It is usually seen that the Revenue Officers disbelieve the version of the assessees, discard their valid explanations, reject their un-rebuttable evidence, treat the supporting material as fabricated and frame assessments as per their whims and fancies. The action of the erring officers is defended by their higher ups as purported to have been done in “the interest of Revenue”. The assessee has to run from pillar to post for justice. This entire process is painstaking, expensive and morally devastating. This distracts the assessees from their normal business and is detrimental to the financial interests of both the assessee and the Revenue. The Allahabad High Court in two recent cases, one in Trade Tax and the other in Income Tax, have reprimanded these erring officials and have taken harsh measures against the highhanded officials for undue harassment of the assessees.
In a case being Commercial Tax Revision No.571 of 2013 M/s Seema Enterprises, (Orissa) versus The Commissioner, Commercial Tax, U.P., Lucknow decided on 12-07-2013, the Allahabad High Court criticized the action of the Commercial Tax Officers in seizing goods under transportation merely on the basis of presumption, suspicion and doubts. The brief facts are that goods in transit from Delhi to Orissa were seized by the mobile squad. The Tribunal also confirmed the seizure. On Revision in the Allahabad High Court, on the basis of earlier binding decisions, held that the seizure of goods cannot be made on mere presumption. The Court followed the Apex Court’s decision in State of Kerala v M M Mathew & another 42 STC 348, wherein it was held that presumption, however strong, cannot take the place of evidence. The Apex Court had in this case held that strong suspicion, strange coincidences and grave doubts cannot take place of legal proof. The High Court imposed an exemplary cost on the erring officials and also ordered for appropriate departmental action against the erring officials. The Court held thus:
“The goods have been detained illegally, arbitrarily and without any basis and merely on surmises and conjectures and whims of the authorities concerned despite the settled principle of law laid down by the Court referred hereinabove.
The goods have been seized despite the settled principle of law referred hereinabove, on 19.06.2013 and since then goods are in the custody of department. The applicant has suffered huge substantial loss for no fault on his part and subjected to harassment.
It is unfortunate that the Joint Commissioner (S.I.B.) and Tribunal have affirmed the seizure of the goods.
In view of the aforesaid facts and circumstances, in my view the applicant is entitled for the exemplary cost, which I assess at Rs.1 lac. I also direct the Commissioner, Commercial Tax to look into the matter and take the appropriate action against the officials in accordance to law, who have seized the goods. It will be open to the department to realise the amount of cost from the concerned officials.” (Emphasis supplied)
Under the Income Tax Act, in a landmark judgment in Income Tax Appeal No.162/2013 Commissioner of IncomeTax v. Intezar Ali decided by the division bench of the Hon’ble Allahabad High Court on 26.7.2013, the Court not only reprimanded the erring officer but also directed for an enquiry for the ‘conduct & motive’ of the erring officer. The brief facts of the case are the assessee had voluntarily filed his return of Income on 17.10.2008 disclosing total income of Rs.64,188/- and agricultural income of Rs.1,25,000/-. On receipt of certain information that the assessee had deposited an amount of Rs.1,08,32,752/- in bank account no.4621 with Syndicate Bank, Village Dehra, Hapur, enquiries were made and statements of the assessee and purchasers were recorded. The assessee stated that he had sold agricultural land measuring 30 kachcha bigha situate in Village Gordhanpur, Tehsil Hapur, Distt. Ghaziabad for a sum of Rs.1,20,00,000/- on 12.11.2007 to Shri Yameen and Shri Raisuddin. Both the purchasers denied in their statements to have purchased the land for a consideration of Rs.1,20,00,000/- from the assessee. They stated that they had purchased the land only for Rs.22 lacs. The sale deed was executed on the sale value of Rs.22 lacs, whereas the assessee Shri Intjar Ali claimed that he had sold his land for Rs.1,20,00,000/-. During the course of assessment proceedings, the assessee produced the witness to the sale deed, who proved that the assessee had received Rs.1,08,32,752/- in cash which he deposited in his bank account. The Bank Manager of the Syndicate Bank, Village Dehra, Hapur, which was the only bank in the village, and who had stayed late in the evening on the request of the assessee, deposed that the assessee had deposited the entire amount in his bank and which he had stated to be the sale consideration of the land sold by him. The assessee also produced the evidence of the land rates in the area and claimed exemption of the agricultural land, which was not capital asset within the definition of Section 2 (14) (iii) (a) (b) of the Act and was therefore not chargeable for capital gains tax. He also produced the evidence by way of report of Tehsildar, Hapur dated 28.9.2010 showing that the agricultural land in question was more than 8 kms. from the local limit of Nagar Palika and also 9 kms. from the Local Town Area. Without assigning any cogent reasons, the assessing officer added the surplus amount of Rs.97,80,000/- over sale deed value as ‘income from undisclosed sources’.
