Whether the spot collection of taxes is wholly illegal and unwarranted when the assessment for the respective year is still pending?

PJ/CASE LAW/21-22/3655

*Ganesh Lubricants (Proprietor – P. Surendrakumar) Vs Commercial Tax Officer (Madras High Court)*

Issue: - Whether the spot collection of taxes is wholly illegal and unwarranted when the assessment for the respective year is still pending?

Brief Facts: - This Writ Petition has been filed challenging the impugned demand of the first respondent, dated 17.04.2017 calling upon the petitioner to pay a sum of Rs.21,33,005/- towards dishonoured cheques which was issued by the petitioner in favour of the first respondent, on the date of inspection, at their premises, by the Enforcement Wing Officials of the Second respondent.
Earlier, notice was issued to the Revenue Department for illegal collection of dues regarding recovery of tax amount through in cash, cheque, including the payment made by assessee whether be characterised as 'voluntary’during the search proceedings. It was directed to the Authorities to appear before the Court through video conferencing.

Observations: - The learned advocate appearing for the appellant took a lead to file a writ application against the spot collection of dues. It is contended that the Authority lacks statutory power and authorization in settlement of dues and tax payments in a manner it has proceeded to do so.
It is settled law that recovery of tax in advance by inspecting officials (Enforcement Wing) is illegal. The first respondent has admitted that four cheques given by the petitioner on the date of inspection were only towards the payment of tax even though in the impugned demand, they have mentioned that it is towards compounding fees. Since the collection of cheques from the petitioner is admittedly, towards payment of tax, the said collection by the second respondent on the date of inspection from the petitioner is illegal without there being any assessment order. It is also admitted fact that no assessment order has been passed pursuant to the impugned notice of demand, dated 17.04.2017.

Decision: -
This Court, after having heard the rival submissions as well as after pursuing the impugned notice of demand as well as the Judgment cited by the learned counsel for the petitioner, is of the considered view that:

the impugned demand made by the respondent is illegal without there being an assessment order.
For the foregoing reasons, the impugned demand, dated 17.04.2017 issued by the first respondent is hereby quashed and the Writ Petition is allowed.
However, liberty is granted to the respondents to complete the assessment against the petitioner in accordance with the law, and if it is found that the petitioner is liable to pay tax or penalty or other charges, the same shall be recovered from him after completion of assessment proceedings in accordance with the law.

Comments: - In view of this statutory regime already in place, the recovery in a manner before the assessment order is not justified. It follows that imposition of tax dues can take place only after assessment has been completed. For this reason, there was every justification and separate treatment for determination of the date of the completion of the assessment.

This is solely for educational purpose.

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PJ/CASE LAW/21-22/3655

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