Pavan Ved 

Abuse of power by taxmen is common both in direct and indirect taxes. Many times the taxpayers feel they have no remedy and they have to suffer such harassment. This article is an attempt to make taxpayers aware as to the remedies which they have against such taxmen who abuse their powers. Read this article carefully as it would help save you from harassment from officers.

Firstly my suggestion is that the taxpayers should pay tax honestly as it is not wise to evade tax. It has bad consequences. Black money will be unproductive and loss may be higher than the tax evaded.  If no tax is evaded, there will be greater peace of mind and one would be contributing to the cause of nation building. The taxpayer will have courage to fight with tax department against abuses by officers of their powers etc.

The abuses by taxmen can be illustratively listed as under:

1. Abuses by search and survey officers:

1.1 Prolonging search to extract money and to extract disclosure in the name of voluntary disclosure.

1.2 Threatening of huge  penalty, prosecution, covering other premises, sister concerns, relatives cases etc.

1.3 Misbehaving in search and in course of assessment proceedings.

1.4 Not following rules regulations and search and continuing search till midnight.

 1.5 Obtaining incriminating statement forcefully.

1.6 Getting tax deposited then and there.

1.7 Compelling to create false incriminating evidences then and there to sustain disclosure.

1.8 Taking post dated cheque towards tax payment.

1.9 false assurances by search party e.g. they give assurance that tax would be levied at normal ate in place of  tax rate as per sec. 115BBE.

2. Abuse of powers by AO:

After faceless assessment scheme, it will be relevant only where assessment is online but not faceless. Such abuses are as under:

2.1 High pitched assessment.

2.2 Prolonging assessment by raising queries after queries.

2.3 Recovery without deciding stay petition .

2.4 levying penalty at unjustifiably high rate and even before decision of appeal.

2.5 Unnecessary prosecution. Premature prosecution by overzealous officers for creating good statistics of performance. Not withdrawing prosecution even if penalty has been deleted in appeal.

2.6 Not following binding decisions on frivolous grounds.

2.7 Not deciding 154 petition  within 6 Months despite clear mandate of sec. 154(8).

2.8 Not issuing refund or giving appeal effect etc.

3. Remedies:-

Though there are remedies available in law that is filing appeal, rectification, revision, complaining to higher authorities, filing grievance petition etc. but in practice such remedies are not efficacious and pursuing remedy itself is harassment apart from cost involved in appeal etc.  One most efficacious remedy is to take action u/s 166 of Indian Penal code against the officer. This remedy is available only against administrative action of the officer and not against his judicial decision; though in judicial decision also it can sometimes be applied. The section reads as under:-

166. Public servant disobeying law, with intent to cause injury to any person.—

“Whoever, being a public servant, knowingly diso­beys any direction of the law as to the way in which he is to conduct himself as such public servant, intending to cause, or knowing it to be likely that he will, by such disobedience, cause injury to any person, shall be punished with simple imprisonment for a term which may extend to one year, or with fine, or with both.”

This remedy is available where the officer knowingly disobeys the mandate of law. This is common knowledge that the officers knowingly disobey such mandate. Only in such situations, this section can be invoked. The assessee should be able to prove this fact that the officer has knowingly disobeyed the mandate of law. For this purpose, first the assessee should make an application to the officer say that appeal effect should be given.  If he does not give, the assessee cannot straightway invoke this section. The assessee should then write a personal request letter to the officer drawing his attention to his earlier request. Still if there is no result, the assessee should give one show cause notice to officer u/s 166 and only then this section should be invoked and a criminal complaint should be filed. Such procedure would prove that the officer is knowingly not doing his duty.

Section 154(8) mandates an income tax authority to decide rectification application within 6 months. This is mandate of law and if officer does not decide within 6 months, this section can be invoked.

Similarly when demand is raised, the assessee should immediately file stay petition  before CIT(A) who has inherent power of granting stay. Copy should be given to AO with a request not to make recovery till stay is decided. Still if the AO attaches bank account, he will invite action u/s 166 of IPC. Also in a situation when the AO does not issue pending refund or does not reduce demand by rectification and still he attaches bank account he will be liable for actin u/s 166 IPC.

There are some situations in which Hon’ble courts have observed that particular action of officer is abuse of power. Such decisions are useful. Some of such decisions are as under :

 Digipro Import & Export Pvt. Ltd vs. UOI (Delhi High Court) 82 taxmann.com 206 Central Excise case

Severe strictures passed to condemn the illegal practice of the Dept of collecting undated cheques from taxpayers after search/ survey without even quantifying the extent of duty evasion. Attempt of the unscrupulous officers is to ‘negotiate’ the evaded duty by threats and coercion. It is not rule of law but anarchy unleashed by holders of public office. It is an abuse of law which has to be stopped

Shreemati Devi vs. CIT (Allahabad High Court)

Attitude of the Revenue in not returning seized assets despite assessee having succeeded in appeal is clearly arbitrary and shows an attitude of undue harassment to the assessee in the garb of public Revenue. Interest of public revenue does not authorize Revenue Authorities to work without any authority and create or cause all kinds of harassment to innocent people on the pretext of statutory authority

KEC international ltd. vs. Balakrishan 251 ITR 158 Bombay HC

Before parting, we would like to record our total dissatisfaction regarding the manner in which the authorities below have proceeded to enforce the demand totally ignoring the parameters laid down by this Court in the case of KEC International Ltd. (supra) while disposing of the stay applications. Moreover, attaching the bank accounts of the petitioner even before communicating the order passed on the stay application is totally high-handed. We hope that the Revenue shall ensure that in future such  instances do not occur again. Otherwise, the Court will have no option but to take appropriate action in accordance with law. Coca Cola India  ltd 285 ITR 419 observation

Remedy with Human rights commission. Bihar HRC decision: complaint can be filed by searched person against officers on search for their abuse of powers such as continuing search till midnight, unnecessarily prolonging search action etc. e.g. in one case, search party consisting of 6 members were searching a small two room flat of 800 sq. ft. total incriminating document found were only 12 and search continued for five days and was concluded immediately after the assessee made disclosure. This is a clear case of forcefully extracting disclosure.

Protection to officers under section 293 of  Income tax Act is not available when the act is willfully illegal :

The section reads as under:

“No prosecution suit or other proceedings lies against the government or any officer of government for anything in good faith done or intended to be done under this Act.”

This protection is not available  if the AO has not acted in good faith.

Some decisions quoted by ld. author palkiwala  are as under:

Taking absurd view of law is not good faith.

Making recovery even if there is stay.

Not following binding decision.

Seized books are missing. No protection. Assessee is also eligible for compensation. Banke Bihari Vs. UOI 226 ITR 498 Rajashthan Acting clearly against objection raised against jurisdiction of AO.

Most important: done in good faith does not, in my opinion,  include omitting to do hence if the AO does not do his duty say of rectification within 6 months or issuing refund after appeal effect etc. then he cannot take benefit of this section.

These remedies are useful against all departments e.g.  GST, passport, state government  registrar office etc.

The above are my personal views regarding interpretation of law and should not be taken as a legal advice. I disclaim any liability if somebody faces any problem because of these views.

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