Agricultural Produce Marketing ... vs Union Of India (Uoi) And Anr.
2006 Latest Caselaw 571 Del

JUDGMENT

T.S. Thakur, J.

1. This writ petition calls in question the legality of a notice of demand and an order of attachment issued by the respondents for recovery of the outstanding income-tax dues from the petitioner. It is common ground that during the pendency of these proceedings, the respondents have through an order of attachment issued by them already recovered the entire amount of tax due and recoverable from the petitioner pursuant to the assessment completed against it. In that view, therefore, the petition has indeed become infructuous as all other issues raised become academic once the demands stand satisfied and the petitioner has assailed the assessment order in appropriate proceedings before the appellate authority concerned. All the same, since the submissions at some length were made on behalf of both the parties as regards the procedure which the respondents have followed in making the recoveries, we may briefly recount the facts leading to the present controversy.

2. Assessment for the assessment year 2004-05 was completed against the petitioner by the Assessing Officer by an order dated February 28, 2005. A demand notice based on the said assessment order was issued against the petitioner on February 28, 2005, demanding a sum of Rs. 88,75,155 within a period of 15 days from the date of service of the notice. On receipt of the said notice, the petitioner appears to have pointed out certain errors in the calculation of the amount recoverable from it. An application under Section 154 of the Income-tax Act sought rectification of the demand which was, upon consideration, allowed by the authority concerned resulting in the reduction of the demand from Rs. 88,75,175 to Rs. 81,30,000. Even this figure was not according to the petitioner correct. A second application seeking a further rectification was, therefore, moved which resulted in yet another correction reducing the demand to Rs. 73,61,853. An attachment order was three days later issued on March 23, 2005, attaching the petitioner's accounts and FDRs. Based on the said attachment, the outstanding amount was eventually recovered from the petitioner on March 24, 2005-- the day on which the present writ petition was filed.

3. The petitioner's grievance in the writ petition was that it had not received any demand notice subsequent to the second correction made by the Assessing Officer. It also found fault with the reduction of the period for the payment of the amount of tax from 30 days as stipulated under Section 220 of the Income-tax Act to 15 days. It was argued on behalf of the petitioner that the Assessing Officer even though competent to reduce the-notice period had not actually made any order or recorded any reason while reducing the period to 15 days.

4. Mr. Jolly has, by reference to the record, argued that the rectifications mentioned earlier did not affect the validity of the demand notice issued against the petitioner on February 28, 2005. He urged that the calculation forms in which the amount of tax was computed was a part of the demand notice and that any rectification in the calculation did not affect the validity of the said notice nor did it require the issue of a fresh demand after rectification. He drew our attention to an order dated March 22, 2005, passed by the Joint Commissioner of Income-tax recording the reasons why the period of 30 days was reduced to 15 days. It was submitted by him that the requirements of the proviso to Section 220 had been substantially complied with, inasmuch as there was an order in writing which was supported by reasons that according to Mr. Jolly justified the reduction.

5. This position was, however, disputed by counsel for the petitioner according to whom the reasons recorded for reducing the period were wholly unjustified and irrelevant. We are not, however, inclined to examine in the present proceedings the merits of the contentions urged before us on either side. We say so because the assessment order on the basis whereof the recovery proceedings were initiated and completed has been upheld by the appellate authority, namely, the Commissioner of Income-tax (Appeals) who has rejected the contentions urged on behalf of the petitioner that it was exempt from payment of income-tax on account of its being a local authority. On some other issues urged before him, the appeal appears to have been allowed. The net result, therefore, is that the petitioner has been held liable to pay income-tax although the actual amount of tax determined against it may undergo a further alteration entitling the petitioner to a refund.

6. It was next argued on behalf of the petitioner that although the current controversy has been rendered academic on account of the subsequent events, yet this Court ought to make certain observations about the procedure which the Income-tax Department has been following in the matter of making recoveries without affording to the petitioner-assessed the bare minimum time due to it for making the payment. It was urged that the respondents may even for the subsequent assessment years, adopt a similar hasty and slip-shod approach in making recovery by reducing the period for payment thereby causing prejudice to the petitioner.

7. The legal position regarding the competence of the Assessing Officer to reduce the period for payment of the outstanding dues is clearly stated in Section 220 of the Act. A plain reading of the proviso to Section 220 makes it abundantly clear that while the assessing authority has the power to reduce the period for making the payment, such reduction must invariably be supported by valid reasons to be recorded in writing. All that we need, therefore, mention is that whenever the competent authority invokes its powers of reducing the period stipulated under Section 220, it must take care not only to pass a proper order but also to support the same by cogent reasons. Beyond that, it is in our view, neither necessary nor proper for us to say anything for the present as the question whether a given order passed under Section 220 of the Act is or is not in accord with the standards prescribed under the said provision will have to be judged as and when the said question arises. It is premature for us at this stage to say anything about any order that the respondent may pass in future. So also the question whether the correction of the calculation form attached to the demand notice would itself result in the demand notice becoming ineffective to call for a fresh demand notice need not be determined in these proceedings. In an appropriate case where the issue arises for consideration, the court can suitably answer the said aspect also.

8. With the above observations, this writ petition is disposed of leaving the parties to bear their own costs.