Pending appeals must Halt Recovery Proceedings: Kerala HC Stays Income Tax Demand Against Cooperative Bank Citing SC Precedent [Read Order]
The Court emphasised that continuing recovery proceedings during the pendency of such an appeal would cause irreparable harm if the appeal succeeded
In a recent ruling, the Kerala High Court stayed income tax recovery proceedings pending adjudication of an appeal, holding that recovery must halt when substantial legal questions covered by Supreme Court precedent are under consideration. income tax recovery
The petitioner, The Palode Service Co-operative Bank Ltd. is a Primary Agricultural Credit Society that challenged the assessment order for assessment year 2023-2024 and the demand notice issued by the Additional Commissioner of Income Tax.
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The bank had already filed an appeal before the Commissioner of Income Tax (Appeals) along with a stay petition, both pending consideration. The bank's grievance centered on recovery proceedings initiated despite the pending appeal, which raised issues covered in its favor by the Supreme Court's decision in Mavilayi Service Co-Operative Bank Ltd. v. CIT [(2021) 431 ITR 1 SC].
The petitioner, represented by advocates Dr. K.P. Pradeep, Shri. T.T. Biju, and others, argued that the appeal involved substantial legal questions regarding tax treatment of cooperative banks, as settled by the apex court. The respondents, including the Central Board of Direct Taxes and Income Tax authorities, were represented by Shri. Christopher Abraham, Standing Counsel.
The Single Bench of Justice Ziyad Rahman A.A. observed that the appeal raised a significant legal issue concerning the applicability of the Mavilayi Service Co-operative Bank precedent to the petitioner's case. The Court held that since the appeal involved interpretation of law settled by the Supreme Court, it was imperative that the appellate authority adjudicate the matter expeditiously.
The Court emphasised that continuing recovery proceedings during the pendency of such an appeal would cause irreparable harm if the appeal succeeded.
Accordingly, the Court disposed of the writ petition by directing the Commissioner of Income Tax (Appeals) (3rd respondent) to consider and pass appropriate orders on appeal as expeditiously as possible after providing the petitioner an opportunity for hearing.
Crucially, the Court ordered that all further proceedings pursuant to assessment order shall be kept in abeyance until the appeal is decided. This stay ensures the cooperative bank is not subjected to coercive recovery while its legal challenge, grounded in Supreme Court precedent, remains pending adjudication.
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