Income Tax Authorities cannot Enforce Recovery on Protective Assessment: Kerala HC stays Coercive Proceedings [Read Order]

The Kerala High Court has stayed coercive recovery proceedings initiated by the Income Tax Department against a petitioner who was subjected to a protective assessment under the Income Tax Act, 1961. The Court ruled that since the assessment in question was protective in nature, no recovery can be enforced until the pending appeal is disposed of.

The petitioner, a partner in M/s. Sreedhanya Construction Company, became subject to assessment proceedings following a search conducted at the firm’s premises for the assessment year 2023–24.

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While a substantive assessment was carried out against the petitioner’s husband—also a partner in the firm, a protective assessment order was issued against the petitioner. The substantive assessment against her husband culminated in a separate order and both assessments are currently under challenge in separate appeals.

The petitioner’s own appeal is pending before the second respondent, while her husband’s stay petition is already being considered by the Court as per its earlier order dated April 10, 2025, in W.P.(C). No. 15298 of 2025.

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The counsel of the petitioner argued that since the assessment against the petitioner is only protective in nature, initiating coercive recovery based on the same is legally unsustainable. It was contended that such recovery actions should be kept in abeyance until the appeal is resolved.

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The bench noted the Supreme Court’s ruling in Lalji Haridas v. Income Tax Officer, where it was observed that while the Income Tax authorities may carry out protective assessments, protective recoveries are impermissible. This principle was further taken by a Division Bench of the Kerala High Court in Commissioner of Income Tax v. Cochin Company Private Limited.

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Justice Bechu Kurian Thomas held that since the petitioner was assessed protectively, coercive recovery proceedings must be stayed. Consequently, the Court ordered that all recovery proceedings shall remain in abeyance until the disposal of the appeal filed by the petitioner. With this direction, the writ petition was disposed of.

To Read the full text of the Order CLICK HERE

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