Amul Research and Development Association vs. ITO; 359 ITR 549 (Guj):
The assessee is a charitable trust which enjoyed exemption u/s. 11 of the Income-tax Act, 1961. For the A. Y. 2010-11 exemption u/s. 11 was denied by an order u/s. 143(3) of the Act and a demand of Rs. 1,41,07,755/- was raised. A period of seven days was granted instead of statutory period of 30 days from the date of service of the notice as prescribed u/s. 220 of the Act. Assessee preferred an appeal and also filed stay application before Commissioner(Appeals). In the mean time, the Assessing Officer recovered a sum of Rs. 1,39,70,275/- from the bank account of the assessee on 28th March, 2013.
The Gujarat High Court allowed the writ petition filed by the assessee, set aside the demand notice dated 13/03/2013, with a formal direction to the Revenue to refund the amount of Rs. 1,39,70,275/- by way of a cheque to be issued in favour of the assessee within two weeks and held as under:
“i) S/s. (1) of section 220 of the Income-tax Act, 1961, any amount otherwise than by way of advance tax, specified as payable in a notice of demand to be issued u/s. 156 of the Act, needs to be paid within 30 days of the service of the notice. However, the proviso to section 220(1) of the Act gives discretionary powers to the Assessing officer to reduce such period.
ii) Two conditions are required to be fulfilled before the Assessing officer resorts to this exception of the statutory period of 30 days. Firstly, he must have a reason to believe that the grant of the full period of 30 days would be detrimental to the interest of the Revenue and, secondly, prior permission of the Joint Commissioner requires to be obtained. The words “reason to believe” must have the same flavor as one finds in the case of exercise of powers by a reasonable man acting in good faith, with objectivity and neutrality based on material on record or exhibited in the order itself. The prior permission of the superior officer is to ensure that the powers are not exercised arbitrarily and there is a safeguard of a higher officer applying his mind independently to the issue in question when such belief is communicated by the Assessing Officer.
iii) If the demand is not likely to be defeated by any “abuse of process by the assessee”, belief cannot be sustained on the ground that availing of the full period would be detrimental to the interest of the Revenue.
iv) The reason given for reduction of the period for payment of taxes was that in the assessee’s place of assessment there was a budget deficit in the Income-tax Department. It was the budget deficit which was the very basis for making such a formation of belief. Another reason given was that the assessee had a rich cash flow and if the period of 30 days was reduced, the budget deficit would be met and the target set by the Department would be achieved.
v) The reasoning was contrary to the very object of introducing the proviso for giving discretion to the Assessing Officer. It clearly and unequivocally indicated that the Assessing Officer had completely misread the provision and his belief was neither of a reasonable man nor at all based on a rational connection with the conclusion of reduction of the period on account of it being detrimental to the Revenue.
vi) While issuing notice to the bank u/s. 226(3) of the Act for making payment, a notice has also to be given to the assessee which in this case was on the very day when the notice was issued to the bank. No opportunity had been given to the assessee for meeting such a notice issued to the bank. The sizeable amount of Rs. 1.39 crore had been withdrawn and deposited in the account of the Revenue on the very same day. Notice was an illusory and empty formality. This arbitrary exercise of withdrawal of amount from bank also required interference.
vii) Moreover, when the very action of the Assessing Officer was held to be contrary to the provisions of the law, the assessee’s not resorting to note (3) of the demand notice u/s. 156 of the Act or its having resorted to an alternative remedy was not bar to the court exercising the writ jurisdiction.”
