1. This order shall dispose of stay petitions filed by the assessee in respect of asst. yr. 1997-98 being stay of recovery of the outstanding tax in dispute. Originally the assessee has filed stay petition along with the appeal praying for stay of outstanding tax of Rs. 2,12,80,437.
However, during the course of hearing, the assessee filed further facts and prayer dt. 12th Dec., 2000, which is in continuation of stay petition raising additional grounds and prayed to pass appropriate order granting stay which is status quo anti with direction to the AO to refund the sums coercively acquired by the Department.
2. We have heard the learned counsel for the assessee and learned Departmental Representatives at length and have carefully considered the rival submissions and also gone through the material available on record.
3. In this case, the assessee has declared the income of Rs. 1,35,95,400 and the assessment was completed under Section 143(3) on 30th March, 2000, and the AO assessed the income at Rs. 40,15,33,766.
However, the assessee feeling aggrieved with the order of the AO filed the appeal before the CIT(A) which was decided on 20th Oct., 2000, by the CIT(A) whereby books of accounts were rejected by the CIT(A) and directed that an estimate of profit at 15 per cent GP rate should be adopted in the place of gross profit returned by the assessee and allow the appeal of the assessee partly. The assessee feeling aggrieved with the order of the CIT(A) filed the appeal before the Tribunal on 6th Dec., 2000, within limitation along with this stay petition, The AO issued revised order giving effect to the order of the CIT(A) on dt.
22nd Nov., 2000 and demanded tax of Rs. 1,75,99,062. According to the AO, the demand was served on the assessee on 1st Dec., 2000. The AO also raised demand under Section 220(1) of the IT Act, on 22nd Nov., 2000, and the same was served on the assessee on 1st Dec., 2000. The AO also issued interest demand under Section 220(2). The same was also served upon the assessee on 1st Dec., 2000, according to the AO. As earlier stated, the assessee filed the stay petition on 6th Dec., 2000, for stay of the outstanding which was taken up by this Bench on 8th Dec., 2000, and the case was adjourned to 11th Dec., 2000. During the course of these proceedings, the assessee filed further prayer dt. 12th Dec., 2000, stating therein that the assessee communicated their intention regarding the appeal to the Tribunal to the AO vide their letter dt. 4th Dec., 2000, in which they also requested the AO not to initiate any coercive action for recovery till the disposal of the appeal by the Tribunal. The AO not agreeable for this request, instructed the assessee to appear before him on 5th Dec., 2000. It is further stated that the AO has adjusted a sum of Rs. 36,81,375 being refund due for the asst. yr. 1998-99 and therefore, raised a net demand of Rs. 1,75,99,062. It is further stated that the AO rejected the assessee's representative's request on 5th Dec., 2000, to work out certain modularaties for payment of taxes in instalments. But further posted the case for hearing on 6th Dec., 2000, and also instructed the assessee that she shall consider the assessee's request for instalments provided a sum of Rs. 50 lacs towards tax dues was paid on the date of hearing on 6th Dec., 2000. It is further stated that the assessee immediately after the above hearing, engaged themselves in the course of mobilising funds so as to remit Rs. 50 lacs or such sums that may be feasible to remit by the next day itself i.e., 6th Dec., 2000. However, to the shock and agony of the assessee, the AO even during the pendency of appeal and S.P. before the Tribunal, without offering sufficient opportunity proceeded to issue garnishee order under Section 226(3) of the Act to Indian Bank, Mylapore on 5th Dec., 2000, requiring them to pay Rs. 1,75,99,062 due by the assessee. The said order was never served on the assessee. Under these circumstances, the appeal was preferred before this Tribunal alongwith the stay petition on 6th Dec., 2000, and the matter was fixed for hearing on 8th Dec., 2000. According to the assessee, it sent a letter on 6th Dec., 2000, to the AO indicating that their stay petition is to be heard on 8th Dec., 2000, and requested not to continue further with coercive action till the disposal of the stay petition. However, this stay petition was adjourned to 11th Dec., 2000, and under these circumstances, the AO in spite of being aware of the pendency of the stay petition before the Tribunal proceeded with coercive action in mode of recovery and encashed the fixed deposits held by the assessee in the aforesaid bank on 9th Dec., 2000, towards the entire net demand of Rs. 1,75,99,062.
According to the assessee, they have incurred a business loss in next year and have financial difficulties. The assessee further submitted that the recovery action of the AO is without complying with the provisions of Section 220 of the Act and, therefore, the AO has acted arbitrarily and illegally, Therefore, in view of the aforesaid facts statements the assessee prayed before us that on the ground of natural justice and equity to pass an appropriate order granting stay which is status quo anti with direction to the AO to refund the said sum coercively acquired by the Department. Notices were given to the Revenue for both the petitions.
