Housing and Area Development Act, 1976 and submitted that the

assessee has been setup for giving the effect to the policy of the State

towards securing the principle specified under Article 39 of the

Constitution of India and the execution of proposals, plans or projects

and acquisition therefor of the lands and buildings and transferring the

lands, buildings or tenements therein to the needy persons and the co-

operative societies of occupiers of such lands or buildings. Thus, the Ld.

Senior Counsel has submitted that the purpose and object of setting up

of the assessee is implementing the policy as per the Constitution of

India. He has relied upon the following decisions:
                                         3
                                                                    SA No. 293/Mum/2013
                                        Maharashtra Housing & Area Development Authority

       Mahindra & Mahindra Ltd. Vs Union of India 59 ELT 505 (Bom)
       Mahindra & Mahindra Ltd. Vs Assessing Officer in Writ Petition No.
       2164/2007
       UTI Mutual Fund Vs ITO 19 Taxman 250
       RPG Enterprises Ltd. Vs DCIT 251 ITR 20 (Trib) (Mum)
       Maharashtra State Electricity Board Vs JCIT 81 ITD 299 (Mum)
       Purnima Das Vs Union of India and Others 329 ITR 278 (Cal)
       CIT Vs Lucknow Development Authority, Gomit Nagar 38 Taxman
       246 (Ald)

3.     The Ld. Senior Counsel has submitted that in the case of

Mahindra & Mahindra Ltd. Vs Union of India (supra) the Hon'ble High

Court has held that 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 the

petitioners has specifically informed that the Stay Application is fixed

for   hearing.     Accordingly,   the   Hon'ble     High     Court    directed     the

respondents to pay entire amount recovered by encashing bank

guarantees to the petitioner. The Ld. Senior Counsel then referred the

decision in case of Mahindra & Mahindra Ltd. Vs Assessing Officer

(supra) and submitted that the Income Tax Department should follow

the parameters while passing the orders on Stay Application filed in

pending appeals to the first appellate authority as laid down in the case

of KEC International Ltd. Vs B. R. Balakrishnan and others 59 ELT 505.

After considering the inappropriate action of the taxing authority the

Hon'ble High Court has observed that the entire action of the

respondent nos. 1 & 2 shocks our judicial conscience. Rule of law has




                                                               SA No. 293/Mum/2013
                                   Maharashtra Housing & Area Development Authority

been given a total go-bye and wilfully ignored. The Income Tax

Authorities has acted in a high handed manner and the action is prima

facie ab-initio-void. After observing the serious lapse on the part of the

taxing authority the Hon'ble High Court has directed the respondent to

bring back the said amount and shall be deposited with the Registrar

General of the High Court. The Ld. Senior Counsel has then referred the

decision in case of UTI Mutual Fund Vs ITO (supra) and submitted that

the Hon'ble High Court has again reiterated the guidelines which should

be followed in the pending cases. He has then referred the decision of

this Tribunal in case of RPG Enterprises Ltd. Vs DCIT (supra) and

submitted that in the similar facts the Tribunal has directed the

Revenue Authorities to refund the amount recovered by the A.O by

misusing his powers without waiting the outcome of the Stay

Application or the time period for filing the appeal against the order of

the CIT(A). Similarly, in case of Maharashtra State Electricity Board Vs

JCIT (supra) the Tribunal has again directed the Revenue Authorities to

refund the amount which were collected without giving the sufficient

opportunity and waiting till the hearing of the Stay Application filed by

the assessee. On the proposition of service of notice prior to recovery

u/s 226(3), the Ld. Senior Counsel has submitted that in case of

Purnima Das Vs Union of India and Others (supra) the Hon'ble Calcutta

High Cout has held that the copy of notice shall be forwarded to the

assessee at his last address known to the A.O and such notice has to be

served before action is taken. In the case of the assessee the A.O has

not complied the provision of Section 226(3)(iii) of the Income Tax Act
                                   5
                                                              SA No. 293/Mum/2013
                                  Maharashtra Housing & Area Development Authority

as the copy of the notice by which the recovery has been made from

the bank account of the assessee was not served prior to such action.

Thus, the Ld. Senior Counsel has submitted that the action of the A.O is

in complete disregard to the orders of the Hon'ble High Court as well as

this Tribunal and therefore the same is not sustainable. He has urged

that the amount recovered unlawfully by the A.O should be refunded

immediately and the recovery of the demand should be stayed. In

support of his contention he has relied upon the order of this Tribunal

on 16.3.2012 passed in the Stay Application No. 126/M/2012 for the

assessment year 2009-10 and submitted that the Tribunal has found a

prima facie strong case in favour of the assessee and thereby granted

the stay against the demand for the assessment year 2009-10. He has

relied upon the decision of Hon'ble Allahabad High Court in case of CIT

Vs Lucknow Development Authority and submitted that in the identical

fact the Hon'ble High Court has held that mere selling some product at

a profit will not ipso facto hit the assessee by applying proviso to

Section 2(15) and deny exemption available u/s 11 when there is no

material on record which may suggest that the assessee was conducted

its affairs on commercial lines with motive to earn profit and has

deviated from its objects. He has also relied upon the decision of

Hon'ble Delhi High Court in case of Bureau of Indian Standards Vs

Director General of Income Tax (Exemptions) in Writ Petition No.

