Facts of the Case

The petitioner, Shri Shyam Sales, approached the Delhi High Court seeking issuance of a writ of certiorari for quashing notices issued under Section 226(3) of the Income-tax Act, 1961, whereby the Income Tax Department had attached the petitioner’s bank accounts for recovery of outstanding tax demand.

The petitioner also sought directions to the Department to stay the recovery proceedings until the appeals relating to Assessment Year 2001-02 were decided and to withdraw the attachment notices. The petitioner had already filed an application dated 09.07.2004 before the concerned authority seeking stay of demand, but no decision had been taken on that application at the time of filing the writ petition.

Issues Involved

  1. Whether attachment of bank accounts under Section 226(3) of the Income-tax Act, 1961 could continue when the assessee's stay application was pending consideration.
  2. Whether the Court should interfere with recovery proceedings pending disposal of the stay application.
  3. Whether the Revenue should be directed to decide the stay application within a specified period.

Petitioner’s Arguments

  • The petitioner challenged the attachment notices issued under Section 226(3) of the Income-tax Act, 1961.
  • It was contended that a stay application concerning the disputed tax demand for Assessment Year 2001-02 had already been filed before the competent authority on 09.07.2004.
  • The petitioner argued that despite filing the stay application, no action had been taken by the Department.
  • The petitioner requested the Court to direct the Department to stay recovery proceedings until disposal of the pending appeals and to withdraw the attachment notices issued against its bank accounts.

Respondent’s Arguments

  • Counsel for the Revenue submitted that the petitioner’s stay application would be disposed of within four weeks.
  • The Revenue further stated that, in respect of earlier assessment years, stay had already been granted.
  • Therefore, according to the Department, no further judicial intervention was required in the matter.

Court Order / Findings

The Delhi High Court noted the statement made on behalf of the Revenue that the stay application filed by the petitioner would be decided within a period of four weeks.

The Court also recorded that, so far as the earlier assessment years were concerned, stay had already been granted by the Department.

Considering these circumstances, the Court held that no further interference was called for at that stage. Accordingly, the writ petition was disposed of.

Important Clarification

  • Mere pendency of a stay application may not automatically result in quashing of recovery proceedings through a writ petition.
  • Where the Revenue undertakes to decide the stay application within a reasonable period, the High Court may decline to interfere.
  • The Court may dispose of the writ petition after recording the Revenue’s statement regarding expeditious disposal of the stay application.
  • The decision reflects judicial restraint where an effective administrative remedy is already under consideration by the tax authorities.

Sections Involved

  • Section 226(3), Income-tax Act, 1961 – Recovery of tax by attachment of debts, including attachment of bank accounts.
  • Article 226, Constitution of India – Writ jurisdiction of High Courts

Link to Download the Order-https://delhihighcourt.nic.in/app/case_number_pdf/2004:DHC:19075-DB/BCP26072004CW118952004_125931.pdf

 

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