4. The learned counsel for the assessee besides relying upon the facts stated in both the stay petitions submitted that the assessee is a sub-contractor for South India Corporation India Ltd. for clearing and forwarding of coal clearing and disallowances have been illegally made by the AO. According to him, the CIT(A) has also illegally rejected the books of accounts and made only estimated income at 15 per cent which is much higher to those of the earlier years. According to the learned counsel, on 9th Dec., 2000, the AO has acted arbitrarily and illegally and has recovered the sum of Rs. 1,76,99,062 despite the appeal was pending before the Tribunal and the AO acted in contravention of Sections 220 and 226 of the IT Act. According to him garnishee order was also issued on the bank of the assessee illegally without giving sufficient time to the assessee. According to him, the rejection of the books of accounts by the CIT(A) was not based on factual position which is stated in the paper book. He has also relied on Tribunal order of Madras 'B' Bench, in S.P. Nos. 147 & 148/Mds/1997 in ITA Nos. 330 & 331/M/1997 in which the Hon'ble Members, Sri N.D. Raghvan and Sri P.S.Kalsian have directed the Revenue to refund the amounts collected coercively within 7 days of the receipt of the order of the Tribunal and according to him the case of the assessee is squarely covered by the order of the Tribunal supra. The learned counsel for the assessee submitted that the assessee is in financial difficulties as return was filed at loss in the next year. According to him, the assessee being sub-contractor had got TDS etc. deducted which shows that the income shown by the assessee is a genuine one as declared by the assessee. The learned counsel for the assessee further submitted that in respect of asst. yrs. 1984-85 and 1985-86, Tribunal, 'A' Bench, Madras in the case of the assessee itself has remanded the matter to the AO for fresh consideration on the identical fact, and the AO has completed the assessment and gross profit was estimated at 3 per cent as per the guidelines given by the CIT(A). The assessee has also filed a chart containing the G.P. rate, etc. It was contended that in this year only the Revenue has exorbitantly assessed the income at a very higher rate and the income was increased from 1.35 crores to Rs. 40,15,00,000 approximately. According to the learned counsel the assessee is assessed for the last 30 years and it was not a case of urgency and the business of the assessee is completely affected because of the illegal recovery made by the AO and according to him, no demand notice was issued for the revised demand and no reasons have been given by the AO under Section 220 of the Act. The learned counsel also filed the letter dt. 14th Dec., 2000, of Indian Bank whereby the banker of the assessee has directed, it to confine overdraft limit to Rs. 25 lacs only as the Department has attached their FDRs and the assessee has only limited on one draft faculty as their business is badly affected.
5. On the other hand, the learned Departmental Representative through the AO has filed written submissions which is on record and submitted that no valid appeal is pending before the Tribunal and tax amount has already been recovered from the assessee and as such, the stay petitions have become infructuous. According to him, the assessee has not made out any case for financial stringency and the assessee has not availed alternative remedy before the CIT(Admn.), According to him, a separate order under Section 220 was issued along with demand under Section 221 which was served upon the assessee on 1st Dec., 2000, and asking the assessee to deposit the amount and also why penalty should not be levied for non-payment of demand. According to him, the assessee's counsel filed a letter dt. 6th Dec., 2000, accompanied by the notice of hearing of the SP by the Tribunal stating therein that the appeal is pending before the Tribunal. According to him, garnishee proceedings were initiated on 5th Dec., 2000, and the amount was recovered in pursuance thereof from the bank on 9th Dec., 2000, and the AO being Jt. CIT was within the power to reduce the period of 30 days to any number of days under Section 220 of the Act, As such, the AO has not made any order illegally and has not acted arbitrarily.
The learned Departmental Representative also submitted various case laws which are mentioned in the paper book and we would deal with them separately at appropriate stage. According to him, no case of stay of recovery of the amount is made out in favour of the assessee as the amount has already been recovered and it is not within the powers of the Tribunal to pass an order status quo anti in nature. According to the learned Departmental Representative the assessee is not in financial difficulty and further relied upon the decision Pitambardas Dulichand v. Union of India and Ors. (1999) 239 ITR 69 (MP). He also filed copy of the text book dealing with Section 156 of the Act and the balance sheet of the assessee for the next year i.e., 31st March, 2000.
The learned Departmental Representative prayed that the stay petition be dismissed and he has no objection if early hearing may be granted to the assessee on the issue. He further submitted that the CIT(A) has already granted major relief and as such no prima facie case is made out in favour of the assessee in the appeal pending before the Tribunal. Accordingly, he strongly objected that since whole of the tax due is recovered the stay petition cannot be entertained and no order or direction should be issued to the Revenue to return the tax already collected from the assessee.
