Facts of the Case

  • The petitioner challenged an impugned order dated 23.11.2022 passed by the tax authorities.
  • A tax demand was raised under Section 156 for multiple assessment years.
  • The petitioner had already deposited a portion of the demand under protest.
  • The appeal against the assessment order was pending before the Commissioner of Income Tax (Appeals).
  • The dispute primarily related to recognition of surcharge received from debtors as income on receipt basis.

Isues Involved

  1. Whether the petitioner is entitled to stay of demand and protection from coercive recovery during pendency of appeal.
  2. Whether requiring deposit of 20% of disputed demand was justified when the issue is allegedly covered.
  3. Whether relief can be granted under Article 226 against recovery proceedings under Section 156.

Petitioner’s Arguments

  • The issue involved is already covered in favour of the petitioner, hence no deposit should have been insisted upon.
  • The tax authorities wrongly treated surcharge receipts as income, leading to incorrect demand.
  • The petitioner sought:
    • Stay on recovery
    • Refund of amount paid under protest
    • Protection from further coercive action
  • It was argued that forcing deposit despite a covered issue is unjustified.

Respondent’s Arguments

  • The Revenue accepted notice and submitted that counter-affidavit was not necessary at this stage.
  • The matter could be disposed of based on existing records and submissions.

Court’s Findings / Order

  • The Court permitted the petitioner to:
    • Approach the appropriate authority (Principal Commissioner of Income Tax) for relief regarding stay and refund.
    • File an application within 10 days.
  • The concerned authority shall:
    • Decide the application within 3 weeks after hearing the petitioner.
  • Interim Protection Granted:
    • No coercive or precipitative action shall be taken until decision on application.
  • If the decision is adverse:
    • The order shall not be given effect for two weeks.
  • Regarding expeditious hearing:
    • Petitioner may approach CIT(A), who shall consider early disposal.
  • The writ petition was disposed of with liberty and directions.

Important Clarification by Court

  • Protection from coercive recovery is conditional upon filing application within prescribed time.
  • Relief was not granted directly; instead, statutory remedy route was emphasized.
  • Court balanced interests by granting interim protection while preserving administrative jurisdiction.

Sections Involved

  • Section 156 of the Income Tax Act, 1961 (Notice of Demand)
  • Articles 226 & 227 of the Constitution of India

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS23122022CW176202022_192705.pdf

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