Whether tax arrears from sick companies that satisfy conditions u/s 22(1) of SICA are not to be recovered by coercive method unless BIFR gives consent for same – YES: HC

THE issue is – Whether tax arrears from sick companies that satisfy conditions u/s 22(1) of SICA are not to be recovered by coercive method unless BIFR gives consent for same. YES is the answer.
Facts of the case

The assessee is a company. The application of the Petitioners to be declared as a SICA unit has been registered on 12.01.2015 and the subject demand was issued by the Assessing Officer only in December, 2015. Learned Counsel has thereafter taken us through the provisions of Section 22 of the said Act to point out that even for recovery under the Act, no coercive action can be taken against the Petitioners without obtaining the permission from the Board for Industrial and Financial Reconstruction (BIFR) in terms of the SICA Act. Counsel further pointed out that in the present case, no such permission has been obtained and, as such, the impugned demand cannot be sustained. In support of his submission, the learned Counsel has relied upon the Judgment of the Gujarat High Court reported in (2004) 269 ITR 548 (Guj) in the case of Ezy Slide Fastners Ltd vs. Joint CIT(Assessment). Counsel as such pointed out that the impugned demands dated 07.12.2015 and 14.12.2015 be accordingly quashed and set aside. The Revenue’s counsel had pointed out that the Respondents are entitled to recover such amounts and the Petitioners have an alternate remedy to challenge the impugned Demands before the Commissioner of Income Tax. Counsel further pointed out that the Assessing Officer learnt that the Petitioners were being registered as a sick unit only recently and the authorities will take necessary consent in terms of Section 22 of the SICA Act. Counsel as such pointed out that the Petitions be rejected.
Held that,
++ on plain reading of the provisions of Section 22 of SICA, it cannot be disputed that even coercive action to recover the dues in terms of the Income Tax Act would require the consent from BIFR in terms of the said Act as an inquiry u/s 16 of the SICA is pending. The counsel appearing for the Respondents also does not dispute that the Respondents would take steps to obtain such consent. The Gujarat HC in the case of Ezy Slide Fastners Ltd vs. JCIT (Assessment) has observed in the said Judgment thus in Gram Panchayat v. Shree Vallabh Glass Works Limited MANU/SC/0188/1990: [1990] 1 SCR 966 and in Tata Davy Ltd, MANU/SC/1256/1997 : (1997) IILLJ 989 SC, the SC held that arrears of taxes and the like dues from sick industrial companies that satisfy the conditions set out in Section 22(1) of the SICA cannot be recovered by coercive process unless the said BIFR gives its consent thereto. That is what the respondents can do in the instant case also, i.e., the respondents can obtain consent from the BIFR for recovery that they propose to make. Thus, we grant interim relief restraining the respondent-authorities from acting upon the impugned notice dated October 20, 2000, and also restraining the respondent authorities from enforcing any notice u/s 226(3) without first obtaining consent of the BIFR as provided in Section 22(1) of SICA. Taking note of the said observations and the Judgment of the SC referred to therein, it cannot be disputed that without obtaining consent in terms of Section 22 of the SICA Act, the AO cannot implement the impugned Demands dated 07.12.2015 and 14.12.2015. In such circumstances, we find that the above Petitions can be disposed of by holding that the impugned demands dated 07.12.2015 and 14.12.2015 would be implemented by the Respondents upon obtaining the requisite consent in terms of Section 22 of the SICA Act. With the above directions, Rule stands disposed of.