6. We have bestowed our careful consideration to the submissions and materials on record. Since many questions of law and facts are involved and serious disputes have been raised by both the parties, it would be appropriate if all these points are considered separately. We therefore consider it appropriate to mention those points before further discussion on the matter. According to us the following points arise for consideration by this Tribunal : (i) Whether the Tribunal has power to order and direct the Revenue on stay petitions, directions mandatory in nature or in the nature of anti status quo to refund or return the amount of tax already collected by the Revenue.
7. Point No. 1--Whether the Tribunal has power to order and direct the Revenue on stay petitions, directions, mandatory in nature or in the nature of anti status quo to refund or return the amount of tax already collected by the Revenue : The Powers of the Tribunal, are defined under Section 254(1) of the Act in which it is mentioned that "The Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
Section 255(6) of the Act is reproduced for the sake of convenience which is as under: "255(6)--The Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the IT authorities referred to in Section 131, and any proceeding before the Tribunal shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and the purpose of Section 196 of the Indian Penal Code(45 of 1860) and the Tribunal shall be deemed to be a civil Court for all the purposes of Section 195 and Chapter XXXV of the Cr.PC 1898 (5 of 1898)." "131(1) :--The AO, Dy. CIT(A), Jt. CIT/(CIT(A) and Chief CIT or CIT shall, for the purposes of this Act, have the same powers as are vested in a Court under the CPC, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely : (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath; (c) compelling the production of books of account and other documents; and Therefore, the combined reading and plain interpretation of all these provisions of the IT Act above, would emerge that the Tribunal is vested with powers of a civil Court under CPC when trying a suit as stated above the proceedings before it are judicial in nature. Section 254 gives wide powers on the Tribunal to "pass such order thereon as it thinks fit" but the only fetter put by the legislature upon the Tribunal is to give opportunity of hearing to both the parties. These powers are to be exercised in all matters pending before the Tribunal which includes the orders on stay petitions and miscellaneous petitions. However, of course, these wide powers are to be exercised judiciously.
8. The Hon'ble Supreme Court in Hukumchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC) has held : "The powers of the Tribunal in dealing with appeals are expressed in Section 33(4) of the IT Act in the widest possible terms. The word "thereon" in Section 33(4) restricts the Jurisdiction of the Tribunal to the subject- matter of the appeal. The words "pass such order as the Tribunal thinks fit" include all the powers (except possibly the power of enhancement) which are conferred on the AAC by Section 31." 9. The Hon'ble Bombay High Court in New India Life Insurance Co. v. CIT (1957) 31 ITR 844 (Bom) has held : "The position of the Tribunal is the same as a Court of appeal in the Civil Procedure Court and its powers are "identical" with the powers enjoyed by the Appellate Court under the Code." 10. The Hon'ble Bombay High Court in CIT v. Hazarimal Nagji & Co.
(1962) 46 ITR 1168 (Bom) has held : "The powers of the Tribunal are similar to the powers of the appellate Court under the CPC." 11. The Hon'ble Kerala High Court in CIT v. Smt P.K. Noorjehan (1980) 123 ITR 3 (Ker) has held : "The right of appeal to the Tribunal and the powers of the Tribunal are to be found in Section 254 of the Act. Under Section 254, the Tribunal is to pass "such orders on the appeal as it thinks fit". This is a wide power that is conferred upon the Tribunal.
Unlike the case of a second appeal to this Court under Section 100 of the CPC, the power of interference by the Tribunal is not in anyway limited to consideration of questions of law or otherwise, so that it is open to the Tribunal to interfere with the judicial discretion exercised by the lower authorities and substitute the same by its own discretion." 12. The Hon'ble Andhra Pradesh High Court in the case of ITO v. Khalid Mehdi Khan (Minor) (1977) 110 ITR 79 (AP) has held : "as held by the Supreme Court in FTO v. M.K. Mohammed Kunnhi (1969) 71 ITR 815 (SC), the conferment of substantive power to entertain and dispose of the appeal carried with it, by necessary implication, all the ancillary and incidental powers which are necessary to make the exercise of the substantive power fully effective. The Parliament which amended the IT Act in the year 1970 must be presumed to have knowledge about the decision of the Supreme Court with reference to the powers of the Tribunal under Section 254 of the Act, and if it wanted to curtail or abridge the power of Tribunal to grant stay, it could have done so expressly." 13. The Hon'ble Punjab High Court in the case of Bipan Lal Kuthiala v.CIT (1957) 32 ITR 361 (Punj) has held "The powers of the Tribunal in dealing with appeals are wider still, for Sub-section (3) of Section 33 enacts that the Tribunal may after giving both parties to the appeal an opportunity of being heard, "pass such orders thereon as it thinks fit". It may affirm, reverse or modify any order appealed from as justice may require, or may remand the case fur further proceedings without determining the issues on the appeal, or finally dispose of the case by entering judgment or directing the Asstt. CIT to enter a particular judgment. The Tribunal can compel the production of documents, enforce the attendance of witnesses and issue commissions for their examination. They follow a procedure which conforms in many respect to that followed by Courts; i.e., the same functions as a Court and their proceedings partake of the nature of judicial proceedings.
