Is that the Constitution of India only empowers the Hon’ble Supreme Court and the High Court to Stay the demand as no provision of the Income-tax Act, 1961 so permits?

In the first place, it may be pointed out that there are various provisions for granting Stay under the Income-tax Act. More particularly,

Sec. 220(3): Where the Assessing Officer may extend the time for the payment or allow payment by instalments subject to imposition of conditions. ITO vs. Gwalior Rayon (1975) 101 ITR 457.

Sec. 220(6): Prescribes the circumstances that on an application made to the A.O. The AO may in his discretion, treat the assessee as not been on default in respect of the amount in dispute in appeal, even though the time for payment has expired and can Stay the demand pending the disposal of the appeal.

CIT (A) has also got powers to grant Stay: Prem Prakash Tripathi vs. CIT 208 ITR 461 (All). and Paulsons Litho Works vs. ITO 208 ITR 676 (Mad).

The assessee can also approach the Commissioner of Income-tax having jurisdiction over the assessee and file an application for Stay.

Moreover, where an appeal is pending before the Tribunal, the assessee can approach the Tribunal for Stay of demand under section 254(2A). The first proviso provides that where an order of Stay is made in respect of any appeal pending before the Tribunal, the appeal shall be disposed of within a period of 180 days.

The power to grant Stay by the Tribunal is wide enough. Analysing the powers of Tribunal under section 254 the following propositions arise:

1)

Tribunal can exercise powers of civil court and pass orders in the nature of mandatory/directions to Income-tax Department to refund/return amounts forcibly recovered during the pendency of Stay petitions.

2)

The Tribunal can also direct that by way of Garnishee Order issued u/s. 226(3) encashing fixed deposits of the assessee held in the bank, the amount taken without due process of law can also be ordered to be refunded;

3)

The Tribunal has also the powers to direct that where an appeal is pending, the assessee shall not be treated as assessee-in default.

These propositions have been laid down in the case of Western Agencies (Madras) Ltd. vs. JCIT (2003) 86 ITD 462 by the Madras Tribunal.

Attention is also drawn to the decision of ITO vs. M. K. Mohammed Kunhi 1969 71 ITR 815 (SC) for the proposition that sec. 254 grants by implication power to Tribunal for Stay recovery proceedings pending appeal before the Tribunal. However, the Stay should be granted only in appropriate cases where Tribunal is satisfied that the continuance of recovery proceedings would frustrate the entire purpose of appeal.

Thus the assessee should first exhaust the remedies before the appropriate authority. In those cases where there is no appeal pending before the Tribunal and where the assessee is facing a situation where disproportionate Notices of demands are issued, where the I.T. Authorities are forcing recovery of the amounts or where bank accounts are attached, or where prohibitory orders are passed or Garnishee orders have been pressed into service, the assessee could definitely invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution and file a Writ Petition in the High Court. If the High Court refuses to entertain the Writ Petitions, then the assessee can approach the Supreme Court under Article 226 by filing Special Leave Petition.

Can a Writ Petition be filed against arrest and detention also, or only for Stay of demand?

Section 222(1)(c) empowers the TRO to arrest the "Assessee in default" and detain him. If the arrest is illegal and unjust, then a writ would lie against such action. Though, by and large, writ petition is filed for stay of recovery, an assessee has right to approach the High Court by way of writ petition for prevention of the arrest and/or detention where it is not justified in law. Arrest and detention, as a mode of recovery, is resorted to only as a last option and as such, the cases of arrest and detention in respect of recovery are very rare. Accordingly, most of the writ petitions pertaining to recovery proceedings are filed for stay of demand and very few for prevention of the arrest.

Any form is prescribed for filing a Writ Petition?

No. There is no specific form prescribed under the High Court Rules as regards the filing of a Writ.

However, the important points which are required to be considered while drafting a writ petition are:

Title and parties to the petition.

The brief facts must be narrated.

Grounds must be specified with legal propositions and case laws.

Orders which are sought to be challenged must be clearly specified, i.e. the impugned orders or Notices of demand, or attachment Notice under section 226(3) should be treated as being bad-in-law, unenforceable and one that deserves to be set aside and quashed.

Exhibits must be attached with the Writ Petition.

