Sale Advance Refunded Taxed as Unexplained Income: Madras HC stays Recovery for 90 Days, allows time to File Income tax Appeal [Read Order]
It was further directed that recovery proceedings pursuant to the assessment order would remain stayed for this 90-day period, provided the petitioner files an application under Section 220(6) seeking stay of demand
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The Madras High Court, granted interim relief by staying recovery proceedings for 90 days in respect of an income tax demand raised against the petitioner, who had been assessed on a sum treated as unexplained income arising from the refund of a property sale advance.
The petitioner, Faiz Wahab challenged an assessment order dated 26 February 2024 passed under Section 147 read with Section 144 of the Income Tax Act, 1961, along with consequential penalty orders under Sections 271AAC(1) and 272(1)(d).
The Assessing Officer had treated the amount refunded to the petitioner originally paid as an advance for purchasing property in a real estate project promoted by M/s Omkar Ventures Pvt. Ltd., Mumbai as unexplained income, raising a demand of ₹2.36 crore.
The Counsel for the petitioner submitted that the petitioner was a bona fide investor whose property transaction had failed, and that he had obtained a favourable order from the Maharashtra Real Estate Regulatory Authority (RERA) on 30 May 2023 directing refund of the advance.
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The counsel argued that the amount could not be treated as unexplained income and sought protection from coercive recovery to enable filing and disposal of the statutory appeal on merits.
The Revenue opposed the plea, submitting that since an appeal under Section 246A had already been filed on 16 September 2024, the petitioner should pursue the statutory remedy instead of invoking writ jurisdiction.
Justice C. Saravanan observed that while the petitioner had an alternate remedy before the Commissioner (Appeals), interim protection was warranted to enable him to effectively pursue the appeal.
The Court therefore disposed of the writ petition, granting the petitioner 90 days’ time to file and pursue the appeal before the appellate authority.
It was further directed that recovery proceedings pursuant to the assessment order would remain stayed for this 90-day period, provided the petitioner files an application under Section 220(6) seeking stay of demand.
The Court clarified that if the petitioner fails to move such an application within the prescribed period, the Income Tax Department would be at liberty to proceed with recovery as per law. Accordingly, the writ petition was disposed of.
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