Lavanya Property Developers Private Ltd. vs The Assistant Commissioner of Income Tax, The Commissioner of Income Tax (Appeals), The Deputy Commissioner of Income Tax and The Branch Manager, Canara Bank, Railway Junction Branch

T.S. Sivagnanam, J.—By consent, the writ petition is taken up for final disposal.

The prayer in the writ petition is to quash an order passed by the first respondent dated 10.07.2008 and the notice issued by the third respondent dated 14.10.2008 u/s 226(3) of the Income Tax Act and to forbear the first respondent herein from in any manner enforcing the demand of the tax pursuant to the assessment order dated 31.12.2007 for the assessment year 2005-2006 (previous year 2004-2005) till the disposal of the appeal preferred by the petitioner on 01.02.2008. The petitioner is a private limited company engaged in the business of property development. The petitioner''s case was taken for scrutiny by the first respondent u/s 143(3) read with Section 14 of the Income Tax Act, on 31.12.2007 and a show cause notice was issued which did not allow the claim of the petitioner u/s 80(1)(B)(10) of the Act and proposed to disallow the claim of the petitioner towards cost of consturction. On receipt of the showcase notice, the petitioner submitted its reply claiming an exemption u/s 80(1)(B)(A) of the Act by stating that all the conditions under the said provision were fulfilled. The first respondent passed an order of assessment on 31.12.2007 disallowing the claim made by the petitioner u/s 80(1)(B)(10) of the Act, disallowing the cost of construction nad made a total above of Rs. 2,43,70,680 and on that basis computed tax demand at Rs. 84,58,911/-. Along with the order of assessment the first respondent, also issued a notice of demand u/s 156 of the Act calling upon the petitioner to pay amount assessed to tax within 30 days failing which recovery proceedings would be initiated under Sections 222 - 229, 231 and 232 of the Act . The petitioner preferred a statutory appeal on 01.02.2008 u/s 246A before the second respondent. The said appeal petition is pending. Learned senior Counsel while contending that the petitioner has got an excellent case on merits, made submissions has to how the order of assessment is not sustainable.

Learned senior Counsel would further submit that the respondents 1 to 3 before passing the impugned order in the writ petition ought to have seen that u/s 220(6) of the Act, made in his discretion and subject to the condition as he made made even fit to impose in the circumstances of the case, treat the assessee has 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 the statutory appeal remains indisposed of. Further, learned senior Counsel would also attack the impugned order as being in violation of the principles of the natural justice. Learned standing Counsel appearing for the Department , after relying upon the counter affidavit filed by the first respondent would submit that the petitioner is at liberty to approach the authority before whom the appeal is pending seeking for stay of collection of tax. It is further stated that the notice dated 14.10.2008 u/s 226(3) of the Act attaching bank account has been withdrawn on 18.03.2009.

Heard the learned Counsel for the petitioner and the learned Counsel for the respondents and perused the materials on record.

The only issue to be considered is as to whether the respondent/Department have to be restrained from enforcing the order of assessment against the petitioner pending disposal of the statutory appeal filed before the second respondent. It is true that mere pendency of the appeal cannot operate assess. However, considering the of the Act, it is sufficient power to treat an assessee as a person being not in default in respect of any amount which is pending appeal. Admittely, the appeal has been filed and it is pending before the second respondent from February 2008. Therefore, I deem it appropriate in the facts and circumstances of the case that a direction could be issued to dispose of the appeal at an early date subject to the certain conditions being imposed on the petitioner.

According to the learned senior Counsel, the petitioner already deposited a sum of Rs. 21,00,000/- and he is willing to pay a further sum of Rs. 12,00,000/- within a period of four weeks.

In view of the same, the petitioner is directed to pay a sum of Rs. 12,00,000/- within a period of four weeks. Thereafter, on such payment, the appeal shall be disposed of by the second respondent within a period of three months after affording an opportunity to the petitioner. It is made clear that in view of the above, pending disposal of the appeal, the respondents shall not take any coercive steps against the petitioner.