There must be a pleading that the petitioners have not filed any other petition either in this Hon’ble Court or in the Hon’ble Supreme Court of India in respect of the subject matter of the petition.

There must be a clause that the petitioners have no other alternative or efficacious remedy, other than to approach this Hon’ble Court in its writ jurisdiction.

That the petitioners have paid fixed Court fee. It may be noted that the Court Fee is Rs. 250 per petitioner.

Clause regarding jurisdiction to hear the matter.

Prayers must be clearly spelt out and a specific prayer for ad-interim and interim reliefs must be specified.

Verification clause must be as per Form 3 in O.S. Original Side Rule Book.

The petition must be accompanied by Vakalatnama authorizing the advocate to act, appear and plead for the petition.

There must be memorandum of registered address.

A list of documents on which the petitioner will rely upon should be annexed.

All relevant documents, orders, agreements, applications etc. should be made exhibits.

An affidavit of the petitioner should be filed briefly stating the facts and should contain a pleading that no harm, loss or prejudice will be caused to the respondents, if the reliefs prayed for in the petition are granted in favour of the petitioner.

It must also be stated that balance of convenience is also in favour of the petitioner.

The last thing that is required to be given is, certificate of the advocate stating that the writ petition should be placed before the Division Bench hearing tax matters.

It may be pointed out that in the very beginning:

Synopsis is given along with chronological table.

In brief points to be urgent must be specified setting out legal propositions.

Acts, Rules and Circulars including Notifications which would be relied upon should be given and list of case laws should also be furnished.

As per Circular dated 17-4-2001 of High Court:

"The jurisdiction is to be determined on the basis where the assessee is being assessed and not the order passed by the Tribunal or CIT (A)".

As per Circular/Notification regarding the places where writ petition could be filed the list of Benches and places covered thereunder is as follows :

Goa Benche has jurisdiction over the State of Goa.

Whether a Writ Petition is heard in general by a single Judge or larger bench?

All Writ Petitions concerning taxation matters are heard only by a Division Bench of two judges. Reference is invited to Rule 636 of Chapter XXXIII of High Court (Original Side) Rules, 1980. Under the said Rule, lists of matters are given which specify matters to be hear by a single Judge. In the said list, there is no mention of Income Tax or any other Taxation Laws.

It is provided in the proviso to the said Rule that all matters not specified above would be heard by a Division Bench of two Judges. Hence, all matters concerning Income Tax or any taxation matters including Wealth Tax, Interest Tax, Super Tax, Expenditure Tax, Sales Tax, Excise Duty and Custom Duty would be heard only by a division bench of two Judges.

It is in this connection, that the certificate of the advocate accompanying the Writ Petition certifies that as per amended Rules 636 (lb) of the Original Side Rules—the Writ Petition be placed for hearing before the Division Bench hearing tax matters. Incidentally, similar reference is also to be found in section 260B and section 259 of the Income-tax Act, that the matters concerning tax and appeals/ references to be heard by Division Bench of two Judges.

What is the usual minimum time gap between filing of the writ petition and commencement of hearing? Can the High Court be requested for an "Out of turn hearing where the demand is very high?

Normally, after the petition is filed, objections are to be removed and then the petition is numbered. It is required to effect service on all the respondents. However, the most important respondent is the Union of India where the service is made to Advocate and Solicitor of Union of India.

After the petition is numbered, it will come up on Board "For Admission". The normal time gap between the filing and the commencement of hearing would be between 4 and 6 weeks. Sometimes, it could be up to 8 weeks.

If there is some urgency, or there is imminent danger to property, say for example, when property is attached and is to be put for auction sale or where bank accounts are attached and there is threat that monies would be recovered or taken away from the bank account or where any coercive measures are adopted or even where there is apprehension that there will be grave and serious hardship to the petitioner, in such exceptional circumstances, the High Court can be requested to take up the petition at an early date.

This is done by filing a precipie by the advocate of the petitioner to produce records and proceedings and the petition before the Hon’ble Court. The Court upon being satisfied as regards the urgency and the gravity of the situation may in its discretion fix up the matter for hearing out of turn at the earliest.

It may be noted that in some very exceptional circumstances where, for example, there is proclamation of sale, that the Court may allow the hearing even on Lodging No. of the petition;

However, it is important that all the respondents including the Union of India must be served before the petition comes up for hearing.

