Recovery of tax: Attachment: Stay of recovery: Sections 220(1), 220(6) and 281B of Income-tax Act, 1961: Provisional attachment u/s.281B on 7-10-2011: Assessment order passed on 9-3-2012: Demand directed to be paid within 7 days instead of 30 days: Not proper: Application for stay of demand till disposal of appeal by CIT(A) rejected: Not just: High Court directed stay of recovery till disposal of appeal by CIT(A).

By an attachment order dated 7-10-2011, passed u/s.281B of the Income-tax Act, 1961 mutual funds of value Rs.36.54 crore were attached. The assessment order for the A.Y. 2010-11 was passed on 13-3-2012 raising a demand of Rs.36,56,61,776. Demand was directed to be paid within 7 days instead of 30 days as provided u/s.220(1) of the Act. The petitioner assessee filed an appeal before the CIT(A) and made an application u/s.220(6) of the Act dated 12-3-2012 for stay of demand till disposal of appeal by the CIT(A), which was rejected.

The Bombay High Court allowed the writ petition filed by the assessee and held as under:

 “(i) The provisions of section 220(1) stipulate that the amount of demand shall be paid within 30 days of the service of the notice. The proviso stipulates that where the Assessing Officer has any reason to believe that it would be detrimental to the interest of Revenue if the full period of 30 days is allowed, he may direct, with the previous approval of the Joint Commissioner, that the demand shall be paid within a period less than 30 days. The power to reduce the period under the proviso cannot be exercised casually and without due application of mind. The question as to whether it would be detrimental to the interest of the Revenue to allow the full period of 30 days has to be addressed. The reasons as well as the approval which has been granted by the Joint Commissioner must be made available to the assessee where a copy of the reasons is sought from the Assessing Officer.

(ii) In the present case, a provisional attachment has already been made on 7-10-2011 u/s.281B. The attachment was to the extent of Rs.36.54 crore. That being the position, evidently there would have been no basis for forming a reason to believe that if the period of 30 days was to be observed u/s.220(1), that would be detrimental to the Revenue. Merely because the end of the financial year is approaching that cannot constitute a detriment to the Revenue. The detriment to the Revenue must be akin to a situation where the demand of the Revenue is liable to be defeated by an abuse of process by the assessee. This is of course illustrative, for what is detrimental to the Revenue has to be determined on the facts of each case and an exhaustive catalogue of circumstances cannot be laid down. Consequently, we find that there is absolutely no justification for the Assessing Officer for making an order of demand directing the assessee to deposit the entire demand by 16-3-2012. The action is highhanded and contrary to law.

(iii) The Revenue is adequately protected by the attachment u/s.281B. No coercive steps shall be taken for recovery of the demand, pending the appeal.”