They have power to take and weigh evidence, to determine facts based upon the consideration of evidence and to make an order supported by findings. They have power to hear, to determine and to enforce. The powers exercised by them affect the personal and private rights of private individuals and their determinations are final and conclusive.
They must proceed in a judicial spirit, conform to rules of natural justice and come to judicial conclusions upon properly ascertained facts. Discretion conferred on a judicial or quasi-judicial Tribunal is an impartial legal discretion to be exercised in conformity with the spirit of law and in a manner to subserve rather than to defeat substantial justice." 14. The Hon'ble Supreme Court in the case of CIT v. Bansi Dhar & Sons (1996) 157 ITR 665 (SC) has held : "The power to grant stay is incidental and ancillary to appellate jurisdiction. What is true of appellate jurisdiction cannot be predicated of the advisory or consultative jurisdiction.
15. The Hon'ble apex Court in the case of Esthuri Aswathiah v. CIT (1957) 66 ITR 478 (SC) has held : "The function of the Tribunal in hearing an appeal is purely judicial. It is under a duty to decide all questions of fact and law raised in the appeal before it for that purpose it must consider whether on the materials relied upon by the assessee his plea is made out. Conclusive proof of the claim is not predicated: the Tribunal may act upon, probabilities, and presumptions may supply gaps in the evidence which may not, on account of delay or the nature of the transactions or for other reasons, be supplied from independent sources. But the Tribunal cannot make arbitrary decisions: it cannot found its judgments on conjectures, surmises or speculation.
Between the claims of the public revenue and of the taxpayers, the Tribunal must maintain a judicial balance."Industrial Credit and Investment Corporation of India Ltd. v. Grapco Industries Ltd. and Ors.
AIR 1999 SC 1975 has dealt with the powers of Debts Recovery Tribunal, powers of appellate Tribunal under Foreign Exchange Regulation Act and powers of Motor Accident Claims Tribunal wherein it has held : powers of Tribunal--Tribunal can exercise powers of civil Court as contained in CPC rather it can travel beyond the CPC only fetter put on its powers is to observe principles of natural justice. We would like to mention here that the Hon'ble Supreme Court has dealt with Section 22 regarding powers of the said Tribunal in respect of recovery of Debts Due to Banks and Financial Institutions Act (51 of 1993) and Section 53 of the Foreign Exchange Regulation Act, 1973 and Section 169 of the Motor Vehicles Act, 1988. In all the cases, the Hon'ble Supreme Court came to the conclusion that the powers of all these Tribunals are similar with regard to summoning, enforcing the attendance of any person and examining him on oath, requiring the discovery and production of documents; the evidence on oath, examination of witnesses and documents etc. are the same and as such the powers of the civil Court as per CPC would be applicable. We may remind here that the same powers are conferred upon the Tribunal as per Section 131(1) of the IT Act, which is mentioned specifically above and the powers of this Tribunal are similar to that of the Debts Recovery Tribunal and other Tribunals as held in the judgment of the Supreme Court supra.
Therefore, while relying upon the judgment of the Supreme Court, it is clear that this Tribunal can exercise the powers of a civil Court contained in CPC and rather it can travel beyond the CPC and only fetter put on its powers is to observe principles of natural justice.
17. The ITAT, Madras 'B' Bench in the matter of Tamilnadu Industries v.Dy. CIT in ITA Nos. 330 & 331/Mds/1997 (supra) has directed the Revenue to refund the amount within 7 days which was recovered by the AO during the pendency of the appeal before the Tribunal. Though the facts of this case are slightly different but the Tribunal has exercised its power earlier also to direct the Revenue to refund the tax amount already recovered during the pendency of the appeal and the stay petitions, 18. The Hon'ble Delhi High Court in the case reported in 1988 Rajdhani Law Reporter at p. 7 has held "that the mandatory injunction would be granted by the Courts in interim relief also.
19. Relying on the aforesaid catena of authorities and particularly, ITR 66, AIR 1999 (supra), all the Supreme Court decisions, order of the Tribunal, 'B' Bench and other authorities the crux of the Sections 254, 255 and 131 of the IT Act would be that, this Tribunal can exercise powers of civil Court and could pass order in the nature of mandatory directions to the Department to refund/return the amounts recovered forcible during the pendency of the stay petitions and the income-tax appeals. Section 254 is very clear and gives wide power to this Tribunal to pass "such orders thereon as it thinks fit, according to facts and circumstances of each case and only fetter put is to give both the parties an opportunity of being heard.
