HC not happy with reopening of case of IRS officer to settle personal vendetta
The petitioner is a retired officer of the Indian Revenue Service and served in various capacities including, inter alia, the position of Chief Commissioner of Income Tax, Director General of Vigilance, Chief Vigilance Officer of the Central Board of Direct Taxes and Income Tax Ombudsman. In respect of the assessment year 2004-05, he filed a return of income declaring a total income of Rs.4,10,917/- consisting of salary income, property income and income from other sources. It was processed under Section 143(1) of the Act. On 31.03.2011 a notice was received by him under Section 148 of the Act seeking to reopen the assessment on the ground that income chargeable to tax had escaped assessment. The petitioner appears to have filed a return of income in response thereto and sought the reasons recorded to reopen the assessment. The reasons were furnished on 27.06.2011 to which the petitioner filed objections questioning the jurisdiction of the respondent No.1 to issue the notice. It was contended that the reasons recorded were not sufficient in law to entertain the belief that there was escapement of income, that the allegations levelled in the tax evasion petition on the basis of which the assessment was reopened were factually incorrect and further that the re¬assessment proceedings were barred by limitation. The first respondent did not agree with the objections and dismissed them vide order dated 25.07.2011. Against the said order the petitioner filed W.P.(C) No.6011/2011 on 17.08.2011, impugning both the notices issued under Section 148 and the order dismissing the objections of the petitioner. By order dated 23.08.2011 this Court allowed the writ petition and directed the first respondent to pass a fresh order dealing with the petitioner‟s objections, particularly the objection that the tax evasion petition on the basis of which the assessment was reopened contained factually incorrect allegations.
The contentions of the petitioner deserve acceptance. Once the first respondent found, after due inquiries, that there was no basis to connect the petitioner with the May Fair Garden property, he ought to have dropped the reassessment proceedings. Nothing survived thereafter. He was, therefore, acting outside jurisdiction when he issued a letter on 02.11.2011 calling upon the petitioner to avail of the opportunity, if so advised, given to him to cross-examine the complainant – i.e., the person who was the author of the tax evasion petition. The only order which could have been passed by the first respondent, after finding that there was no basis for the tax evasion petition connecting the petitioner with the May Fair Garden property, was to drop the proceedings initiated under Section 148. Surprisingly one month after the first respondent wrote to the petitioner conceding that there was no basis for the tax evasion petition, he invited the petitioner to cross-examine the complainant, if so advised. Such a procedure is unknown to the Act. Instead of terminating the proceedings initiated under Section 148 of the Act by dropping them the first respondent chose inexplicably to keep those proceedings alive. This is illegal and impermissible in law. This amounts to nothing but harassment of the petitioner. There appears to be some vested interest in keeping the proceedings against the petitioner pursuant to the notice dated 31.03.2011 alive. The tax evasion petition and the present proceedings seem to be the result of a personal vendetta between two officers of the Indian Revenue Service (IRS) (the complainant being one of them). This unfortunately has resulted in multiple proceedings before this Court.
The respondents have to act in accordance with law and not under any pressure. The AO, being a responsible officer should not be party or pressurised by someone to personal vendetta. Being statutory officers they have to act independently and in accordance with law.
HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 17th February, 2014
+ W.P. (C) 7977/2011
SHRI PRADYOT K. MISRA
versus
ASSISTANT COMMISSIONER OF INCOME-TAX
ORDER
R.V. EASWAR, J. (OPEN COURT)
1. This petition filed under Section 226 of the Constitution of India seeks a writ quashing the notice dated 31.03.2011 issued by the Assistant Commissioner of Income Tax, Circle 40(1), New Delhi (first respondent) under Section 148 of the Income Tax Act, 1961 („Act‟, for short) and the letter dated 02.11.2011 issued by him fixing the proceedings for further hearing on 16.11.2011.
