Recovery of tax pending stay application – Ss. 220(6) and 226(3) – A. Y. 2009-10 – Notice of demand – Attachment of bank accounts – No recovery permissible till stay application is disposed of – Pending stay application withdrawal of part of attached amount from banks is without jurisdiction and unlawful – Garnishee notice quashed – Direction issued to deposit withdrawn amount and dispose of stay application –

For the A. Y. 2009-10, the assessee had filed an appeal against the order u/s. 143(3) of the Income-tax Act, 1961 and had also made an application for stay of the demand u/s. 220(6) of the Act, inter alia on the ground that the issue arising in this case had been concluded in its favour by the decision of the Tribunal in its own case for the A. Y. 2000-01. The Assessing Officer attached the bank accounts of the assessee u/s. 226(3) of the Act and later withdrew amounts of Rs. 7,59,185/- and Rs. 34,265/- from the assessee’s bank accounts.

The Bombay High Court allowed the assessee’s writ petition and held as under:
“i) The right to file an application u/s. 220(6) of the Act is a statutory right available to an assessee. Any action to recover taxes adopting coercive means is not permissible till the assessee’s application for stay u/s. 220(6) of the Act is disposed of. An order disposing of the stay application must give some prima facie reasons in the context of the submission for stay made by the assessee.

ii) The Assessing Officer had only dealt with the assessee’s rectification application and not with the assessee’s application for stay. The third paragraph in that order calling upon the assessee to pay the entire demand within five days, could not be read as a communication rejecting the stay application filed by the assessee.

iii) In any case, the order was bereft of any consideration of the assessee’s primary contention that the issue in appeal is concluded in its favour by virtue of a Tribunal’s order for A. Y. 2000-01 in the assessee’s own case. Thus, the application for stay filed had not yet been disposed of by the Assessing Officer.

iv) Therefore, the action of the Assessing Officer in attaching the assessee’s bank accounts was without jurisdiction and bad in law. The notices u/s. 226(3) of the Act, issued by the Assessing Officer to the assessee’s bankers were to be quashed and set aside. The Assessing Officer was to deposit the amounts of Rs. 7,59,185 and Rs. 34,265 respectively in the assessee’s bank accounts and dispose of the assessee’s pending stay application in accordance with law.”