W.P.(C) 1755/2012 as well as in case of M/s GSI India Vs Director

General of Income Tax (Exemption) in Writ Petition No. 7797/2009 and

submitted that in these case a similar issue was decided by the Hon'ble
                                    6
                                                              SA No. 293/Mum/2013
                                  Maharashtra Housing & Area Development Authority

High Court in favour of the assessee. Thus, the Ld. Senior Counsel has

submitted that the assessee has very strong prima facie case in its

favour and therefore the stay of recovery be granted.


4.    On the other hand, the Ld. D.R has submitted that the recovery

proceedings in this case were pending from the year 2010 as the Stay

Application filed by the assessee was disposed off by the A.O with the

direction to pay the tax in the instalment. The assessee has not

complied with the directions passed by the DDIT (E) while deciding the

Stay Application of the assessee. Further the assessee has filed a writ

petition against the recovery of tax which is pending in the Hon'ble High

Court. The Ld. D.R has further submitted that the A.O has complied with

the provision and conditions prescribed u/s 226(3) of the Income Tax

Act by serving the copy of the notice whereby the recovery has been

affected. In rebuttal the Ld. Senior Counsel has submitted that though

the assessee has filed a writ petition in the High Court but same has not

come up for hearing therefore in view of the various decisions the

action of the A.O is not sustainable. He has referred the letter dated

13.11.2013 whereby the assessee has informed the Assessing Officer

that the assessee has not received the impugned order passed by the

CIT(A) and subsequently the assessee would like to pursue the course

of second appeal. The assessee has also brought to the notice to the

A.O the directions of the Hon'ble High Court in case of UTI Mutual Fund

Vs ITO 345 ITR 71. Despite the assessee's letter dated 13.11.2013 the
                                   7
                                                              SA No. 293/Mum/2013
                                  Maharashtra Housing & Area Development Authority

A.O has taken a coercive action by recovery the entire tax amount from

the bank of the assessee.

5.   Having considered the rival submissions and careful perusal of

the relevant record we note that the A.O issued a letter dated

11.11.2013 regarding recovery of outstanding demand in view of the

order passed by the CIT(A) on 29.10.2013. In response to the said letter

the assessee vide letter dated 13.11.2013 stated that the assessee has

not received the copy of the order of the CIT(A) and further the

assessee would like to pursue the course of second appeal. The

assessee has also requested the A.O not to take any recovery action

before the time for filing the appeal in view of the directions of the

Hon'ble High Court in case of UTI Mutual Fund Vs ITO (supra). The

assessee was earlier asked to make the payment of outstanding

amount in instalment of ` 17.76 crores per month starting from month

of September 2013 but the assessee did not agree. The A.O then wrote

a letter dated 14.11.2013 and reasserted the demand without further

delay failing which action in terms of section 226(3) of the Income Tax

Act shall be taken. The assessee received the impugned order of the

CIT(A) ON 16.11.2013 and this fact has not been contraverted by the

Revenue therefore the remedy with the assessee to file the appeal

against the impugned order of the CIT(A) is available only after receipt

of the impugned order but in the mean time the A.O has effected the

recovery of outstanding sum of ` 159,84,03,720/- by taking action u/s

226(3) on 18.11.2013 itself. Thus, it is clear that the assessee was not

afforded a minimum reasonable time to take remedial steps under the
                                    8
                                                               SA No. 293/Mum/2013
                                   Maharashtra Housing & Area Development Authority

law against the impugned order of the CIT(A). Even the assessee has

filed the appeal against the impugned order without any wastage of

time on the very next working day but the A.O without waiting the

hearing and outcome of the Stay Application has taken the coercive

action of recovery of the entire outstanding amount from the bank of

the assessee as per Section 226(3) of the Income Tax Act. The Hon'ble

High Court in case of Mahindra & Mahindra Ltd. Vs Union of India

(supra) has opined in para 4 as under:

     "4. 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 & 3 to
     pay entire amount 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 tow 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."

6.    It has been observed by the Hon'ble High court that the action of

the Central Excise Authorities encashing the bank guarantees before

expiry of the statutory period of filing the appeal was highly improper.

