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Allahabad HC directs Centre, Tax Dept to take action against officials for issuing order despite adverse opinion

Shishir Sinha | | Updated on: May 28, 2022
Image for representational purpose only

Image for representational purpose only | Photo Credit: heliopix

Allahabad High Court has directed the Income Tax Department to initiate appropriate proceedings against the tax officials who passed an order against an assessee despite opinion against it.

A Division Bench of Justices Surya Prakash Kesarwani and Jayant Banerji referred to a Coordinate Bench ruling in the matter of Harish Chandra Bhati vs Union of India & Others where the Revenue Secretary filed an affidavit.

It highlighted that instructions issued by the Central Board of Direct Taxes (CBDT) saying the local committee ascertains whether the additions made in the assessment order is not backed by any sound reasons or logic, provisions of law have been grossly misinterpreted or obvious and well-established facts on record have been ignored outrightly.

“The said instruction also provides for initiation of suitable administrative action against the erring officer in case where assessments are found by the local committee to be high-pitched or where there is non-observance of principles of natural justice, non- application of mind or gross negligence of assessing officer/ Assessment Unit,” the affidavit said. Based on this and taking note of the facts presented before it, the Bench directed the Centre “to ensure that appropriate proceeding in accordance with law is initiated against the erring officers.”

The case was filed against an Income Tax notice, issued under section 148A of the Income Tax Act, 1961 for the assessment year 2018-19.

It was issued on the basis of information available i.e., ‘purchase of immovable property more than ₹20 lakh and accordingly required the petitioner to explain the nature and source of above transaction along with documentary evidences.

The petitioner explained that immovable property in question is a flat which was booked in the year 2012 and thereafter payments have been made year-to-year through account payee cheques. He submitted all the required documents including the sale deed. Still, the tax officer issued an order, which the petitioner termed not correct.

As per provisions of Section 148A, the Assessing Officer (AO) has been conferred power to conduct an enquiry before issuing any notice under Section 148, with respect to the information which suggests that the income chargeable to tax has escaped assessment. Here, the assesses are given an opportunity to explain. Based on the reply along with other materials provided, the Assessing Authority will decide as to whether or not it is a fit case to issue a notice.

The Court also took note of the affidavit filed by the Principal Commissioner of Income Tax (PCIT) which opined that the proceeding under section 148 needs to be dropped. Based on that the Court observed the order passed by AO was patently erroneous and grossly illegal and also reflected abuse of power by the concerned officer.

Accordingly, the Bench directed Centre and the Tax Department that action (against the officials) shall be taken within 4 weeks and a compliance report shall be submitted before the Court within 6 weeks.

Published on May 28, 2022
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