In this context, I would like to point out one interesting judgment in the case of State Bank of Bikaner and Jaipur vs. Union of India (2003) 132 Taxman 587 (Raj). In this case, the grievance of the bank was that Income-tax Department was not deciding its appeals expeditiously.

It therefore filed writ petition and also filed instant special appeal for hearing the appeals out of turn.

In this case, the Court held that such a writ petition is not maintainable. However, it directed the Income Tax Department to decide the appeal of the bank within a period of three months from the date of the receipt of the copy of the order. The Court further observed that the bank had without any legitimate reasons filed the writ petition to expedite appeals pending before CIT(A). The Court awarded costs by observing that "Litigation is not a luxury, fun or amusement."

Can a Writ Petition be filed even before the Assessing Officer is requested for Stay under sec. 220(3) where the assessee is apprehending coercive action on the part of the Assessing Officer for recovery?

In the first place after an assessment is completed, the AO along with the Assessment Order will issue Notice of Demand under section 156 of the Income-tax Act. Normally, the time for filing the appeal before the CIT(A) and to pay up the demand is 30 days.

In many cases, the assessee files an Appeal in Form No. 3 before the CIT(A) specifying the grounds of appeal and the Statement of facts. In the meantime a Stay Application is filed before the Assessing Officer. Section 220(3) speaks about extension for the time limit for making the payment. But the more important section under which an Application for Stay to the AO should be made is section 220(6) of the I.T. Act.

In a Stay Application before the Assessing Officer, it is pointed out that the demand be kept in abeyance pending the hearing and final disposal of the appeal by the CIT(A).

In some circumstances, some down payment is insisted by the Assessing Officer. Stay Applications are normally rejected summararily by the Assessing Officer without assigning any specific reason or without giving any opportunity of being heard to the assessee. A normal rejection letter would specify that it is not possible to keep the demand in abeyance till the disposal of appeals and that the same is rejected in view of CBDT Instruction No. 19l4 dt. 02.12.1993 (Refer Page 76 of this Issue) and that the assessee is directed to make the payment of demand at an early date and to produce proof thereof.

There are number of instances where rejection of Stay Application is made by the Income-tax Authorities without giving proper reasons. Also Garnishee Orders are issued to the assessee bankers. In such circumstances, it would be advisable to file a Writ Petition to quash the order of rejection of Stay and the Garnishee Notice.

Attention is invited to the decision in KEC International Ltd. vs. B. R. Ba1akrishnan & Ors. (2001) 251 ITR 158 (Bom). In this case the Bombay High Court has led down various parameters which are reproduced.

"Parameters:

While considering the Stay Application the authority concerned will at least briefly set out the case of the assessee.

In cases where the assessed income under the impugned order far exceeds returned income, the authority’ will consider whether the assessee has made out a case for unconditional Stay. If not, whether looking to the questions involved in Appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order.

In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit.

The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order.

We clarify that if the authority concerned complies with the above parameters while passing orders on the Stay Application, then the authorities on the administrative side of the Department like respondent No. 2 herein need not once again give reasoned
order.

Thus since certain guidelines/modalities have been laid down by the Courts, in my opinion before filing a Writ Petition at least Stay Application must be filed. There may be situations where the Assessing Officer may not pass any orders on the Stay Application, which could compel the assessee to approach the High Court by filing Writ Petition. However, in its extraordinary jurisdiction under Article 226 of the Constitution of India and its discretionary powers in only very rare and exceptional circumstances, a Writ would lie, but it is necessary that at least Stay Application should be made which is not disposed of.

Can the AO start recovery proceedings pending Writ petition or he has to wait till the disposal of the Writ Petition?

When a writ is filed, it is advisable that a letter is written by the Advocate of the Petitioner informing that the writ is filed and that the matter is now seized with the Court.

A copy of the Writ Petition is also served upon the Assessing Officer. Thus the AO is aware that the subject matter is now before the High Court.

However, it may be noted that the AO normally does not take any action where a Writ Petition is filed in the Court. However, it is advisable to take an ad interim injunction so that the AO is prevented from proceeding with the recovery of the demand. It is not necessary that the AO has to wait till the final disposal of Writ Petition. Any order of the Court or even an interim injunction granted on admission, restraining the Assessing Officer from recovering or from taking any coercive action is sufficient.

