“This Court also holds that the action of recovery on the part of the respondents was de-hors the statutory provisions specified under Section 220(6), 245 of the IT Act and was without jurisdiction in terms of Sections 222 and 223 of the IT Act. The respondents have also failed to honour the series of judgments, referred to above which for them are merely pieces of papers. They have completely given go-bye to the principles of judicial discipline, majesty of law and even their action is contrary to their own circulars.”
A division bench of the Rajasthan High Court comprising Justice Prakash Gupta and Justice Sameer Jain has slammed the income tax department for not following the natural justice principles and illegal recovery actions during the pendency of appeal proceedings. The bench further imposed a cost of Rs. 50,000 on the department for the grave violation of law and judicial precedents.
Income Tax Return for the Assessment Year 2018-2019 was processed by the CPC Wing of the respondent department and a refund of Rs.70,86,950/- due in favor of the petitioner-assessee, Mr. Rajendra Kumar, was adjusted against the balance demand of Assessment Year 2017-18 created on 13/12/2019. The petitioner-assessee filed a Stay Application in response to intimation issued to him on 13/01/2020 under Section 245 of the IT Act in the form of a Note. However, the department ignored the intimation and adjusted 20% of the demand amounting to Rs.41,88,620/- from the said refund in terms of the departmental circulars.
The petitioner contended that he has preferred an appeal against the said order but in spite of the same, again on 25/02/2020, while processing Income Tax Return for the Assessment Year 2019-20, the CPC adjusted a refund of Rs.32,35,662/- against the balance demand of Assessment Year 2017-18 in spite of the appeal and the stay application filed in response to intimation under Section 245 of the IT Act.
The division bench found that in the specified format of notice of demand under Section 156 of the IT Act, it was specifically submitted that recovery proceedings will be carried out in case of default and non-payment within thirty days under provisions of Section 222 to 227, 229 and 232 of the IT Act. It was also mentioned in the said notice under Section 156 of the IT Act that an appeal can be preferred within a period of thirty days.
Noting that the case in hand is a classic example of ‘absolute power corrupts absolutely’, the Court observed that “The petitioner-assessee was quite prompt in filing appeal under Section 246-A of the IT Act against the order dated 13/12/2019 without waiting for thirty days of statutory time. He filed the appeal on merits in the prescribed format on 26/12/2019. It is a fact on record which is admitted by the respondents themselves that till date, the CIT(A), for the reasons best known to him, has not considered the said appeal which is beyond control of the petitioner.”
“The mandate of Section 220(6) of the IT Act makes it very clear that once an appeal is filed within time in the prescribed format, the assessee will not be deemed as an ‘assessee in default’. Further, the notice under Section 156 of the IT Act categorically specifies that the demand can only be initiated in the case of default under the provisions of Sections 222, 223 of the IT Act which in the given case is not made out,” the Court said.
The Court further noted that not following the mandatory requirement of intimation under Section 245 of the IT Act and also not following the principles of natural justice, is illegal, without authority and unjustified.
Concluding the order, the Court added that “this court further deems it appropriate to issue strictures to the effect that appropriate departmental action be initiated against the officers and authority concerned of the respodnent-Revenue who are involved in non-consideration of appeal of the petitioner in time as well as for not obeying and considering the judgments of the Apex Court, referred to above as well as the provisions of Section 220(6), 245 of the IT Act and the circulars of the department. The Chief Commissioner of Income Tax, Rajasthan, Jaipur, Udaipur, etc. is directed to apprise about pendency situation and statistics to the Rajasthan State Legal Services Authority, Jaipur so that in the interest of justice, the same can be considered and appropriate correspondences can be made with the higher/appropriate authorities in the larger public interest as illegal recoveries, levy of interest is imposed for the reasons beyond their control.”
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