20. We are therefore of the considered view that this Tribunal has power to pass such appropriate orders in the facts and circumstances of each case to maintain judicial balance between the parties and therefore the powers under Section 254 of the Act would include power to grant stay which is incidental and ancillary to the appellate jurisdiction. While exercising the powers to grant stay, this Tribunal would be having all powers to grant stay in the nature of prohibitory, mandatory, or directory to order for return of the amount already recovered by the Revenue in appropriate cases where such directions are warranted in view of facts and circumstances of the case. This Tribunal could pass order which includes all types of orders which ought to be passed according to peculiar facts and circumstance in appropriate cases to do justice between the parties. In this case, we have given sufficient opportunities to the parties and both the parties have argued their cases at length. Therefore, the only exception created by the statute is also specifically complied with by this Tribunal.
21. Now before dealing with other points mentioned above, we would like to consider whether it is a fit and appropriate case in which while dealing with stay petitions, this Tribunal should exercise its powers to issue directions to the Revenue through the AO to return the amount of Rs. 1,75,99,062 recovered during the pendency of the said petitions and pendency of the appeal. In this case, the appeal was partly allowed by the CIT(A) on 20th Oct., 2000 and the AO issued revised order of the demand giving effect to the order on dt. 22nd Nov., 2000 and the demand of tax of Rs. 1,75,99,062, was issued to the assessee under Section 220(1) of the Act. The same was served upon the assessee on 28th Nov., 2000, as stated by the assessee in their papers. The AO filed the photo copy of the acknowledgement of the same which shows that it was received on 1st Dec., 2000. In this order, the AO has also directed the assessee to pay all the outstanding demands immediately and directed them to appear before her on 5th Dec., 2000. The AO also served notice under Section 221(1) on the assessee on 1st Dec., 2000 and also issued order of charging interest under Section 220(2) for the same year and the same was served upon the assessee on 1st Dec., 2000.
22. Section 220(1) is reproduced for the sake of convenience hereunder : "220(1) : Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under Section 156 shall be paid within (thirty) days of the service of the notice at the place and to the person mentioned in the notice : Provided that, where the AO has any reason to believe that it will be detrimental to Revenue if the full period of (thirty) days aforesaid is allowed, he may, with the previous approval of the (Jt.
CIT), direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of (thirty) days aforesaid, as may be specified by him in the notice of demand.
(2) If the amount specified in any notice of demand under Section 156 is not paid within the period limited under Sub-section (1), the assessee shall be liable to pay simple interest at (one and one-half per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in Sub-section (1) and ending with the day on which the amount is paid : .........
(3) Without prejudice to the provisions contained in Sub-section (2), on an application made by the assessee before the expiry of the due date under Sub-section (1), the AO may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.
(4) If the amount is not paid within the time limited under Sub-section (1) or extended under Sub-section (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default.
(6) Where an assessee has presented an appeal under Section 246 the AO 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." 23. Section 221(1) is reproduced for the sake of convenience hereunder : "221(1) : When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under Sub-section (2) of Section 220, be liable, by way of penalty, to pay such amount as the AO may direct, and, in the case of a continuing default, such further amount or amounts as the AO may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears; " 24. In this case, garnishee order on the bank was issued by the AO on 5th Dec., 2000 and the appeal was filed before the Tribunal with stay petition on 6th Dec., 2000. The AO recovered the aforesaid amount from the bank of the assessee on 9th Dec., 2000, despite the matter was under consideration before the Tribunal and notice was also served upon the Revenue. The assessee also intimated the AO that the appeal and stay petition are pending before the Tribunal vide their letter dt. 6th Dec., 2000 and during the course of arguments it was stated by the AO who was personally present in the Court that the assessee's representative met her personally on 5th Dec., 2000, for fixing the modalities to pay the arrears of tax in instalments and according to the learned counsel for the assessee, the AO directed to consider the request only on deposit of Rs. 50 lacs by next day, i.e., 6th Dec., 2000. The learned counsel submitted that the assessee is assessed to the income-tax for the last 30 years. No sufficient time was given as per Section 220 to pay the tax and no reasons have been recorded by the AO to reduce the period of 30 days and therefore, the AO has acted arbitrarily and illegally. According to the learned Departmental Representative, the AO was within her powers to reduce the period of recovery of arrears as per proviso to Section 220(1) of the Act. The learned Departmental Representative also relied upon the decision reported in (1999) 239 ITR 69 (MP) (supra) and also relied upon the provisions, of Taxation Law Act, 1969, from text book by Chaturvedi & Pithisaria photocopy was placed before us.