The High Court said that harassment of assessees is intolerable and held thus:
“13. Before parting with the case we may observe here that from the facts and circumstances on the record that in the present case the Income Tax Officer did not act in bonafide manner. The assessee led substantial evidence to establish that the amount treated to be undisclosed income by the A.O. was the sale consideration of sale of his agricultural land, which he had deposited in the bank and had voluntarily filed return disclosing his income. Overwhelming evidence led by him was discarded without giving any reasons at all. The assessment was framed only on the ipse dixit of the A.O., which gives us reason to believe that he had exceeded his authority with some ill will or with ulterior motive.
14. We, therefore, find it appropriate to direct the Registrar General of the Court to forward a copy of this judgment to the Chairman of the Central Board of Direct Taxes to cause an enquiry into the conduct and motives of Shri Yaduvansh Yadav, Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner.” (Emphasis Supplied)
It would be trite to refer to a recent decision of the Income Tax Appellate Tribunal (Delhi) in the case of Bharti Airtel Ltd. Vs. ACIT in I.T.A. No.: 5816/Del/2012 decided on March 11, 2014, where the ITAT hauled up the Assessing Officer (AO) and Dispute Resolution Panel (DRP) for ‘Blatantly frivolous & unsustainable’ additions and suggested accountability mechanism to put check on the Assessing Officers and also questioned the existence of ‘ineffective Dispute Resolution Panel’. The facts of the case are that the AO made an arbitrary & illegal addition of Rs. 5,739 Crores to the income of the assessee, without any basis. The ITAT while allowing the Appeal passed strictures against the AO & the DRP and held thus:
“… if an action of the AO is so blatantly unreasonable that such seasoned senior officers well versed with functioning of judicial forums, as the learned DRs are, cannot even go through the convincing motions of defending the same before us, such unreasonable conduct of the AO deserves to be scrutinized seriously. At a time when evolving societal pressures demand greater degree of accountability in the governance also, it does no good to the judicial institutions to watch such situations as helpless spectators. If it is indeed a case of frivolous addition, someone should be accountable for the resultant undue hardship to the taxpayer -rather than being allowed to walk away with a subtle, though easily discernable, admission to the effect that yes it was a frivolous addition, and, if it is not a frivolous addition, there has to be reasonable defence, before us, for such an addition.
… Whichever way one looks at these entries, the inescapable conclusion is that the addition made by the AO is wholly erroneous and devoid of any legally sustainable merits.
…. The fact that even such purely factual issues are not adequately dealt with by the DRPs raises a big question mark on the efficacy of the very institution of Dispute Resolution Panel. One can perhaps understand, even if not condone, such frivolous additions being made by the AOs, who are relatively younger officers with limited exposure and experience, but the Dispute Resolution Panels, manned by very distinguished and senior Commissioners of eminence, will lose all their relevance, if, irrespective of their heavy work load and demanding schedules, these forums do not rise to the occasion and do not deal with the objections raised before them in a comprehensive and effective manner.
… While we delete the impugned addition of Rs 5739,60,05,089, we also place on record our dissatisfaction with the way and manner in which this issue has been handled at the assessment stage. Let us not forget that the majesty of law is as much damaged by not rendering justice to the conduct which cannot be faulted as much it is damaged by a wrongdoer going unpunished; not giving relief in deserving cases is as much of a disservice to the cause of justice and the cause of nation as much a disservice it is, to these causes, by granting undue reliefs. The time has come that a strong institutional check is put in place for dealing with such eventualities and de-incentivizing this kind of a conduct.”
On the basis of the aforesaid decisions of the Allahabad High Court & the ITAT, binding on all authorities, it is high time for the assessing officers to act in accordance with the law as declared time & again by the Apex Court, Jurisdictional High Court and the Tribunals else they are bound to be reprimanded & penalized by the Courts at their own peril and risk. There is urgent need for fixing accountability of these Erring Officers. Mere reprimanding these erring Assessing Officers alone will not serve the purpose. Fines, Warnings & Strictures are an effective means to check the erring officials but the million dollar question is when these exemplary measures would put an end to the undue harassment of the assessees by the revenue officials.
(Author- Inder Chand Jain, Agra, Mobile:9319215672, Email: firstname.lastname@example.org)