Writ jurisdiction should not interfere with issues pending before ITAT; coercive recovery remains barred pending interim consideration.

The petitioner, Bihar State Power (Holding) Company Limited, challenged the continuation of income-tax proceedings and a demand of ₹29,23,94,340 for Assessment Year 2012–13.

The impugned proceedings, including orders under Sections 143(3)/147, 271(1)(c) and 154 of the Income-tax Act, 1961, had been initiated or passed in the name of the erstwhile Bihar State Electricity Board (“BSEB”), which had been dissolved and its assets, liabilities, proceedings and personnel transferred to successor entities under the Bihar Government’s scheme dated 30 October 2012.

The petitioner filed a rectification application dated 2 April 2025 under Section 154, contending that the proceedings were void because they were conducted in the name of a non-existent entity, relying on Principal Commissioner of Income Tax v. Maruti Suzuki (India) Ltd., (2020) 18 SCC 331, and CBDT Circular No. 68 dated 17 November 1971.

During the pendency of the appeal, the Income Tax Officer issued a recovery notice dated 8 May 2026 threatening coercive action for recovery of the outstanding demand.

1. Whether the High Court should entertain the petitioner’s challenge to the validity of the income-tax proceedings and rectification order when the same issue was pending consideration before the ITAT?

2. Whether coercive recovery should be stayed pending consideration of the petitioner’s application for interim relief by the Assessing Officer or the ITAT?

3. Whether the Assessing Officer or the ITAT should be directed to consider the petitioner’s application for interim protection within a specified period?

The Court considered Section 154 of the Income-tax Act, 1961, which empowers rectification of mistakes apparent from the record.

The principle recognised in Principal Commissioner of Income Tax v. Maruti Suzuki (India) Ltd., (2020) 18 SCC 331, that an assessment order passed in the name of a non-existent entity may be void ab initio.

The Court also referred to CBDT Circular No. 68 dated 17 November 1971, relied upon by the petitioner in support of rectification.

Where the same issue is pending before the statutory appellate forum, the High Court, in exercise of its extraordinary writ jurisdiction, ordinarily avoids adjudicating the merits so as not to interfere with the independent consideration of the matter by that forum.

The Court noted that the petitioner’s principal contention—that the proceedings were conducted in the name of the dissolved and non-existent BSEB—was already pending before the ITAT along with the challenge to the order dated 10 February 2022.

Although the contention raised a substantial jurisdictional question, deciding it in the writ petition could prejudice or interfere with the ITAT’s independent assessment of the appeal.

Accordingly, the Court declined to examine the validity of the rectification order or the underlying tax proceedings at that stage.

At the same time, the Court recognised that recovery proceedings had been initiated or threatened while the appeal and interim application remained pending.

To prevent coercive recovery before the petitioner’s request for interim protection was considered, the Court directed the Assessing Officer or the ITAT, as appropriate, to decide the interim application within six weeks.

It directed the Assessing Officer or the ITAT, as the case may be, to consider the petitioner’s application for interim relief within six weeks from receipt or production of the judgment.

Until such consideration, no coercive action in any form was to be taken against the petitioner for recovery of the demand.

The writ petition was accordingly disposed of.