1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 05.06.2015 CORAM HONOURABLE MR.JUSTICE T.RAJA W.P.No.15959 of 2015 M/s Kalapet Primary Agricultural Co-op. Credit Society Ltd., P-96 rep.by its Administrator, Sri A.Irysappan Son of Sri M.Adhimulam Kalapet Post Pondicherry 605 014 .. Petitioner -vs- 1. Income Tax Officer Ward-4 Pondicherry 2. Commissioner of Income Tax (Appeals)-15 121, Mahatma Gandhi Road Nungambakkam Chennai 600 034 .. Respondents Petition under Article 226 of Constitution of India, praying for issue of Writ of Certiorarified Mandamus, calling for records in PAN:AAAAK1570G dated 18.05.2015 relating to assessment year 2009-10 on file of first respondent and quash same and further forbearing first respondent from initiating or continuing with any proceedings for recovery of disputed demand pursuant to order of assessment in P.A.No./G.I.R.No.AAAAK1570G dated 10.03.2015 relating to assessment year 2009-10 passed by first respondent. For Petitioner :: Dr.Anita Sumanth For Respondents :: Mr.T.Pramod Kumar Chopda Senior Standing Counsel 2 ORDER This writ petition has been directed against impugned order dated 18.05.2015 passed by first respondent-Income Tax Officer, Ward-4, Pondicherry in PAN:AAAAK1570G relating to assessment year 2009-10, to quash same with further direction to forbear first respondent from initiating or continuing with any proceedings for recovery of disputed demand pursuant to order of assessment in P.A.No./G.I.R.No.AAAAK1570G dated 10.03.2015 relating to assessment year 2009-10. 2. Dr.Anita Sumanth, learned counsel for petitioner submitted that petitioner, being primary agricultural cooperative credit society, maintains regular books of accounts and has been filing returns of income regularly in terms of provisions of Income Tax Act within statutory period, hence, assessments were also completed by department with co-operation of petitioner. While so, when petitioner filed return of income claiming deduction under Section 80P of Income Tax Act for assessment year 2009-10, claim of petitioner was rejected holding that petitioner did not satisfy definition of 'agricultural credit society' set out in terms of Explanation to Section 80P(4) of Act. Yet another grievance of petitioner is that when impugned assessment order dated 10.3.2015 was passed under Section 143(3) effecting disallowance of Rs.91,92,883/- under Section 40(a)(ia) 3 for alleged violation of Section 194A and Rs.3,20,686/- and Rs.27,500/- as disallowances under Section 40(a)(ia) for alleged violation of Section 194H and Section 194J of Act, order of re-assessment under Section 143(3) read with Section 147 erroneously resulted in determination of income of petitioner at Rs.1,28,87,139/- and tax payable thereon at Rs.59,79,550/-. Aggrieved by same, appeal has been filed before second respondent- Commissioner of Income Tax (Appeals), Chennai and said appeal is pending after issuance of notice dated 4.2.2015. In this background, grievance of petitioner is that when petitioner is primary agricultural credit society and comes under exclusion of Section 194A(viia), disallowance brought under Section 40(a)(ia) is wholly unfounded. In any event issue raised in present writ petition has been decided in favour of assessee by jurisdictional bench of Income Tax Appellate Tribunal 'D' Bench, Chennai in I.T.A.No.197/Mds/2013 dated 11.2.2014 (Income Tax Officer, Ward-II(3), Coimbatore v. M/s Veerakeralam Primary Agricultural Cooperative Credit Society, Coimbatore) in respect of very same assessment year, therefore, assessing authority cannot pass assessment order nor refuse to grant stay during pendency of appeal, for simple reason that when petitioner, aggrieved by impugned order of reassessment dated 10.3.2015, has preferred appeal before Commissioner of Income Tax (Appeals), Chennai and along with appeal, when petitioner has filed petition 4 before assessing authority, first respondent herein under Section 220(6) of Income Tax Act on 15.4.2015 for being treated as 'not in default' during pendency of appeal before appellate authority, assessing authority arbitrarily passed order directing petitioner to pay 50% of demand raised for assessment year 2009-10 as preliminary measure even before disposal of stay petition. Such approach is clear violation of procedure and also running contrary to issue decided in favour of assessee by jurisdictional Bench of Tribunal as mentioned supra. 