Grant of stay during lockdown times
The Hon’ble Mumbai Bench of the Income Tax Appellate Tribunal in hearing a stay petition via web based video conferencing in Stay Application No. 184/Mum/2020 dated 24th April 2020 in the case of Pandhes Infracon Pvt Ltd lifted the attachments/garnishee orders with the following directions:
“We find that in view of the attachment of asessee’s bank accounts and assessee’s debtors, the assessee is stated to be not in a position to perform these obligations. Given this situation, we are satisfied that this situation calls for our interference. In any case, even though we refrain from commenting upon merits of the case at this stage, we find that prima facie the assessee has an arguable case in appeal.
We have also taken note of the fact that the assessee has already paid his entire tax liability, and in case the assessee is to opt for Vivad se Vishwas Scheme, he will have nothing further to pay. In these circumstances, the legitimate interests of the revenue cannot be prejudiced by our grant of stay on the remaining outstanding dues which are primarily on account of levy of interest, and consequential levies. In view of the above discussions, as also bearing in mind entirety of the case, we deem it fit and proper to grant a stay on collection/ recovery of the outstanding demands of Rs. 2,91,05,660 till the disposal of appeal or till the end of six months from the date of this order – whichever is earlier, subject to the following conditions:
(a) Any amount available to the assessee, as a result of this stay order and as a result of garnishee proceedings being lifted, will be first used for making payments of overdue and current wages payable to the labourer working with the assessee, and for making payment of overdue and current salaries to its employees. The amount available, after this exercise, will be used for the purpose of carrying out construction activity as necessary for providing quarantine facilities, as directed by the Collector. Any surplus amount thereafter will be used for construction activities of the business. The assessee will give an undertaking to this effect in writing.
(b) The assessee will file a statement showing utilization of funds, so available to the assessee on account of the garnishee proceedings being lifted, within 15 days from the date of this order.
(c) The assessee will fully cooperate in expeditious disposal of this appeal on out of turn basis, on 8th June 2020, and will not seek any adjournment. All the requisite paper books etc will be filed sufficiently in advance.”
Thus in the instant case the ITAT granted stay to enable the assessee to meet-up the following obligations:
- Pay outstanding salaries to staff and labour;
- Construction work for providing quarantine facilities to state.
In the order there is neither mention of what sum is outstanding as payable as on date to the labour and staff with their respective names and what sum is available as on date in the respective bank accounts and dues from debtor being the State in this case.
And in respect of provision of buildings for quarantine purpose the requirement presupposes provision of partially completed building at the instance of the Collector and not any directions such as undertaking any construction. More so that is impossible given that all activities including construction are suspended during national lockdown and importantly in the absence of labour.
Mumbai in Maharashtra State is the most affected of Covid crisis. Whereas the intent in the order of the Tribunal is without any doubt quite justifiable but the implementation required by the order is undoubtedly not touching upon the cornerstone of most urgent problem to be addressed.
For instance the order does not so take into account what is the amounts payable to labour and staff respectively with complete details of their banks, telephone nos, address etc. The order does not have mention of what are the balances in the respective banks attached by the garnishee order. The order even does not so mention what is the amount due to the assessee from Malegaon Municipal Corporation as the assessee is given to have been a contractor for the State statutory authorities for carrying of construction for the poor and economically weaker sections of the society, under the Prime Minister Awas Yojna .
On the contrary the order granting stay recount what is amount due from assessee, what has he paid until now and what is remaining payable from it to the Government. The order gives an impression that the assessee has already paid his entire tax liability, and in case the assessee is to opt for Vivad se Vishwas Scheme, he will have nothing further to pay. In these circumstances, the legitimate interests of the revenue cannot be prejudiced by grant of stay on the remaining outstanding dues which are primarily on account of levy of interest, and consequential levies.
In all in all, in the above, the stay granting order in the virtual desire/expect the Central Government to pay for the labour and staff of the contractor assessee. That unfortunately is not the advisory of the Ministry of Labour and Employment, Government of India, in their communication dated 20/23rd March, 2020 which is heavily relied upon by the Tribunal in this matter.
In the right earnest the following would have served the good purpose and intent of the Tribunal and most importantly must be followed as the crucial parameter in grant of stay in all future hearing of stay applications by any judicial tax court:-
- Knowing complete details of current amounts due to all individual labour and staff – permanent and casual;
- Knowing what are the liquid assets held in the name of the company on current date including marketable securities, deposits under lien or otherwise etc;
- If the amounts shown as available as per 2 above are sufficient to pay the amounts as per 1 above then stay may be given.
The Tribunal did not do this basic exercise before grant of stay and rather insisted for a utilization statement on future dates. Given this difficult times where all the honourable citizens of our country and the Governments at the Centre and States have come closer in the fight against Corona and the intentions at large are doubtless it is very important for the judicial bodies to also protect the coffers of the revenue/Government in the grant of any stay of demand. It is here that the recent amendment made in Budget 2020 for payment of minimum taxes before seeking grant of stay may be insisted upon. The Tribunal in all fairness also may have insisted for 20% of outstanding amount in this case.
But most importantly the order set a precedence and in loud a message in as much as it reminds every employer in the country whether Indian or foreign to pay for the dues of its staff workers labour etc. in priority and without any deductions. And this direction per se must be followed in tooth and nail all across without citing any jurisdictional challenges.
- Gopal Nathani