2. The facts are not much involved. The petitioner is a retired officer of the Indian Revenue Service and served in various capacities including, inter alia, the position of Chief Commissioner of Income Tax, Director General of Vigilance, Chief Vigilance Officer of the Central Board of Direct Taxes and Income Tax Ombudsman. In respect of the assessment year 2004-05, he filed a return of income declaring a total income of Rs.4,10,917/- consisting of salary income, property income and income from other sources. It was processed under Section 143(1) of the Act. On 31.03.2011 a notice was received by him under Section 148 of the Act seeking to reopen the assessment on the ground that income chargeable to tax had escaped assessment. The petitioner appears to have filed a return of income in response thereto and sought the reasons recorded to reopen the assessment. The reasons were furnished on 27.06.2011 to which the petitioner filed objections questioning the jurisdiction of the respondent No.1 to issue the notice. It was contended that the reasons recorded were not sufficient in law to entertain the belief that there was escapement of income, that the allegations levelled in the tax evasion petition on the basis of which the assessment was reopened were factually incorrect and further that the re¬assessment proceedings were barred by limitation. The first respondent did not agree with the objections and dismissed them vide order dated 25.07.2011. Against the said order the petitioner filed W.P.(C) No.6011/2011 on 17.08.2011, impugning both the notices issued under Section 148 and the order dismissing the objections of the petitioner. By order dated 23.08.2011 this Court allowed the writ petition and directed the first respondent to pass a fresh order dealing with the petitioner‟s objections, particularly the objection that the tax evasion petition on the basis of which the assessment was reopened contained factually incorrect allegations.
3. On 30.09.2011, the first respondent passed an order accepting the legal objections raised by the petitioner on the ground that there was no evidence to connect him with certain properties which were alleged in the tax evasion petition to have been acquired by him out of his undisclosed sources of income and further that the contents of the tax evasion petition were found to be factually incorrect. The first respondent wrote the following letter to the petitioner: -
"To,
Sh. P.K. Misra
C/o. Sh. Y. Das
B-367, New Friends Colony, New Delhi – 110025
Sir,
Sub.: Objections to the re-opening of assessment year 2004-2005 – directions of Hon'ble Delhi High Court – regarding.
Hon'ble High Court, Delhi quashed the order of the undersigned dated 25.07.2011 and directed to pass fresh order after affording an opportunity of being heard. It was further directed that you or your authorized representative shall appear before the Assessing Officer on 19.09.2011.
The present re-assessment proceedings were initiated vide notice U/s 148 dated 31.03.2011 after recording the reasons and after obtaining approval from the Addl. Commissioner of Income Tax, Range-40, New Delhi. Objections were filed by you for the re-opening of assessment on 18.07.2011. The objections filed were disposed off vide this office order dated 25.07.2011 which were challenged by you by way of writ petition before the Hon'ble High Court, Delhi.
On 19.09.2011 your authorized representatives Sh. Rohit Garg, Chartered Accountant & Sh. Amit Sachdeva, Advocate appeared in this office and filed submissions dated 19.09.2011 and discussed the matter. It was pointed out by you A.R's that ini ation of re-assessment proceedings were bad in law and void ab initio on the following grounds: -
1) There was no reason to believe that income of the assessee had escaped the assessment;
2) The reasons recorded were factually incorrect inasmuch as the assessee has no connection whatsoever with the property, being Plot B-8, Cosmopolitan Cooperative Housing Society Ltd., Hauz Khas, May Fair Garden; and
3) The present reassessment proceedings are barred by limitation prescribed in section 149 of the Act inasmuch as the reasons recorded have been supplied to the assessee after the expiry of period of 6 years from the end of the relevant assessment year.
I have considered the objections raised by you. The objection mentioned at "1 & 3"above, the same were disposed off by me vide order dated 25.07.2011. It is only with respect to objection "2"above for which the Hon'ble High Court has quashed the order dated 25.07.2011.