25. After considering the submissions of the parties, we are of the considered opinion that Section 220(1) is mandatory in nature and the AO has to issue notice under Section 220(1) and to give 30 days time to the assessee to pay the amount of tax payable. Further proviso attached to this section says that where the AO has any reason to believe that it will be detrimental to Revenue if full period of 30 days aforesaid is allowed, then he may, with the previous approval of the Jt. CIT may reduce such period. According to him, the AO in this case is Jt. CIT herself and therefore, no approval was required. We do not agree with the submission of the learned Departmental Representative in this regard. The proviso to Section 220(1) clearly speaks that the AO has to record reasons to believe that it will be detrimental to Revenue if full period of 30 days is allowed. During the course of argument, the AO has produced original file before us and photo copy of the notice under Section 220(1) is placed on record. We have perused the record and did not find that the AO has recorded anywhere any reasons to believe that it will be detrimental to the Revenue if full period of 30 days is allowed. This provision is mandatory in nature and in the absence of any reasons recorded by the AO, we are of the considered view that the Revenue cannot get benefit of the proviso in this regard.
In the absence of any specific finding to that effect, the AO has not given sufficient time of 30 days to the assessee to pay the amount as per demand. Therefore, we hold that the AO has not complied with the proviso to Section 220(1) of IT Act in this regard. Even the Department is not without any remedy, if no amount is paid even after 30 days then the Revenue would be within its power to recover interest on the outstanding amount and also impose penalty upon the assessee. The Department has also not given liberty to the assessee to pay the amounts in instalments. We may also add here that Section 220(6) also cannot be ignored as this provision specifically provides that in case the appeal is pending then the assessee shall not be treated in default in respect of the amount in dispute in the appeal, as long as such appeal remains undisposed of. In this case, admittedly, the appeal and the stay petitions were pending as on 6th Dec., 2000, and recoveries collected from the banker of the assessee on 9th Dec., 2000, during the pendency of the appeal and the stay petitions.
26. The Hon'ble Allahabad High Court in the case of Mrs. R. Mani Goyal v. CIT and Anr. (1996) 217 ITR. 641 (All) has held "that the petitioner had submitted a return declaring a total income of Rs. 11,710. The Dy.
CIT did not accept the return and enhanced the income by making several additions and determined the tax at Rs. 33,04,450, i.e., more than several times the income returned. The petitioner's appeal was pending before the CIT. In such a situation, the petitioner could not be treated to be in default and recovery proceedings until the disposal of the appeal would have to be kept in abeyance. The Board's instruction had desired the Recovery Officers to keep such recoveries in abeyance until disposal of the appeal by the appellate authority. Moreover, it was opposed to principles of good conscience and fairplay that the disputed amount of tax is sought to be recovered even though the appeal is pending." 27. The Hon'ble Rajasthan High Court in the case of Maharana Shri Bhagwat Singhji of Mewar v. TTAT and Ors. (1997) 223 ITR 192 (Raj) has held "Circulars issued by the CBDT are binding on the authorities exercising powers under taxing statutes and have sufficient force of law. In view of Instruction No. 96 [F. No. l/6/69/(ITCC)], dt. 21st Aug., 1969, of the Board, it is clear that where the income determined on assessment was substantially higher than the returned income, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision of the appeals. Held accordingly, on the facts, that the factors which are relevant for deciding the stay applications primarily are a prima facie case, balance of convenience, financial status of the petitioner, hardship and also the interest of the Revenue. In the instance case there was an order of the Court restraining the accountable person from alienating/disposing of the proper ties of the estate. The value of the estate which was determined by the authority was much more than twice the returned value. Hence, Instruction No. 96 of 21st Aug., 1969, was applicable. It was also established that the accountable person had no cash belonging to the estate. A perusal of the order of the Tribunal indicated that the contention raised by the petitioner before the Tribunal for staying the total recovery was not controverted and no relevant and convincing material regarding the financial status of the petitioner was placed before the Tribunal to establish that the petitioner was in a position to deposit 25 per cent of the disputed duty. The recovery of the entire duty had to be stayed till the disposal of the appeal." 28. We are therefore of the considered view that the AO was under obligation when intimated to wait for the result of the order of the Tribunal, even according to Section 220(6) of the IT Act. According to the learned counsel, the assessee is assessed for the last 30 years and no case of urgency was shown by the AO which prompted her to recover the outstanding amount during the pendency of the appeal. We have also considered the decision in the case of Pitambardas Dulichand and Ors.
