Facts of the Case

The petitioner, M/s Hind Pocket Books Pvt. Ltd., approached the Delhi High Court under Article 226 of the Constitution challenging actions taken by the Income Tax Department concerning recovery proceedings arising from an assessment order.

The respondent raised a preliminary objection regarding the maintainability of the writ petition. It was contended that the petitioner had an effective statutory alternative remedy available under the Income-tax Act.

The assessment order dated 12.10.2004 was admittedly appealable, and the petitioner had already preferred an appeal before the Income Tax Appellate Tribunal. The appeal was pending consideration. The petitioner had also filed an application before the Commissioner of Income Tax (Appeals) seeking stay of recovery of the disputed tax demand. However, the stay application had not yet been disposed of.

The petitioner expressed apprehension that encashment of the cheques deposited with the Department would render its appellate remedy ineffective.

Issues Involved

  1. Whether a writ petition under Article 226 is maintainable when a statutory appellate remedy is already available and has been availed by the assessee.
  2. Whether interim protection should be granted against recovery proceedings while the appeal and stay application remain pending.
  3. Whether the Income Tax Appellate Tribunal should be directed to consider a stay application expeditiously.

Petitioner’s Arguments

  • The petitioner submitted that an appeal against the assessment order was already pending before the Tribunal.
  • A stay application seeking suspension of recovery proceedings had also been filed but remained undecided.
  • Encashment of the cheques deposited by the petitioner would cause serious prejudice and practically frustrate the effectiveness of the pending appeal.
  • Interim protection was necessary until the competent appellate authority considered the stay request.

Respondent’s Arguments

  • The Revenue objected to the maintainability of the writ petition.
  • It was argued that the petitioner had an adequate and efficacious statutory remedy under the Income-tax Act.
  • Since the petitioner had already filed an appeal before the Tribunal, invocation of writ jurisdiction under Article 226 was not justified.
  • The dispute ought to be addressed through the statutory appellate mechanism provided under the Act.

Court Order / Findings

The Delhi High Court observed that the principal objection of the Revenue related to the maintainability of the writ petition in view of the availability of an alternative statutory remedy.

The Court noted that there was no dispute regarding the fact that the assessment order was appealable and that the petitioner had already filed an appeal before the Tribunal. The Court further noted that the petitioner’s grievance was limited to protection against recovery proceedings while the stay application remained pending.

Without entering into the merits of the assessment dispute or the controversies raised in the petition, the Court disposed of the writ petition with liberty to the petitioner to file an application seeking stay of enforcement and recovery of the tax demand before the Income Tax Appellate Tribunal within fifteen days.

The Court directed that if such an application was filed within the stipulated period, the Tribunal should consider and dispose of the same expeditiously and in accordance with law.

As an interim measure, the Court directed that the cheques deposited by the petitioner should not be encashed for a period of fifteen days from the date of the order.

Accordingly, the writ petition and the connected application were disposed of.

Important Clarification

  • Availability of an effective statutory appellate remedy generally discourages exercise of writ jurisdiction under Article 226.
  • When an appeal is already pending before the Tribunal, the High Court may decline to adjudicate the dispute on merits and instead direct the assessee to pursue the statutory remedy.
  • The Court may nevertheless grant limited interim protection to safeguard the effectiveness of the appellate remedy.
  • Temporary protection against recovery can be granted until the Tribunal considers the stay application.

Relevant Sections Involved

  • Article 226 of the Constitution of India
  • Provisions of the Income-tax Act, 1961 relating to statutory appellate remedies
  • Provisions governing appeals before the Income Tax Appellate Tribunal (ITAT)
  • Recovery and stay of tax demand pending appeal

Link to Download the Order

https://delhihighcourt.nic.in/app/case_number_pdf/2005:DHC:15403-DB/SK03032005CW4672005_150528.pdf

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