Similarly, in the case of Mahindra & Mahindra Ltd. Vs Assessing Officer

(supra) the Hon'ble High Court has taken a serious view of the action of

the taxing authority by observing in para 9 as under:

     "9. Entire action of the respondent Nos. 1 & 2 shocks our judicial
     conscience. Rule of law has been given a total go-bye and
     wilfully ignored. The Income Tax Authorities have acted in a high
     handed manner. The impugned action is prima facie ab-initio-
     void."
                                    9
                                                              SA No. 293/Mum/2013
                                  Maharashtra Housing & Area Development Authority



7.    In the case in hand we are of the view that the A.O has taken a

coercive action by ignoring the basic rule of law and the directions and

guidelines issued by the Hon'ble Jurisdiction High Court in case of UTI

Mutual Fund Vs ITO (supra) as under:

     "In exercising his power, the Income-tax Officer should not act as
     a mere tax gatherer but as a quasi judicial authority vested with
     the power of mitigating hardships to the assessee."

     These are, we may say so with respect, sage observations which
     must be borne in mind by the assessing authorities. Consistent
     with the parameters which were laid down by the Division Bench
     in KEC International Ltd. (supra) and the observations in the
     judgment in Coca Cola (P.) Ltd.(supra). We direct that the
     following guidelines should be borne in mind for effecting
     recovery:

     1. No recovery of tax should be made pending
        (a) Expiry of the time limit for filing an appeal;
        (b) Disposal of a stay application, if any, moved by the
        assessee and for a reasonable period thereafter to enable
        the assessee to move a higher forum, if so advised.
        Coercive steps may, however, be adopted where the
        authority has reason to believe that the assessee may
        defeat the demand, in which case brief reasons may be
        indicated.

     2. The application, if any, moned by the assessee should he
     disposed of after hearing the assessee and bearing in mind the
     guidelines in KEC international Ltd. (supra);

     3. If the Assessing Officer has taken a view contrary to what has
     been held in the preceding previous years without there being a
     material change in facts or law, that is a relevant consideration
     in deciding the application for stay;

     4. When a bank account has been attached, before withdrawing
     the amount, reasonable prior notice should be furnished to the
     assessee to enable the assessee to make a representation or
     seek recourse to a remedy in law;




     5. In exercising the powers of stay. the Income Tax Officer should
     not act as a mere tax gatherer but as a quasi judicial authority
     vested with the public duty of protecting the interest of the
     Revenue while the same time balancing the need to mitigate
                                       10
                                                                  SA No. 293/Mum/2013
                                      Maharashtra Housing & Area Development Authority

     hardship to the assessee. Though the assessing officer has made
     an assessment, he must objectively decide the application for
     stay considering that an appeal lies against his order : the matter
     must be considered from all its facets, balancing the interest of
     the assessee with the protection of the Revenue."

8.    Thus, it is clear that the Income Tax Officer being a quasi judicial

authority should observed the parameters which are laid down by the

Hon'ble High Court in various decisions and reasserted in the case of

UTI Mutual Fund Vs ITO (supra). A similar view has been taken by this

Tribunal in the case of RPG Enterprises Ltd. Vs DCIT as well as in case of

Maharashtra State Electricity Board Vs JCIT. Thus, in view of the above

judicial principles we hold that the A.O has misused his powers and the

action of recovery from the bank amount of the assessee is a gross

violation of the directions as well as the basic rule of law and principle

of natural justice. Accordingly, we direct the Revenue to refund the

entire amount of ` 159,84,03,720/- to the assessee within 10 days from

the dated of receipt of this order.


9.    As regards the stay of the recovery of the demand since the

assessee has already filed a writ petition in the High Court and the

matter of stay of demand is subjudice before the Hon'ble High Court

therefore the judicial propriety and discipline demand that this Tribunal

should not venture into the subject matter which is subjudice before the

Hon'ble High Court. We are conscious about the various decisions of

this Tribunal whereby the recovery of demand has been stayed after

giving the directions of refund of the demand illegally recovered but in

those cases no stay proceedings were pending before the Hon'ble High
                                      11
                                                                 SA No. 293/Mum/2013
                                     Maharashtra Housing & Area Development Authority

Court. The appeal of the assessee is directed to the listed for out of turn

hearing on 4.2.2014. The date of hearing of the appeal is pronounced in

the open Court and in the presence of both the parties therefore no

separate notice of hearing will be issued.


10.    In the result, the Stay Application of the assessee is partly

allowed.


Order pronounced on this 25th day of November 2013

                     Sd/-                                    Sd/-
           (N. K. BILLAIYA)                          ( VIJAY PAL RAO )
        Accountant Member                              Judicial Member
Place: Mumbai: Dated: 25th November 2013
SUBODH*
Copy forwarded to:
1      Appellant
2      Respondent
3      CIT
4      CIT(A)
5      DR
                                 /TRUE COPY/
                                   BY ORDER




                              Dy /AR, ITAT, Mumbai

 
 
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