v. Union of India and Ors. (supra) and in our opinion the said judgment of the Madhya Pradesh High Court would not advance the case of the Revenue. In this case, the only point of charging of interest is discussed and has not decided the time to be given under Section 220(1) of the Act and in the present case, there was no dispute with regard to interest. The Hon'ble Madhya Pradesh High Court in its judgment has relied upon the principle of merger which is not applicable in this case. The law is clear that the appeal is continued process of the main proceeding. In this case, the appeal was filed before the recovery and valid appeal was pending before the Tribunal and as such the proceedings of the AO were not finally decided. Hence, the principle of merger could be applied only on the final decision of the appeal pending before us. Therefore, in our opinion, the judgment relied upon by the learned Departmental Representative is not applicable to the facts and circumstances of this case. We have also considered the Taxation Law Act as relied upon by the Departmental Representative from same text book and in our considered view this would also not help the Revenue. In this case, originally demand was issued by the CIT(A) and the order was issued by the AO on 22nd Nov., 2000. If the Department was of the view that no notice was required under Section 220(1) and demand was payable originally without an earlier notice under Section 156 of the Act, in our view there was no need for the AO to issue notice under Section 220(1). This plea in our view has been taken in haste by the AO The time is given under Section 220(1) of the Act so that the assessee may either deposit the amount with the Department or face the interest and penalty in case he has not taken any remedy before the higher authorities under the IT Act. Therefore, we are of the considered view that the AO has not complied with Section 220(1) as discussed above and we hold that the AO has acted in hasty arbitrarily and in contravention of Section 220(1) of IT Act. The Garnishee order under Section 226(3) is unreasonable and illegal and we direct that the order under Section 220(1) and consequent to that order under Section 226(3) of the Act are treated to be vacated and withdrawn.
28. Keeping in view above discussion, applying the ratio of the judgments reported in 217 ITR, 223 ITR and mandatory provisions of Section 220(1) of the Act, we feel it appropriate to exercise our powers under Section 254 of the Act and accordingly, we hold that the Revenue/Department through the AO to refund/return Rs. 1,75,99,062 to assessee forthwith.
29. Point 2--Prima facie case.--In this case, the CIT(A) rejected the accounts books of the assessee and 15 per cent gross profit rate was fixed. The assessee felt aggrieved with the order of the CIT(A) and filed the appeal before the Tribunal. Therefore, it is a valid appeal as pending before us. The AO has only given effect to the order of the CIT(A) and as such the arguments of the learned Departmental Representative cannot be accepted that no appeal is pending before us.
For the asst. yrs. 1984-85 and 1985-86, same question was raised before another Bench of this Tribunal in the case of the assessee itself and the Tribunal in ITA Nos. 1431 & 3098/Mds/1988 has set aside the same question of the G.P. rate and referred the matter back to the AO to decide the same question upon which the AO has estimated the G.P. rate at 3 per cent and assessed accordingly. We have gone through the order of the Tribunal, order of the AO and comparative table filed by the learned counsel for the assessee showing that excess G.P. rate has been applied in the year under consideration in dispute, the assessee has declared the income in the present year at Rs. 1,35,95,400. The AO has assessed the same income on a higher amount, at Rs. 40,15,33,766 and the CIT(A) allowed the appeal of the assessee partly and the amount of tax recovered by the AO was reduced to Rs. 1,75,99,062, The CIT(A) applied 15 per cent of G.P. rate. While relying upon the decisions reported in 223 ITR and 217 ITR (supra), we are of the considered view that even the demanded tax in the present year is more than the income declared by the assessee and as such the assessee is able to prove prima facie case in its favour for allowing the stay petitions 30. Point 3--Balance of convenience--Since the findings of prima facie case is there, in favour of the assessee, the AO has already attached FDRs and also adjusted the refund of some other years and the income was assessed by the AO entirely based on estimate of the G.P. rate.
Therefore, keeping in view, the earlier years finding in favour of the assessee where 3 per cent was applied as G.P. rate, we are of the considered opinion that balance of convenience also lies in favour of the assessee and against the Department.
31. Point 4--Financial status of the assessee--We have considered all the material on record. The AO has already applied the refund of next year in the outstanding tax amount. All the FDRs of the assessee have been encashed by the AO. The assessee has filed on record copy of acknowledgement of filing of the return at loss of Rs. 214.40 lacs for the financial year ending March, 2000 showing that the assessee is under financial crisis and has filed the return at loss as the assessee has incurred business loss. In para 9 of their subsequent petition, it is stated that in view of general recession in their business, the assessee was already crippled in meeting their liquidity requirements of their commercial operations. In furtherance to the situation, order of recovery was carried out by the AO has now caused substantial damage to the financial status of the assessee. The assessee also fears that the very survival of their business which has earned repute and goodwill in the last 30 years would suffer serious set back because of the recovery proceedings. The learned counsel also filed letter of their banker dt. 14th Dec., 2000, wherein the banker has instructed the assessee to restrict their overdraft limit upto Rs. 25 lacs which according to him, the assessee has already exceeded and further benefit would not get due to the attachment by the AO. On the other hand, the learned Departmental Representative filed copy of the balance sheet of the assessee to show financial position in respect of assets, is good.
We have considered all the facts and circumstances and we are of the considered view that the assessee was able to prove that financial status of the assessee is not good and all the FDRs have been attached and the assessee has filed return of loss ending March, 2000 in a sum of Rs. 214.40 lacs, in this year. Therefore, keeping in view of the facts and circumstances of the case we take that the assessee's financial condition is also not good and unable to pay all the outstanding amount at once.