3. Continuing her arguments, Dr.Anitha Sumanth contended that in spite of bringing to notice of assessing authority that petitioner is falling within exclusion of Section 194A(vii)(a) being primary agricultural credit society and issue has been decided in favour of assessee by jurisdictional bench of Tribunal in I.T.A.No.197/Mds/2013 dated 11.2.2014, more particularly, that petitioner society does not have resources to make any portion of demand raised, assessing authority has neither considered same nor followed instructions of Central Board of Direct Taxes in File No.404/10/2009-ITCC dated 1.12.2009 affirming Instruction No.1914 dated 2.12.93, which mandates that stay of recovery is liable to be granted if issue covered by orders of superior authority, directly applicable to present case. In support of her submissions, she also brought 5 to notice of this Court various decisions of Income Tax Appellate Tribunal, Panaji and Chennai Benches in (1) I.T.A.Nos.1 to 3/PNJ/2012 dated 30.3.2012 (Deputy Commissioner of Income Tax, Central Cirlce, Panaji, Goa v. M/s Jayalakshmi Mahila Vividodeshagala); (2) in I.T.A.No.174/Mds/2013 dated 23.8.2013 (Income Tax Officer v. Kasipalayam Primary Agricultural Co-operative Bank Ltd.) and (3) in I.T.A.No.197/Mds/2013 dated 11.2.2014 (Income Tax Officer v. M/s Veerakeralam Primary Agricultural Cooperative Credit Society), for proposition that if assessee is admittedly not credit cooperative bank, but credit cooperative society, exclusion clause of sub-section (4) of Section 80P, therefore, would not apply. 4. Taking support from above decisions, it was contended that when petitioner had filed appeal against assessment order and same is also pending consideration before appellate authority, in meanwhile, as against demand of entire tax by first respondent, petition for stay was moved before first respondent-assessing officer seeking to grant order of stay of recovery till such time appeal is finally heard and disposed of by appellate authority. However, by communication dated 20.4.2015, petitioner was informed that stay petition would be taken up only subject to payment of 50% of tax demand at once or on proposal for making payment of demand in installments. It was also further informed that in case of 6 failure to respond to said communication within week, stay petition would be treated as rejected and necessary coercive measures would be taken to recover entire demand. learned counsel further submitted that aggrieved by demand of 50% tax as condition precedent even for consideration of stay petition, petitioner again approached second respondent- appellate authority seeking absolute stay of recovery proceedings pending appeal. When appeal/stay petition has been pending consideration before second respondent-appellate authority, first respondent has wrongly rejected stay petition by order dated 18.5.2015 directing petitioner to pay demand at once. On this basis, learned counsel sought indulgence of this Court for appropriate direction to appellate authority to decide appeal on merits, as otherwise irreparable loss would be caused to petitioner. 5. On other hand, Mr.T.Pramod Kumar Chopda, learned senior standing counsel for respondents submitted that writ petition cannot be entertained for simple reason that when order dated 18.5.2015 passed by first respondent is explicitly clear that mere pendency of appeal would not be ground for petitioner to escape from payment of disputed liability, it is not open to petitioner to bypass pending appeal to maintain present writ petition. learned senior standing counsel also submitted that if at all petitioner wants early disposal of matter, 7 direction may be issued to second respondent-appellate authority to take up stay petition and dispose of same on merits expeditiously. 6. Replying to said submission, learned counsel for petitioner requested this Court to direct second respondent-appellate authority to take up appeal itself in I.T.A.No.327/CIT(A)PDY/2013-14 for final hearing on merits expeditiously, as petitioner had already received notice dated 4.2.2015 fixing date of hearing on 16.2.2015, since adjourned to subsequent date. 7. Heard learned counsel on either side. 8. circular issued by Central Board of Direct Taxes in File No.404/10/2009-ITCC dated 1.12.2009 affirming Instruction No.1914 dated 2.12.93 clearly enlightens duty, responsibility and guidelines cast on assessing authority for staying demand. In this context, it is appropriate to extract relevant portions of Instruction No.1914 dated 2.12.93, as follows:- ''A. Responsibility (i) It shall be responsibility of Assessing Officers and TRO to collect every demand that has been raised, except following: 8 (a) Demand which has not fallen due; (b) Demand which has been stayed by Court or ITAT or Settlement Commission; (c) Demand for which proper proposal for write off has been submitted; (d) Demand stayed in accordance with paras B & C below. ..... B. Stay petitions (i) Stay petitions filed with Assessing Officers must be disposed of within two weeks of filing of petition by taxpayer. assessee must be intimated of decision without delay. (ii) Where stay petitions are made to authorities higher than Assessing Officer (DC/CIT/CC), it is responsibility of higher authorities to dispose of petitions without any delay, and in any event within two weeks of receipt of petition. Such decision should be communicated to assessee and Assessing Officer immediately. (iii) decision in matter of stay of demand should normally be taken by Assessing Officer/TRO and his immediate superior. higher superior authority should