Law:

Section:

Section 220 of the Income-tax Act, 1961 - Collection and recovery of tax - When tax payable and when assessee deemed in default - Assessment years 2007-08 and 2008-09 - Where assessee had shown its bona fides in paying substantial amount of tax liability, prohibitory order against it was stayed subject to condition of certain monthly payment towards outstanding income tax dues [In favour of assessee] The assessee challenged the orders issued by the Tax Recovery Officer under rule 26(1) of the Second Schedule to the Act, by which the creditors of the assessee had been restrained and prohibited from making payment of debts due and payable to the assessee on the ground that the assessee had to pay arrears of tax amounting to Rs. 97 lakhs together with interest under section 220(2). The revenue contended that it was compelled to issue the impugned prohibitory order since there was a default on the part of the assessee in complying with its agreed obligation to discharge the outstanding at the rate of Rs. 10 lakhs per month. The assessee contended that it had paid 37.75 per cent of total tax liability and therefore, there was no warrant for issuing garnishee notices to its customers. Held that both the assessments for the assessment years 2007-08 and 2008-09 were pending before the Commissioner (Appeals). Having taken into account the total payment made by the assessee, ends of justice would be met if the impugned orders were stayed conditional on the assessee making payment of Rs. 10 lakhs per month of the outstanding towards the liability to tax for the assessment years 2007-08 and 2008-09. This facility was granted to the assessee which came to be withdrawn as a result of the default. The assessee had shown its bona fidesin paying a substantial amount as noted earlier. Therefore, the prohibitory orders were stayed on the condition that the assessee would deposit an amount of Rs. 10 lakhs monthly towards outstandings payable on account of income tax dues. CASES REFERRED TO KEC International Ltd. v. B.R. Balakrishnan [2001] 251 ITR 158 (Bom.) JUDGMENT 1. The petitioner has instituted these proceedings under article 226 of the Constitution, inter alia, to challenge…

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