Action Of Recovery By Income Tax Dept. Was Without Jurisdiction: Rajasthan High Court Imposes Cost Of Rs. 50,000 On The Dept.

The division bench of Justice Prakash Gupta and Justice Sameer Jain has directed the Assessing Officer to issue a refund to the assessee along with interest as specified in law. The department was directed to adjust an excess of 20% of the disputed demand for Assessment Year 2017-18 within a period of thirty days.

The petitioner/assessee contended that in terms of the order under Section 245 of the Income Tax Act, the appeal was preferred by him immediately and as per the provisions of Section 220(6) of the Income Tax Act. The assessee cannot be termed as an assessee in default.

The petitioner contended that the recovery can only be initiated as per the statutory mechanism and that too by a Tax Recovery Officer as mandatory under Section 223 of the Income Tax Act. The refund was established on its own, disregarding departmental circulars, settled legal positions, natural justice principles, statutory mandates, and the provisions of Section 245 of the Income Tax Act.The department's act was arrogant and autocratic, lacking legal authority.

The petitioner filed the writ petition for violation of his fundamental rights, principles of natural justice and recovery being violative of Article 265 of the Constitution of India.

The department submitted that it was true that against the order passed under Section 143(3) of the Income Tax Act, a demand was raised under Section 156 of the Income Tax Act against the addition. The assessee filed an appeal, which was pending adjudication with the department. No application for waiver of recovery and stay of demand was filed along with the appeal. It was only on 22/02/2021 that an application under Section 220(6) of the Income Tax Act for a stay of demand was filed by the assessee and, thereafter, the respondents passed an order of stay on the balance amount till disposal of the appeal before the Commissioner of Income Tax (Appeals). Therefore, the recovery made is within the four-corners of law and till the filing of the stay application on 22/02/2021, the assessee was deemed to be in default and hence the recovery was made.

The court observed that the assessee cannot be termed as an assessee in default where the assessee has presented an appeal under section 246(2) [or section 246A]. The Assessing Officer cannot treat the assessee as in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as the appeal remains undisposed of.

"The case at hand is a classic example of 'absolute power corrupts absolutely'. The petitioner-assessee was quite prompt in filing an 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 the control of the petitioner," the court said.

The court held that the action of recovery on the part of the respondents was de-hors the statutory provisions specified under Section 220(6) and 245 of the Income Tax Act. It was without jurisdiction in terms of Sections 222 and 223 of the Income Tax Act. The respondents have also failed to honour the series of judgments, which for them are merely pieces of paper. They have completely given go-bye to the principles of judicial discipline and majesty of the law and even their actions are contrary to their own circulars. This high-handed action of the respondents was against Articles 14, 19, and 265 of the Constitution of India.

Case Title: Rajendra Kumar Versus The Assistant Commissioner Of Income Tax

Citation : 2022 LiveLaw (Raj) 179

Case No: D.B. Civil Writ Petition No. 11980/2021

Dated: 25/05/2022

Counsel For Appellant: Advocate Ankit Totuka

Counsel For Respondent: Advocate Anuroop Singhi with Advocate N.S. Bhati

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