interfere with decision of AO/TRO only in exceptional circumstances e.g. where assessment order appears to be unreasonably highpitched or where genuine hardship is likely to be 9 caused to assesee. higher authorities should discourage assessee from filing review petitions before them as matter of routine or in frivolous manner to gain time for withholding payment of taxes. C. Guidelines for staying demand (i) demand will be stayed only if there are valid reasons for doing so. Mere filing appeal against assessment order will not be sufficient reason to stay recovery of demand. few illustrative situations where stay could be granted are-- (a) If demand in dispute relates to issues that have been decided in assessee's favour by appellate authority or Court earlier; or (b) if demand in dispute has arisen because Assessing Officer had adopted interpretation of law in respect of which there exist conflicting decisions of one or more High Courts (not of High Court under whose jurisdiction Assessing Officer is working); or (c) If High Court having jurisdiction has adopted contrary interpretation but Department has not accepted that judgment. ..... 9. careful reading of above guidelines clearly shows that it shall be duty of assessing authority to collect every demand which has not fallen 10 due or has been stayed by Court or Tribunal etc. It appears that jurisdictional Income Tax Appellate Tribunal 'D' Bench in I.T.A.No.197/Mds/2013 dated 11.2.2014 (Income Tax Officer, Ward-II(3), Coimbatore v. M/s Veerakeralam Primary Agricultural Cooperative Credit Society, Coimbatore), while dealing with similar issue, placing reliance on judgment of Gujarat High Court in case of Commissioner of Income Tax v. Jatari Momin Vikas Cooperative Credit Society Ltd., 2014 (2) TMI 28, has held as follows:- ''7. From above clarification, it can be gathered that sub-section (4) of Section 80P will not apply to assessee which is not co-operative bank. In case clarified by CBDT, Delhi Coop Urban Thrift & Credit Society Ltd., was under consideration. Circular clarified that said entity not being cooperative bank, section 80P(4) of Act would not apply to it. In view of such clarification, we cannot entertain Revenue's contention that section 80P(4) would exclude not only co-operative banks other than those fulfilling description contained therein but also credit societies, which are not cooperative banks. In present case, respondent assessee is admittedly not credit cooperative bank but credit cooperative society. Exclusion clause of sub-section (4) of Section 80P, therefore, would not apply. In result, Tax Appeals are dismissed. Revenue has tried to establish that assessee 11 although credit cooperative society is carrying on banking business and is thus not eligible. In our opinion, assessee is not cooperative bank...'' 10. above observation, prima facie, brings case of petitioner under guidelines-C(i)(a) for staying demand, which says that if demand in dispute relates to issues that have been decided in assessee's favour by appellate authority or Court earlier, demand will be stayed. While issue appears to be clear, this Court does not find any justification why assessing authority has not considered guidelines under Instruction No.1914 dated 2.12.93. Moreover, it is well settled legal position that all authorities, civil, criminal and judicial, coming within territory of High Court, shall act in aid of High Court. While so, assessing authority is bound by order passed by jurisdictional Tribunal without taking any stand that Tribunal or High Courts of other States are taking different view. 11. Be that as it may, when appeal has been filed by petitioner before appellate authority along with stay petition, keeping in mind that any further observation would have cascading effect on pending appeal of petitioner, with all hesitation, is restraining to express anything on merits, therefore, in fitness of things, this Court, accepting request made by learned counsel for petitioner for direction to dispose of main appeal 12 itself, as petitioner had received notice dated 4.2.2015, hereby directs second respondent-appellate authority to dispose of appeal in I.T.A.No.327/CIT(A)PDY/2013-14 on its own merits within period of three months from date of receipt of copy of this order. Needless to mention that till then, first respondent shall not proceed with recovery, as it is well settled law that during pendency of appeal before appellate authority, department is not entitled to initiate recovery proceedings. With above direction, writ petition stands disposed of. Consequently, M.P.No.1 of 2015 is closed. No costs. Index : yes/no 05.06.2015 Issue copy on 13.7.2015 ss To 1. Income Tax Officer Ward-4 Pondicherry 2. Commissioner of Income Tax (Appeals)-15 121, Mahatma Gandhi Road Nungambakkam Chennai 600 034 13 T.RAJA, J. ss W.P.No.15959 of 2015 05.06.2015 M/s Kalapet Primary Agricultural Co-op. Credit Society Ltd. v. Income-tax Officer Ward-4 Pondicherry / Commissioner of Income-tax (Appeals)-15