There was Tax Evasion Petition in which it was alleged that you had acquired the property bearing no.B-8 ground floor flat with basement and back garden made on 600 sq. yds. Plot, Cosmopolitan Cooperative Housing Society Ltd., Hauz Khas, (Shahpur Jat known as May Fare Garden), New Delhi costing not less than 20 crores. Since there were allegations against your goodself w.r.t. purchase of the said property and the enquiries w.r.t. alleged purchase of the said property were not complete and the time limit for issuing notice U/s 148 was getting time barred on 31.03.2011 and to safeguard the interest of revenue there was no alternative but to issue notice U/s 148 of the Income Tax Act, 1961. In order to verify veracity/ genuineness of the contents of T.E.P. w.r.t. acquisition of aforesaid property, detailed investigations were carried out. Enquiries were made from the occupants of the aforesaid property w.r.t. ownership. Enquiries were also made from the sub-registrar's office.
The results of enquiries do not connect the assessee with the property in question. It has been established on the basis of enquiries and documents gathered that the contents of the tax evasion petition w. r. t. purchase of May Fare Garden property are not substantiated or corroborated. The contents of the tax evasion petition
w. r. t. alleged purchase of the property no.B-8, Cosmopolitan Cooperative Housing Society Ltd., Hauz Khas (Shahpur Jat known as May Fare Garden), New Delhi by you are factually incorrect.
In view of above, the objections filed by the assessee on 18.07.2011 and again filed during the course of hearing on 19.09.2011 are disposed of.
Yours faithfully
Sd/-
(A.K. Dang)
Asstt. Commissioner of Income Tax,
Circle 40(1), New Delhi"
4. One would have thought that the matter ended there but on 02.11.2011 the respondent No.1 issued a letter to the petitioner in the following terms: -
"To,
Sh. P.K. Misra
C/o. Sh. Y. Das
B-367, New Friends Colony, New Delhi – 110025
Sir,
Sub.: Tax Evasion Petition in your case – regarding.
Kindly refer to on going proceedings for A. Y. 2004- 2005 in your case.
Sh. S. K. Srivastava who is the complainant in this case is proposed to be examined as a witness in support of his allegations against you upon his written request in this regard. Sh. Srivastava has informed this office that he will
examine himself as his witness as well as other witness in support of his allegations against you and lead other evidences in the case. The case is fixed for hearing on 16.11.2011.
You are hereby informed that you may if you so desire, be present in this office on 16.11.2011 at 11:00 am sharp when the evidence of Sh. S.K. Srivastava is to be taken by this office and if you so want cross examine the witness as per law.
Considering the shortage of time available for conclusion of proceedings, it is informed that adjournment may kindly be not sought.
Yours faithfully
Sd/-
(A.K. Dang)
Asstt. Commissioner of Income Tax,
Circle 40(1), New Delhi"
5. It is necessary to mention here that on 16.11.2011 this Court had stayed all further proceedings pursuant to the notice dated 31.03.2011 issued under Section 148 of the Act.
6. The contentions of the petitioner deserve acceptance. Once the first respondent found, after due inquiries, that there was no basis to connect the petitioner with the May Fair Garden property, he ought to have dropped the reassessment proceedings. Nothing survived thereafter. He was, therefore, acting outside jurisdiction when he issued a letter on 02.11.2011 calling upon the petitioner to avail of the opportunity, if so advised, given to him to cross-examine the complainant – i.e., the person who was the author of the tax evasion petition. The only order which could have been passed by the first respondent, after finding that there was no basis for the tax evasion petition connecting the petitioner with the May Fair Garden property, was to drop the proceedings initiated under Section 148. Surprisingly one month after the first respondent wrote to the petitioner conceding that there was no basis for the tax evasion petition, he invited the petitioner to cross-examine the complainant, if so advised. Such a procedure is unknown to the Act. Instead of terminating the proceedings initiated under Section 148 of the Act by dropping them the first respondent chose inexplicably to keep those proceedings alive. This is illegal and impermissible in law. This amounts to nothing but harassment of the petitioner. There appears to be some vested interest in keeping the proceedings against the petitioner pursuant to the notice dated 31.03.2011 alive. The tax evasion petition and the present proceedings seem to be the result of a personal vendetta between two officers of the Indian Revenue Service (IRS) (the complainant being one of them). This unfortunately has resulted in multiple proceedings before this Court.
