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Faiz Wahab Vs ITO (Madras High Court)
In Faiz Wahab vs Income Tax Officer, the Madras High Court dealt with a writ petition challenging the assessment order dated 26 February 2024, issued under Section 147 read with Section 144 of the Income Tax Act, 1961. The petitioner had been assessed for alleged unexplained income based on the amount shown in a sale agreement, which the Assessing Officer treated as taxable income after the petitioner failed to respond to multiple notices issued during reassessment proceedings. The petitioner contended that the assessment was erroneous, as the transaction related to a real estate purchase that did not materialize, and the sale advance had been refunded.
The petitioner’s counsel submitted that he was a bona fide investor in a real estate project promoted by M/s Omkar Ventures Pvt. Ltd. in Mumbai and had secured a favorable order from the Maharashtra Real Estate Regulatory Authority (RERA) on 30 May 2023 directing refund of the amount paid as advance. It was argued that despite this refund, the Assessing Officer treated the amount as unexplained income, resulting in a tax demand of ₹2,36,40,710. The counsel further stated that an appeal against the impugned assessment order had already been filed before the Commissioner of Income Tax (Appeals) under Section 246A of the Act on 16 September 2024. However, no application under Section 220(6) for stay of demand had been filed.
The learned Senior Standing Counsel for the respondents contended that since the petitioner had already availed the statutory remedy of appeal, the writ petition was not maintainable and should be dismissed.
After hearing both sides, the High Court observed that the petitioner had indeed filed an appeal before the Appellate Commissioner and therefore could pursue the remedy provided under the Act. Accordingly, the Court disposed of the writ petition, granting the petitioner time to pursue the pending appeal.
The Court directed that the recovery proceedings initiated under the assessment order dated 26 February 2024 shall remain stayed for 90 days from 23 October 2025, provided the petitioner files an application under Section 220(6) seeking stay of recovery. The continuation of this protection would depend on the outcome of the application and appeal proceedings. The Court clarified that if the petitioner fails to move such an application within the prescribed time, the income tax authorities would be free to resume recovery in accordance with law. The writ petition was disposed of with these observations, without any order as to costs, and all connected miscellaneous petitions were closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In this writ petition, the petitioner has challenged the impugned assessment order dated 26.02.2024 in DIN and Order No. ITBA/ AST/ S/147/2023-24/ 1061524429(1).
2. The impugned order has been passed under Section 147 r/w 144 of IT Act since the petitioner failed to respond to the notices that were issued to the petitioner on various dates under the provisions of Income Tax Act, 1961. The petitioner has also filed an appeal before the Appellate Commissioner under Section 246A of Income Tax Act, 1961 on 16.09.2024.
3. The learned counsel for the petitioner submitted that if the petitioner’s appeal is taken up on merits and disposed by the Appellate Authority, the petitioner is likely to succeed as the petitioner is a bonafide investor in the project promoted by the society in Bombay namely M/s.Omkar Ventures Private Limited. It is submitted that the petitioner had approached Real Estate Regulatory Authority, Maharashtra and he has also secured favourable order from the Maharashtra Real Estate Regulatory Authority, Mumbai by order dated 30.05.2023. It is submitted that petitioner is a bonafide purchaser who had proposed to buy a property however, the same did not eventually fructify and the entire amount paid as advance was ordered to be refunded back. It is submitted that the amount that was indicated in the sale agreement has been taken as an unexplained income of the petitioner and therefore, the petitioner has been subjected to a high pitched demand of Rs.2,36,40,710/-. On a specific query as to whether the petitioner has moved any application under Section 220(6) of the Income Tax Act, the learned counsel for the petitioner submitted that no such application has been filed.
4. The learned Senior Standing Counsel for the respondents submitted that the writ petition is liable to be dismissed as the petitioner has already attempted to workout the remedy of filing an appeal before the Appellate Authority on 16.09.2024.
5. Having considered the submissions made by the learned counsel for the Petitioner and the learned Senior Standing Counsel for the Respondents, this writ petition is disposed of by giving opportunity to the petitioner to pursue the appeal remedy before the appellate authority against the assessment order dated 26.02.2024 under Section 246A of Income Tax Act, 1961.
6. The recovery proceedings that has been initiated against the Petitioner pursuant to the aforesaid assessment order dated 26.02.2024 shall be kept abeyance for a period of 90 days from today, i.e., 23.10.2025, subject to petitioner moving an application under Section 220(6) of Income Tax Act, 1961. All further recovery proceedings subject to the disposal of the aforesaid proceedings if such application is moved by the petitioner.
7. In case, the petitioner fails to initiate such proceedings within such time, the respondents are at liberty to proceed against the petitioner in accordance with law as if this Writ Petition was dismissed in limine
8. This Writ Petition stands disposed of with the above observations. No costs. Connected Writ Miscellaneous Petitions are closed.
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