IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM WEDNESDAY, THE 30TH MARCH 2011 / 9TH CHAITHRA 1933 WP(C).No. 5701 of 2011(K) -------------------------------- PETITIONER(S): ------------------- M/S. SOUTH KERALA CASHEW EXPORTERS, KILIKOLLUR, KOLLAM, REPRESENTED BY ITS PROPRIETOR, A.A. SALAM. BY ADVS. SRI.ANIL D. NAIR SRI.J.R.PREM NAVAZ SMT.NIVEDITA A.KAMATH RESPONDENT(S): -------------------- 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM. 2. THE COMMISSIONER OF INCOME TAX (APPEALS)-III, ERNAKULAM. BY ADV. JOSE JOSEPH, SC. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 30/03/2011, ALONG WITH WPC NO. 5761 OF 2011 WPC NO. 5740 OF 2011 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: svs. C.K.ABDUL REHIM, J ----------------------------------------------- W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 ----------------------------------------------- Dated this the 30th day of March, 2011. J U D G M E N T The petitioners in W.P(C) Nos.5701/2011 and 5761/2011 are the two proprietory concerns. The common proprietor of those concerns, is a trustee of the trust, who is the petitioner in W.P(C) No.5740/2011. The trust in question is running a Hospital and a Medical College and its income is exempted under the provisions of Section 10(23-c) (vi) of the Income Tax Act from the assessment year 2008- 09 onwards. Consequent to a search and seizure conducted under Section 132, on 6.1.2009, assessments were completed against the petitioner trust under Section 153A r/w Section 143(3) of the Income Tax Act, for the years 2004-05, 2007-08, 2008-09 and 2009-2010. With respect to the firms in W.P(C) No.5701/2011 and 5761/2011 protective assessments were completed as a consequence, with respect to the years 2003-04 to 2009-2010. W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 2 2. Statutory appeals were filed against the assessments in all the three cases, before the 2nd respondent. Through Ext.P12 in W.P(C) No.5740/2001 and through Ext.P17 in the other two cases, the 2nd respondent appellate authority had dismissed the stay petitions filed along with the appeal. The request for having priority hearing of the appeals were also declined. The petitioners are challenging the interim order issued by the 2nd respondent in all the three cases. 3. The impugned assessments were challenged before the appellate authority on various grounds. While considering the interim applications, the petitioners have pointed out that the assessments are highly erroneous and the assessments were finalised without proper consideration of the explanations offered. In all these cases, the petitioners have pointed out that the assessment is high pitched and the tax amount raised is very huge. It was also contended that the petitioners are incapable of paying even W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 3 a small portion of the demand. In the case of the trust it was specifically pointed out that due to financial stringency the trust is even not in a position to carry out its objectives of imparting medical education to about 100 students and is also not in a position to pay salary to the Doctors and Para- Medical staff who were engaged in running the Hospital. But the interim applications were dismissed by the 2nd respondent finding that the petitioners have not filed its updated statements of financial affairs to prove their incapacity in paying the amounts. The 2nd respondent further observed that, “other averments made regarding assessments being grossly erroneous cannot be verified at this stage”. On the basis of such finding the appellate authority found that stay of recovery of amounts could not be granted. Regarding the request for early disposal of the appeals, it was observed that, in view of the CBDT's action plan, which is only to dispose of high demand appeals filed upto 31.3.2010 on priority basis before March 2011, the W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 4 request could not be allowed. 4. Learned counsel for the petitioners raised various contentions to point out that the attitude taken by the appellate authority is highly misconceived and it is totally against the guidelines issued by the CBDT with respect to disposal of stay petitions. The petitioner relies on various decisions reported in N.Ragan Nair V. Income Tax Officer & another [1987(165) ITR 650], Valvoline Cummins Ltd. V. Deputy Commissioner of Income Tax & others [2008 (307) ITR 103], Commissioner of Income Tax, Kerala V. Cochin Company (Pvt) Ltd. [1976(104) ITR 655] in support of their contentions. The petitioners further point out that with respect to protective assessments it is settled position in law that there cannot be any recovery of tax and interest. However, it is contended that the denial of stay, pending disposal of the appeal, will cause severe prejudice and the same will defeat the proceedings in the appeal itself. It is also contended that W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 5 huge demand based on the high pitched assessments could not be met with, considering the financial situation. It is urged that the reasoning mentioned by the appellate authority is totally baseless and that the rejection is made in a mechanical manner without any proper application of mind and without any due advertance to the grounds raised in the appeal. Under such circumstances the petitioner seeks interference of this Court. 5. Heard standing counsel appearing for the respondents. It is contended that huge amounts is under demand by virtue of the assessments. It is further contended that disposal of the appeal may take considerable time since voluminous records and documents need be perused meticulously. 6. On consideration of the facts and circumstances attendant in these cases, as well as on consideration of the rival submissions, I am of the view that dismissal of the stay petitions is totally unjustified and unreasonable. On W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 6 appreciation of the grounds enumerated for dismissal, it is evident that the appellate authority has not made a proper application of mind and failed in evaluating merits of the grounds raised in appeal. It is not evident as to whether the appellate authority required the appellants to produce any proof regarding the financial status. Going by the settled precedents which prescribe the parameters to be followed by the statutory appellate authorities while dealing with interim applications, the orders which are impugned in these writ petitions could not be termed as sustainable under law. It is also evident that a proper application of the guidelines issued by the CBDT in its real perspective was not done. Under such circumstances I am inclined to set aside the interim order impugned in this writ petitions. 7. However, on considering the factual aspects, I am of the view that remitting of the matter to the appellate authority for passing fresh interim order will only help in multiplying proceedings. On the other hand, I am of the W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 7 view that ends of justice will be achieved, if the appellate authority is directed to dispose the appeals itself on an early basis, and till then to make interim arrangements subject to conditions to be imposed. 8. Therefore, these writ petitions are disposed of directing the 2nd respondent appellate authority to consider and dispose of the statutory appeals (Exts.P6 to P9 in W.P (C) No.5740/2011, Exts.P8 to P14 in other two cases), as early as possible, at any rate within a period of six months from the date of receipt of a copy of this judgment. 9. Till such time the appeals are disposed of as directed above, recovery steps for enforcement of the demand initiated pursuant to the assessments concerned, shall be kept in abeyance, subject to condition of the petitioners remitting a sum of Rs.3 crores in 3 (three) equal monthly instalments, falling due on or before 30.4.2011 and on or before the last day of the two succeeding months thereafter. W.P(C) Nos.5701/2011, 5740/2011 & 5761/2011 8 10. It is made clear that on the event of default in payment of any one of the instalments, the respondents will be free to proceed with further steps of recovery. C.K.ABDUL REHIM JUDGE ab