HC comes down heavily on Income Tax department’s tax terror

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In what could be termed as a hearing of significant importance, the Bombay High Court has imposed a fine of INR one lakh against the Income Tax Department (IT) for filing frivolous appeal. The court has also directed the department to recover the sum from the official responsible for taking such an action.

The court passed an exemplary order on July 10, 2014 which read “The Revenue officers must realize that just like other powers an executive power confined in them is in the nature of a Trust. They hold office as trustees of the public at large. They deal with public revenue and public money and that cannot be wasted in such frivolous litigation. We, therefore dismiss these appeals with costs quantified at INR I lakh each”.

The roots of the case relates to an appeal filed by the Commissioner of IT against Larsen and Turbo Ltd. (L&T). The court made its remark while upholding the Tribunal’s decision to set aside the penalty imposed by the IT department on L&T.

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The Bombay HC came down heavily on the IT department and remarked that the Revenue is wasting precious time of the judiciary with such superficial appeals. The HC also directed the Revenue Officers to accept and abide by the Tribunal’s findings in such matters.

The Court further raised questions on the inability of higher officials to take bold decisions and tackle such insignificant matters on its own. The fact that the assessee is a leading Public Limited Company should not deter the officials to make informed and rational decisions that can best serve the interest of the public. “The biggest litigant namely, the State ought to be aware of the Pendency of Cases in High Courts of Bombay, Madras, Calcutta and Allahabad for example. If their process particularly on litigations are not aimed at reducing frivolous and speculative litigations, then, the least that can be said is that the State has failed to act for Public good and in Public Interest”, the High Court observed.

The HC further held that the superior and competent authority should recover the cost personally from the officer responsible. The authority must also take disciplinary action against him if the power to decide about filing such appeals is abused. The IT department is on a collection spree and it seems that the department is terrorizing its tax payers indiscriminately in an effort to meet its steep collection.

Following a video conference held on March 20, 2014, the undersecretary had issued a memorandum to the government of India, ministry of finance, highlighting the below mentioned points:

  • There is a shortfall of more than INR 50,000 crore in net revenue collection for the current year. It is expected to end on March 31, 2014.
  • The growth trend till date and the growth trend with reference to minor heads suggest that target could be reached, provided there is no slacking of efforts. All officers must show commitment to work 24 hours a day and 7 days a week for the remaining 11 days of the financial year.
  • The assessing officers/Addl.CIT/CIT/CCIT, responsible for the assessment work should not leave headquarter up to March 31, 2014. In case of any emergency requirement, they have to seek permission from respective Zonal officers.

On February 7, 2012, a letter from Laxmann Das, the then chairman of the Central Board of Direct Taxes (CBDT) seems to make matters worse for the highest ranking officers of the tax department. The letter clearly cited the ability of meeting tax targets for tax collection to decide the career prospects of the officials. He sent out a message to the top 100 IT officials that tax revenue targets are not negotiable.

The point here is simple – the tax officers of the country have fallen prey to the strict policies of the finance ministry. Guidelines such as appraisals of officials depending on their ability to collect taxes are certainly making things worse for the tax payers of the country.