Dept hauled up for
“over-zealousness” and
“ham-handed” attempt to recover taxes
in violation of stay order. Tribunal is duty-bound to order
refund of such taxes
The AO raised a demand of Rs.210.57 crores by making
certain adjustments for the AMP expenditure incurred. This
was confirmed by the DRP. The assessee filed an appeal
before the Tribunal as well an application before the CBDT
under the Mutual Agreement Procedure (MAP) prescribed in
Article 27 of the India-USA DTAA. The assessee also filed a
stay application before the Tribunal. The Tribunal granted a
stay of the demand for a period of 180 days or disposal of
the appeal or of the MAP application, whichever is earlier.
It was provided that the assessee sought an adjournment,
the stay would be vacated. On the date fixed for hearing,
the assessee pointed out that the issue of adjustments to
the AMP expenditure was pending before the Special Bench in
L. G. Electronics (since
decided 152 TTJ 273) and so the appeal was adjourned. The AO
took the view that as the assessee had sought an
adjournment, the stay stood automatically vacated and so he
attached the assessee’s bank account. The assessee
filed an application u/s 151 of the CPC before the ITAT
seeking refund of the amount recovered by the revenue. The
Tribunal held that the adjournment was granted by it suo
motu in conformity with judicial discipline as the issue
was pending before the Special Bench. It held that the AO
had acted in violation of the stay order and directed him
to refund the amount collected. The Department filed a Writ
Petition to challenge the said order. HELD by the High
Court dismissing the Petition:
(i) A trivial adjournment, an overzealous revenue
department, compelled apparently by year ending revenue
collection targets, has led to this unnecessary litigation.
It is not a case where the assessee sought an adjournment
but one where the Tribunal chose to adjourn to await the
decision of the Special Bench. Apart from that the show
cause notice issued to the assessee does not refer to
vacation of the stay order but refers to admission or not
of the MAP application though that there was discussion
relating to vacation of the stay order during the personal
hearing. The AO should have been honest enough to issue a
show cause notice on the ground that the stay order stands
vacated. The vacillating stand of the revenue clearly
indicates a confused state of mind, apparently compelled by
the need to achieve targets fixed by superiors of the
department;
(ii) As regards the jurisdiction of the Tribunal to order
refund of the amount appropriated by the revenue, the
Tribunal has rightly held that it is empowered, in view of
nature of its jurisdiction, as well u/s 151 of the CPC to
order refund, as the stay order has not been vacated. The
power to ensure that its orders are not violated during
pendency of a lis are inherent in any Court or Tribunal. In
fact it is the bounden duty of the Tribunal to ensure where
its order is violated that the violation is adequately
redressed and money appropriated, is restituted. If such a
power is held not to be available to the Tribunal, its
interim orders would be flouted with impunity. If, the
revenue was of the opinion that the stay order has been
violated by the assessee or has been vacated, it should
have approached the Tribunal for clarification by way of an
appropriate application but instead proceeded in a
ham-handed manner, to appropriate this amount.
Note: This impliedly approves
RPG Enterprises 251 ITR 20 (Mum) (AT),
MSEB 81 ITD 299 (Mum) &
KLM
Royal Dutch Airlines 1 SOT 659 (Del) where the
Tribunal directed the AO to refund taxes illegally
recovered