Facts of the Case

The petitioner, M/S Halcrow Consulting India Pvt Ltd, challenged a notice issued by the Assessing Officer (AO) under Section 221(1) of the Income Tax Act. The company sought protection against coercive recovery steps proposed by the AO for tax allegedly required to be deducted under Section 194J. The petitioner also requested a stay on these proceedings, which had been rejected by the AO under Section 220(6) without stating reasons.

 

Issues Involved

  1. Whether the petitioner is entitled to relief under writ jurisdiction against the AO's notice issued under Section 221(1).
  2. Whether coercive recovery steps by the AO can be stayed pending consideration under Section 220(6).
  3. The proper administrative remedy for challenging the AO’s refusal to grant a stay.

 

Petitioner’s Arguments

  • The petitioner contended that the AO issued notices and threatened coercive recovery without justifiable cause.
  • Requested that the court provide immediate relief under writ jurisdiction to prevent undue harassment.
  • Argued that the stay application under Section 220(6) was arbitrarily rejected without reasons.

 

Respondent’s Arguments

  • The AO argued that the order under Section 221 is appealable and that the petitioner must exhaust administrative remedies.
  • Maintained that the stay application rejection under Section 220(6) could be addressed by approaching the Commissioner of Income Tax (CIT).
  • Asserted that the writ petition could not provide relief beyond the statutory provisions.

 

Court Order / Findings

  • The High Court held that the order under Section 221 is appealable.
  • Petitioner is directed to approach the CIT under Section 220(6) for protection against coercive action.
  • The CIT is instructed to consider any such application within a week from filing.
  • Pending the CIT’s decision, no coercive action is to be taken by the AO if the petitioner approaches the CIT within three days.
  • The writ petition and pending applications were disposed of in these terms.

 

Important Clarifications

  • Writ jurisdiction cannot override statutory remedies; administrative remedies under the Income Tax Act must first be exhausted.
  • Interim relief can be granted only in limited circumstances, i.e., pending CIT’s decision on stay under Section 220(6).
  • Emphasizes proper procedural channels under Sections 194J (TDS on professional fees), 221 (notice for tax), and 220(6) (stay of demand).

 

Sections Involved

  • Section 194J – Tax deduction at source on professional fees.
  • Section 221(1) – Notice by AO for tax recovery.
  • Section 220(6) – Stay of demand application to CIT.

 

Link to download the order –
https://delhihighcourt.nic.in/app/case_number_pdf/2012:DHC:10534-DB/SRB29112012CW73412012_145139.pdf 

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