In a very fine ruling the Mumbai Bench of the Tribunal in the case of RPG Enterprises Limited v. Dy. CIT (251ITR20) came down heavily over an unfair headstrong & enthusiastic action by an assessing officer in recovering monies out of assesses bank account by not following the procedures established by law. The Bench concurred the fact that by such an action the taxpayer has suffered humiliation and has been deprived of remedies available to it under law. In so holding the Hon’ble Judicial Member, M A Bakshi pronounced, showing regrets from the revenue action, the following golden words: –
“ We consider our duty to arrest the wrong so that the taxpayers’ confidence and faith in the rule of law is not shattered.”
In this case the assessment got completed on 15.03.99 raised a demand of RS. 19L. Quite naturally the assessee went in appeal and requested the AO to hold on till the disposal of appeal. The order of Commissioner (Appeals) dated 24.02.2000 upholding the action of the AO was received on 07.03.2000. The AO wrote a letter dated 16.03.2000 requiring deposit of tax within three days of receipt of such letter. Such letter dated 16.03.2000 was received on 27.03.2000 thereby demanding payment by 30.03.2000.
Taking immediate action the assessee filed an appeal to the TAT on 27.03.2000 itself and moved an application for stay to the Commissioner (Admn.) with an intimation of such action to the AO. On 29.03.2000 the assessee was informed by the AO that the stay petition to the CIT is rejected. In an ironical act the AO even before the actual receipt by the assessee of such rejection of stay at about 5.55 pm withdrew the tax from the assesses bank account in a so called exercise of powers u/s 226(3) of the Income tax Act, 1961.
After hearing arguments of both sides the Bench laid down the following established procedures that must be adhered to by the revenue officer(s) in the disposal of stay petitions and subsequent resulting action : –
a) That when an application for stay of recovery was pending before the Commissioner of Income tax, no action could be taken for recovery of the disputed demand;
b) That the assessing officer cannot resort to any coercive action before the expiry of period prescribed in the notice;
c) That the Commissioner of Income tax would be wrong if he/she disposes of the stay application without giving an opportunity of being heard to the assessee;
d) That the recovery of the disputed demand by resorting to coercive action even before the expiry of the statutory time prescribed for appeal to the Tribunal would be illegal;
e) That the Commissioner of Income tax would be wrong if he/she disposes of the stay application without passing a speaking order narrating precise facts of the case and the reasons for the exercise of discretion;
f) That the assessee is entitled to refund of the amount collected in an unfair manner like in this case of complete misuse of powers by an assessing officer. This would perhaps be a unique case where such a direction is ever given.