Facts of the Case:
The petitioner, Bikram Singh, was assessed under Section 68 of the Income Tax Act for Assessment Year 2011-12, with a demand raised for ₹4,39,71,545. The assessing officer added ₹3,25,50,000 under Section 68 due to an unacceptable explanation from the petitioner. While an appeal was pending, the assessing officer issued a demand under Section 156 of the Income Tax Act. The petitioner requested a stay of the demand under Section 220(6). The Deputy Commissioner of Income Tax communicated that unless 50% of the demand was paid, no stay application would be entertained.

Issues Involved:

  • Legality of the garnishee order under Section 226(3) of the Income Tax Act.
  • Balance between the hardship faced by the petitioner and the urgency of the tax demand.
  • The procedure for handling tax demands during the pendency of an appeal.

Petitioner’s Arguments:

  • The garnishee order was unfair, and there were financial hardships involved.
  • The demand was excessive and should be stayed due to the appeal being pending.

Respondent’s Arguments:

  • The demand was based on a valid assessment, and the order was issued as per the provisions of the Income Tax Act.
  • A stay could not be granted unless 50% of the demanded amount was paid.

Court Order/Findings:
The Court found that, although it could not assess the merits of the appeal at that stage, it recognized that the petitioner might suffer irreparable loss. Therefore, it decided to vacate the garnishee order to the extent of 50%. The bank was instructed to release half of the demanded amount and allow the petitioner to access the balance. Additionally, the Court directed the CIT (Appeals) to expedite the hearing of the appeal within four months.

Important Clarification:

  • The garnishee order was partially vacated, and the petitioner was allowed to pay 50% of the demand to seek a stay.
  • The appeal before the CIT (Appeals) was directed to be resolved as soon as possible.

Sections Involved:

  • Section 68 (Income Tax Act, 1961)
  • Section 156 (Income Tax Act, 1961)
  • Section 220(6) (Income Tax Act, 1961)
  • Section 226(3) (Income Tax Act, 1961)

Link to download the order: https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:1878-DB/RKG27022015CW19612015.pdf

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