Failure Of Dept. To Comply With ITAT's Order: Delhi High Court Directs Dept. To Remove Demands, Penalty From ITBA portal

The Delhi High Court has held that the Department has failed to comply with Income Tax Appellate Tribunal's (ITAT's) Order in passing a fresh assessment order within the stipulated time.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the underlying rationale of the Legislature behind the enactment of Section 153(3) of the Income Tax Act and setting the limitation therein, cannot be envisaged to expand the time limit for passing of a fresh assessment. Rather, provision entails a strict adherence to the time period within which the remand order in the present case should have been complied with by the department.

The petitioner/assessee has filed its Income Tax Return (ITR) for the AY 2008- 09, declaring a total income of Rs. 19,92,354 which was processed by the respondents under Section 143(1) of the Income Tax Act, 1961. The ITR of the petitioner was picked up for scrutiny and an assessment order under Section 143(3) was passed by the respondents by which the total income of the petitioner was assessed to be Rs. 100,42,66,390 for the concerned AY. The department had seized two properties of the petitioner.

The petitioner preferred an appeal before the CIT(A), challenging the additions which were made by the department. The CIT(A) partly allowed the appeal in favour of the petitioner, by which out of total disallowance of Rs. 22,74,040, disallowance only to the tune of Rs. 5,27,321 was upheld.

However, the petitioner assailed the order of the CIT(A) before the Income Tax Appellate Tribunal (ITAT). The ITAT remand the matter back to the file of the AO for the purpose of fresh assessment. Also, by virtue of the order, the demand being reflected on the Income Tax Business Application (ITBA) portal in the quantum came to be deleted by the ITAT.

The penalty order passed under Section 271(1)(c) was dropped by the ITAT on account of quantum assessment being remanded back to the file of the AO and a demand of Rs. 33.98 Crore towards penalty was also deleted. During the period between 30 July 2020 to 10 August 2021, the petitioner made several representations to the respondents praying for rectification of the error with respect to the demand being reflected on the ITBA portal and the issue of refund.

Since no reply was received by the petitioner upon its representations, it filed an application in accordance with the Right to Information Act, 2005 to the Tax Recovery Officer to give appeal effect to the order passed by the ITAT. Pursuant to the RTI application, an order was passed by respondent in which it was expressed its inability to give appeal effect on the ground that it had not received the order passed by the ITAT for the concerned AY through a proper channel.

Upon receipt of the information, an application was preferred by the petitioner before the registry of the ITAT in order to seek information of service of order passed on 8 October 2018. The petitioner was provided with the information by the registry of the ITAT that the order passed in the case of the petitioner was duly sent to the CIT (Judicial) for further action. The petitioner made subsequent representations to the respondents to rectify the error with respect to the reflection of demand on the ITBA portal and issue refund, but to no avail.

The petitioner contended that the action of the respondents in not giving appeal effect and not issuing the income tax refund is completely unreasonable and unjustifiable. Despite the order passed by the ITAT being communicated to the concerned authority of the Income Tax Department within the stipulated time, the respondents have failed to pass a fresh assessment order.

The department contended that since the order of the ITAT never reached the concerned authority of the Department, the remand as directed by the ITAT order could not be complied with. The ITAT is bestowed with the responsibility to provide the order to the concerned authority which it had failed to perform.

The court noted that there was no force in the argument put forth by the department that the order was not received by the concerned authority through appropriate channels.

The court directed the department to ensure that the demands of quantum amounting to Rs. 34.70 Crores and penalty amounting to Rs. 33.98 Crores being reflected in the ITBA portal shall be removed within two weeks of the passing of this judgement.

The court, while allowing the petition, stated that the properties of the petitioner be released within two weeks.

Counsel For Petitioner: Amol Sinha and Kshitiz Garg

Counsel For Respondent: Sanjay Kumar

Case Title: Sunshine Capital Limited Versus DCIT

Citation: 2024 LiveLaw (Del) 467

Case No.: W.P.(C) 7015/2022

Click Here To Read The Order