IT Department can’t sit over appeal of the assessee and take coercive steps – HC

Income Tax Department  can not sit over appeal and at the same time taking steps for getting assessment and penalty order being executed by resorting to coercive steps.

In a recent judgment, Hon’ble High Court of Telangana quashed the order attaching the bank accounts of the assessee observing that it was incumbent upon the authorities to take up the stay application and decide the same at the first instance or decide the appeal itself as expeditiously as possible rather than sitting over the appeal on the one hand and at the same time initiating steps for getting the order of assessment and the order of penalty being executed by resorting to coercive steps.

ABCAUS Case Law Citation:
4449 (2025) (03) abcaus.in HC

In the instant case, the Petitioner/assessee had filed a Writ Petition challenging the action on the part of the Assessing Officer (AO) in issuing garnishee notices attaching the bank accounts of the petitioner.

The garnishee notices had been issued pursuant to an assessment order and a subsequent penalty order. The Petitioner had preferred two appeals against both the assessment order and the penalty order along with an application for stay of demand. Both the appeal as well as the stay application was still pending consideration. Meanwhile, the Income Tax Authorities had issued the said impugned garnishee notices.

The Petitioner submitted that in the event if the garnishee notices were not set aside at this juncture the petitioner would be put to substantial inconvenience so far as operating the business is concerned. Further the fact that the right to appeal having been availed by the petitioner, the authorities should not have invoked coercive steps in between.

The Petitioner relied upon a couple of decisions of the Division Bench of the High court decided in the recent past wherein under similar set of circumstances, the Division Bench had granted interim protection while disposing of the writ petitions directing the respondent-authorities to decide the appeal and stay application first before initiating proceedings issuing garnishee notice.

The Hon’ble High Court observed that when the petitioner had availed his right of appeal along with the petition for grant of stay, it was incumbent upon the authorities to take up the stay application and decide the same at the first instance or decide the appeal itself as expeditiously as possible rather than sitting over the appeal on the one  hand and at the same time initiating steps for getting the order of assessment and the order of penalty being executed by resorting to coercive steps.

The Hon’ble High Court opined that the impugned garnish notice was not sustainable and accordingly was set aside. The authorities were directed to take up the appeal as well as the stay application at the first stance and thereafter proceed in accordance with law.

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