But a mere filing of the Writ Petition and keeping the matter pending without any hearing or where the assessee remains complacent and does not take any action for hearing of the Petition, then the Assessing Officer would be justified in pressing for recovery on the ground that mere filing of a writ petition without any order or relief or injunction, is of no consequence.

Is the filing’ of the Appeal u/s. 260A a pre-condition for filing a Writ Petition?

In fact if an Appeal is filed under sec. 260A then there is an absolute bar for filing of Writ Petition.

It is settled law that when a right or liability is crept by Statute which prescribes the remedy or procedure for enforcement of a right or liability, resort must be made to that particular remedy before seeking the discretionary remedy under Article 226. Based on the above propositionary where a Tax Appeal under section 260A is filed in the High Court on the same subject matter, a Writ Petition cannot lie.

When the litigant has statutory remedy of assailing the order of I. T. Authorities by filing an Appeal, it could nor bypass such remedy and take recourse to the proceedings under Article 226.

In Seth Ratan Chand vs. Pandir Durga Prasad, AIR 2003 SCW 3078 the Supreme Court held that when an Appeal is filed an Writ Petition on the same subject matter is also filed, such a course Metropolitan of action would defeat the provisions of the Statute which provide for certain conditions for filing the Appeal. In Bombay Region Development Authority vs. Gokak Patel Vallkart Ltd. (1995) 1 SCC 642 it was held that Writ Petition filed during the pendency of Petitioner’s Appeal before a statutory authority is not maintainable. In view of the above, settled legal position, if an Appeal is pending u/s. 260A a Writ Petition on the same subject matter would not lie.

While deciding the Writ Petition, which are the aspects that the High Court generally takes into account? For example, co-operation extended by the assessee to the department till filing of the Writ Petition, financial condition of the assessee, etc.

The Court will go strictly as per the merits of the case. Writ and discretionary jurisdiction of the High Court to prevent miscarriage of justice. Question of financial status or co-operation are not material criteria.

In fact, the Court would normally look into the fact whether the impugned order is time barred and the proceedings and action initiated against the assessee are null and void and whether they deserved to be quashed. The Court would look into the overall position on the basis of the fact that whether there was total lack of jurisdiction on the part of the Income-tax Department to issue the impugned Order. The Court may also examine the justification and the nexus between the materials and the order and would decide whether the impugned action justifies quashing of the demand. The Court may further direct the I.T. Department to give effect to certain directions.

It may be noted that normally the Court would issue:

a writ of certiorari under Article 226 calling for the records of the Petitioner’s case and after examining the legality and validity thereof, quash and set aside the impugned orders;

The Court may also issue a writ of mandamus directing the Income Tax Authorities not to take any action in furtherance of the recovery of the demand. The Court may further Stay the demand; 1

The Court may issue writ of prohibition prohibiting the Assessing Officer from taking any further action for recovery or may pass suitable order for releasing attachment orders on the Bank Accounts.

Can the High Court direct the CIT and CIT(A) to dispose of the Stay Application?

Yes. If proper procedure has not been complied with by the Assessing Officer or by the CIT, the High Court can definitely direct that the said Application of Stay to be disposed of in accordance with law and based on the parameters laid down in KEC International Ltd.’s case (2001) 251 ITR 158 (Bom).

Even recently, the Bombay High Court in the case of United Riceland Ltd. vs. DCIT & Ors., Writ Petition No. 32 of 2004 by its Order dated 2l-l-2004 issued suitable directions.

It may further be noted that very often Stay Applications are disposed of by the Assessing Officer by (i) without giving proper opportunity to the assessee of being hear; (ii) without a speaking order; (iii) without giving any justifications or reasons as to why the Stay Application is rejected; (iv) without considering the merits and the overall circumstances and totality of situation; (v) the Orders are issued mechanically and in a routine manner.

The Courts have also heard that hearing must be adequate and "effective" and shall not be "an empty formality": Mustafa Ummar vs. Appropriate Authority (2002) 254 ITR 134 (Ker).

Normally a direction would not be issued to the CIT(A), but the Court may in certain cases direct that the assessee should take steps to get the Appeal pending before CIT(A) disposed of expeditiously.

Can an assessee file an SLP before the Hon’b1e Supreme Court, if his Writ Petition is dismissed by the High Court?