7. The respondents have to act in accordance with law and not under any pressure. The AO, being a responsible officer should not be party or pressurised by someone to personal vendetta. Being statutory officers they have to act independently and in accordance with law.
8. The notice dated 31.03.2011 issued under Section 148 of the Act as well as the impugned letter dated 02.11.2011 are hereby quashed. The writ petition is accordingly allowed.
POSCO Engineering & Construction Co Ltd vs. ADIT (ITAT Delhi)
Entire law on taxability of "composite" contracts for supply of offshore & onshore supply & services under Act & DTAA explained
(i) The first question which requires to be decided is whether it is a case of composite contract? In our considered opinion, the AO was initially not correct in holding that the contract was a composite one devoid of any bifurcation towards onshore and offshore supplies and services, which stand was subsequently altered to the correct position. We, therefore, hold that it is wide off the mark to categorize the present contract agreement as a composite one since all its major four components are distinctly identifiable with separate consideration for each. There is a separate mention of consideration for supply of equipments and for rendition of services. Simply because the supply of equipment and the rendition of services is to one party and for a common purpose, we are unable to find any logic in treating the entire amount as one composite payment attributable commonly both to the supply of equipment and rendering of services, more so when there is a specific identifiable amount relatable to these segments
Kostub Investment Ltd vs. CIT (Delhi High Court)
Expenditure on foreign education of employee (son of director) is deductible if there is business nexus
Whilst there may be some grain of truth that there might be a tendency in business concerns to claim deductions under Section 37, and foist personal expenditure, such a tendency itself cannot result in an unspoken bias against claims for funding higher education abroad of the employees of the concern. As to whether the assessee would have similarly assisted another employee unrelated to its management is not a question which this Court has to consider. But that it has chosen to fund the higher education of one of its Director's sons in a field intimately connected with its business is a crucial factor that the Court cannot ignore. It would be unwise for the Court to require all assessees and business concerns to frame a policy with respect to how educational funding of its employees generally and a class thereof, i.e. children of its management or Directors would be done. Nor would it be wise to universalize or rationalize that in the absence of such a policy, funding of employees of one class – unrelated to the management – would qualify for deduction under Section 37(1). We do not see any such intent in the statute which prescribes that only expenditure strictly for business can be considered for deduction. Necessarily, the decision to deduct is to be case-dependent
BBC World News Limited vs. ADIT (Delhi High Court)
High Court alarmed at shoddy record-keeping by dept and allegations of tampering. S. 147 reopening quashed
We have examined the original record but did not find the proceedings or order sheets relating to original proceedings on record. This is a serious lapse, and it is apparent that the proceeding sheets in the respondents‟ custody and charge, have been removed. The record belongs to the respondents and was in their custody and charge. It was/is their duty and obligation to maintain the records properly and as per law and to ensure their sanctity and accuracy. The records cannot and should not be interpolated or changed. This High Court has in some cases earlier adversely commented about record maintenance by the Revenue as it is unacceptable and faulters on the principle of good governance. Facts mentioned above do not disclose a commendable situation and in fact the situation appears to be alarming and perilous. This requires urgent effective remedial steps. Failure to maintain records has resulted in serious allegations being made that the papers/documents have been tempered or removed etc. The papers/documents on record are not serially numbered and indexed. We also note that it is not practice of the department to give acknowledgement of papers submitted during the course of assessment proceedings
Pradyot K. Misra vs. ACIT (Delhi High Court)
High Court irked at abuse of law to settle personal vendetta between top-level IRS officers
The respondents have to act in accordance with law and not under any pressure. The AO, being a responsible officer should not be party or pressurised by someone to personal vendetta. Being statutory officers they have to act independently and in accordance with law
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