32. Point 5--Interest of the Revenue--The assessee in their additional prayer filed on 12th Dec., 2000, has mentioned in paras 5 and 6 that the AO rejected the assessee's personal representation dt. 5th Dec., 2000, to work out certain modulalaties for payment of tax in instalments, but however, posted the case for hearing on 6th Dec., 2000 and instructed the assessee that she shall consider its request for instalment of payments, provided a sum of Rs. 50 lacs towards tax due was paid on next day i.e., 6th Dec., 2000 and thereafter the assessee immediately engaged themselves in the course of mobilising funds so as to remit Rs. 50 lacs or such sum that may be feasible to remit by next day itself. The learned counsel during the course of argument offered to pay Rs. 5 lacs per month during the pendency of the appeal proceedings if entire amount recovered is refunded to the assessee. On the other hand, the learned Departmental Representative strongly objected and stated that the Government cannot run without taxes and offer of the assessee is not sufficient to meet out the tax liability though, earlier the learned Departmental Representative strongly objected to the return of any amount to the assessee.
33. We have considered the rival submissions and we are of the considered view that offer of the learned counsel for the assessee to pay Rs. 5 lacs per month during the pendency of the appeal is not sufficient, In our view to protect the interest of the Revenue particularly when no security is offered in the stay petition or during the course of hearing before us. We have considered the entire facts and circumstances of the case and particularly the entire amount recovered by the Revenue which we have already held to be returned forthwith. However, in order to maintain judicial balance in this peculiar situation and also to protect the interest of the Revenue, we consider the fact that the AO has already adjusted Rs. 36,81,375 in this year which was for the asst. yr. 1998-99. Therefore, the Department has already adjusted refund of Rs. 36,81,375 in the outstanding tax. Therefore, keeping in view the willingness of the assessee before the AO on 5th Dec., 2000, to pay even to the extent of Rs. 50 lacs on earlier occasion, we consider the Revenue's interest would definitely be protected if the assessee be directed to pay Rs. 50 lacs to the Revenue in lump sum instead of Rs. 5 lacs per month as offered by the assessee's counsel and in addition to that it would be proper to direct the assessee to deposit Rs. 1 lakh per month during the pendency of the appeal.
34. Since Rs. 1,75,99,062 is already with the Revenue, which we have held earlier to be returned the same forthwith, we direct that out of this amount already recovered, Revenue shall retain Rs. 50 lacs and treat it as tax deposited by the assessee on this account and balance shall be returned to the assessee. We think that this arrangement would protect the interest of the Revenue.
35. Before issuing the directions in the matter, We would like to mention here that the contentions of 'the learned Departmental Representative that the assessee should take alternative remedy before the CIT(Admn.) cannot be considered. The powers of the Tribunal, to grant stay are independent to that of the CIT(Admn.) The assessee can choose any form as he likes in the facts and circumstances of the case.
There is no bar in this regard. Moreover, the order dt. 17th Oct., 2000, of the Jt. CIT is. available on the record and that of the CIT(A) dt. 20th Sept., 2000, wherein similar request of the assessee has already been rejected by them even before the decision of the appeal before the CIT(A). One can expect what order would be passed by these authorities after the decision of the appeal before the CIT(A).
Therefore, this ground of the learned Departmental Representative has no force and is rejected.
36. We have considered the case law referred to by the AO in her written submissions which are 154 ITR 174 (SC) (sic), Sri Balaji Trading Co. v. Dy. CTO and Anr. (1998) 175 ITR 428 (Mad), Shahabad Co-operative Sugar Mills Ltd. v. Dy. CIT and Anr. (1994) 208 ITR 756 (P&H) and JT 1996 (5) SC 322. The same authorities have already been considered on all the above five points mentioned above which are mainly on the points for grant of stay. There is no dispute with regard to the ratio of the other authorities mentioned by the AO in her written submission but in our humble view, remaining authorities would not in anyway advance the case of the Revenue.
37. In view of the above discussion and various pronouncements of the Hon'ble Supreme Court and High Courts, we are inclined to allow the stay petitions" filed by the assessee and we direct : (1) Revenue through the AO to refund/return Rs. 1,25,99,062 to the assessee forthwith on receipt of this order.
(2) The assessee, to deposit Rs. 1 lakh per month with Revenue starting from the month of February, 2001 during the pendency of the appeal. The Revenue shall not take unnecessary adjournment.
(3) Further recovery of all remaining outstanding demand amounts and further proceedings are stayed in the matter till the disposal of the appeal.
(4) Registry, to post this appeal on out of turn basis for hearing before the Bench on 12th March, 2001. Parties shall file their paper books etc. before one month before the date of hearing and shall not ask for unnecessary adjournment in the matter.
38. Nothing stated herein shall prejudice the rights of the parties on merits of the case. We further direct the Registry to supply the copy of this order to both the parties and other authorities forthwith. With these observations and directions, the stay petitions are allowed to the extent stated above.