Yes. A Special Leave Petition under Article 136 of the Constitution of India can be filed in the Supreme Court against the Judgment and Order passed by the High Court in the Writ Petition.

It may be noted that the Special Leave Petition (SLP) is confined only to the pleadings before the Court whose Order is being challenged. No additional facts, documents or ground can be taken up in the SLP. Only the documents/ Annexures which ware already before the High Court are to be annexed to the Petition.

The SLP is basically based on substantial questions of law which are raised and on the grounds urged in the Petition. Normally, an SLP would contain the following:

Office report on limitation;

List of dates and events;

Impugned Order of the High Court;

Special Leave Petition with Affidavit land

Various relevant annexures.

Contents of the Petition would include the following:

Comments on impugned Order of the High Court;

Questions of Law of public importance arising for consideration;

Declaration in terms of Rule 4(2) that no other Petition seeking leave to appeal has been filed;

Declaration in terms of Rule 6 of the Supreme Court Rule; that the
annexures are true copies and forms part of record of the case in the High Court;

Grounds;

Grounds for interim reliefs;

Main prayers.

Can the Court award costs in the Writ Petition?

A Writ Petition is a constitutional remedy available under Article 226 in certain cases. The Court may award costs depending upon the facts and circumstances.

In this connection, attention is drawn to the decision in Chiranji Lal Tak vs. Union of India (2001) 252 ITR 333 (Raj), where AO had initiated action for TDS which compelled the assessee to file a Writ Petition. The AO withdrew the Order after sometime. The Petitioner therefore, asked for costs which was contested by the Revenue. The Court held that Writ Petitions are filed by citizens against the Government for redressal of grievance and often incur heavy costs on themselves.

In this case, looking at the situation and the fact that the AO had realised the mistake and withdrawn the impugned Notice, cost of
Rs. 13,000 was awarded. Even where costs are awarded by the Court, they are often a token cost. In normal circumstances, Courts normally pass an order that there would be no orders as to costs.

The general rule in Civil Law is that, cost should follow the event. Some times exemplary costs are also awarded but that would depend upon the facts and circumstances of the case.

Which documents / papers an assessee planning to file a Writ Petition should keep ready?

This would depend on a number of factors, but the relevant documents would be:

Assessment orders and any other orders passed;

Notice of demand u/s. 156;

If re-assessment is challenged, then Notice u/s. 148;

Computation of income;

Application for keeping the demand in abeyance;

Order on rejection for Stay of demand;

Notice u/s. 226(3) issued to the Bank by the I. T. Authorities attaching Bank A/c;

Communication from Bank intimating attachment of Bank A/c.

It may further be pointed out that in the Writ Petition there is also "List of Documents relied upon by the Petition which is attached". This would include copies of all Exhibits, Applications, Demands, Appeals, correspondence ensuing and any other documents with the permission of the Court. It would be advisable to have all relevant documents annexed to the Writ Petition.

What is the time limit to file the Writ Petition?

There is no time limit prescribed for filing Writ Petition. It is advisable that a Writ should be filed expeditiously since it is invoking Extraordinary Jurisdiction of the High Court. It must be clarified that there is no time limit like in Appeals for filing a writ, but it must be filed within a reasonable period of time from the date of the impugned Order/Notice which is sought to be challenged. The earlier a Writ is filed, it is better.

Can a Writ Petition be withdrawn? Can the assessee once again file a Writ Petition after it is withdrawn?

Some times Writ Petitions are withdrawn. Sometimes the Court itself suggests that instead of dismissing the Writ Petition, it would be advisable to withdraw the same.

A Writ when it is withdrawn gets dismissed So a fresh Writ on the cause of action cannot be filed unless permission is obtained at the time of withdrawal of Writ to file fresh Petition. Thus at the time of withdrawal, the Court grants liberty to file a fresh Petition which is normally done and hence a Petition can be filed later on.

There may be circumstances when alternative remedies have not been exhausted, whereupon, on withdrawal, a Writ could be filed once again.

It is, therefore, advisable that on withdrawing the Writ Petition liberty should be taken from the Court for filing fresh Petitions as was laid down in Upadhyay & Co. vs. State of U.P. AIR 1999 SC 509 and Anil Kumar Bindal vs. Director General of Income Tax (2002) 259 ITR 493 (Del).