2022 (5) TMI 1289 - HC - Income Tax

Refund the amount adjusted in excess of 20% of the disputed demand - action of the respondents and the Revenue Authorities is violative of Article 265 of the Constitution of India. - need to pass strictures against the offices - HELD THAT - As the action of recovery on the part of the respondents was de-hors the statutory provisions specified u/s 220(6), 245 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. This high-handed action of the respondents is against Article 14, 19 and 265 of the Constitution of India. In spite of categorical directions of the Apex Court in Kamlakshi Finance Corporation Ltd. 1991 (9) TMI 72 - SUPREME COURT This Court considers that in the present case, the respondents have totally ignored the provisions of law, the judicial pronouncements of higher forum and the action of the respondents in not considering the appeal in time and even till date, is against the principles of natural justice, the requirement of law, fair play and therefore, the action of the respondents and the Revenue Authorities is violative of Article 265 of the Constitution of India. Accordingly, on perusal of the case in hand, apart from allowing the writ petition, 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 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. In the case in hand, this Court further deems it appropriate to impose a cost upon the respondents which is quantified to Rs.50,000/- which the respondent-department shall pay itself or if it so chooses, the same may be recovered equally from respondents No.1 2 and be deposited with the Rajasthan State Legal Services Authority, Jaipur and assessee in half and half within two months of passing of this order.

Summary

Issues Involved:
1. Excessive adjustment of refund against disputed tax demand.
2. Initiation of recovery proceedings despite pending appeal.
3. Violation of principles of natural justice and statutory provisions.
4. Lack of judicial discipline and adherence to departmental circulars and legal precedents.
5. Imposition of exemplary costs and departmental action against officers.

Issue-Wise Detailed Analysis:

1. Excessive Adjustment of Refund Against Disputed Tax Demand:
The petitioner-assessee filed a writ petition under Article 226 of the Constitution of India, seeking a refund of the amount adjusted in excess of 20% of the disputed demand for AY 2017-18. The court observed that the respondents had adjusted the entire refund amount due for AY 2018-19 and 2019-20 against the disputed demand for AY 2017-18, which was against the provisions of Sections 220(6) and 245 of the Income Tax Act, 1961. The court held that the respondents' action of adjusting the entire refund amount without following the statutory provisions and departmental circulars was illegal and unjustified.

2. Initiation of Recovery Proceedings Despite Pending Appeal:
The petitioner contended that he had filed an appeal against the assessment order and a stay application, and as per Section 220(6) of the IT Act, he could not be treated as an assessee in default. The court noted that the petitioner had promptly filed an appeal within the statutory period, and as per the provisions of Section 220(6), the petitioner should not be deemed an assessee in default. The court criticized the respondents for initiating recovery proceedings and adjusting the refund despite the pending appeal and stay application.

3. Violation of Principles of Natural Justice and Statutory Provisions:
The court observed that the respondents had violated the principles of natural justice by not providing an opportunity of hearing before adjusting the refund against the outstanding demand, as required under Section 245 of the IT Act. The court held that the respondents' action was high-handed, autocratic, and without authority of law, and it violated the petitioner's fundamental rights under Article 265 of the Constitution of India.

4. Lack of Judicial Discipline and Adherence to Departmental Circulars and Legal Precedents:
The court noted that the respondents had ignored the statutory provisions, departmental circulars, and judicial pronouncements of higher forums. The court referred to various judgments, including the Apex Court's decision in Union of India Vs. Kamlakshi Finance Corporation Ltd., which emphasized the importance of judicial discipline and adherence to higher appellate authorities' orders. The court criticized the respondents for not considering the appeal in time and for their arbitrary and unjustified actions.

5. Imposition of Exemplary Costs and Departmental Action Against Officers:
The court allowed the writ petition and directed the respondents to refund the amount adjusted in excess of 20% of the disputed demand for AY 2017-18, along with interest, within thirty days. The court also imposed a cost of Rs. 50,000 on the respondents, to be deposited with the Rajasthan State Legal Services Authority and the petitioner. Additionally, the court issued strictures for appropriate departmental action against the officers involved in the non-consideration of the appeal and for not adhering to statutory provisions and judicial pronouncements. The court directed the Chief Commissioner of Income Tax to apprise the Rajasthan State Legal Services Authority about the pendency situation and statistics for further action in the larger public interest.

Conclusion:
The writ petition was allowed, and the court directed the respondents to issue a refund along with interest, imposed costs on the respondents, and called for departmental action against the concerned officers. The court emphasized the importance of adhering to statutory provisions, judicial pronouncements, and principles of natural justice in tax recovery proceedings.