By TIOL News Service

MUMBAI, JAN 02, 2019: THE ISSUE AT HAND BEFORE THE HIGH COURT WAS - Whether it is the duty of the Revenue official to ascertain as to whether any notices of demand u/s 156 has been served on the assessee or not, before initiating any steps for adjustment of refunds due to the assessee. YES is the verdict.

The High Court also held that if some procedure is initiated by a Revenue official & is taken to its erroneous conclusion at by another officer, merely on basis of presumptions, then such wanton conduct by the official should be punished by imposing penalty. The Bench also gave stern directions to the Department, observing that should it fail to justify the acts of certain officials due to their inefficiency, then such errant officers were liable to be punished by their superior officers, through denial of promotion or monetary benefits.

Facts of the case

The assessee-company preferred the present petition challenging the action of Revenue Officers in seeking inordinate adjournment as well as adjustment of refunds payable to assessee without any outstanding dues, and that too without issuing any communication in that regard or raising any demand for previous years.

In writ, the High Court held that,

++ the instructions given by the Revenue officer who is present in Court, are that, in the records though the Department/Revenue claims that the demand of Rs.62 Lakhs for the A.Y 2003-2004 is raised on the Assessee and for the A.Y 2009-2010, the demand of Rs 90,92,528/- is raised, there is no proof in the official records of service of such demand on the Assessee. Thus, it is conceded that the demand has been raised on the Assessee but there is absolutely no communication of the said demand to the Assessee. It is stated by Revenue's counsel that in the absence of this, it will not be possible to file affidavit to justify what has been done by the Department. If this is the position and emerging from the official records and public documents then, it is surprising that Revenue's counsel is instructed by the officer present in Court to state that at the relevant time when he addressed this communication, he was informed that the demand was indeed raised. However, though this notice of demand u/s 156 in the sum of Rs 90,92, 528/- is raised, the records do not indicate that such a notice was served on the Assessee. It is conceded that a proof of service would be necessary before the action and particularly seeking to adjust the refund due to the Assessee against such demand is taken;

++ it is then stated by Revenue's counsel that the officer who is present in Court while taking the steps and measure proceeded on the assumption that the notice of demand is duly served. It is difficult to see as to how the step which was initiated by some other official but taken to its logical end and conclusion by this officer should not be visited with such consequences as the law permits. All the more because on account of his fault, lapse and error, it is the Department who have been severely embarrassed and seriously handicapped in justifying their acts which are challenged in this Petition. It is the Revenue Officials who go on boasting that 30% to 40% of the Revenue collection in this Country is from the city of Mumbai. If that is the position and the status of city of Mumbai styled as a commercial capital of India, then, it is but natural that the judiciary and the public expects highest degree of efficiency and expediency on the part of the officials. The enormous power that the Department of Revenue and particularly the Income Tax Commissionarate wields is for larger public good. They have to be prompt in recovering the revenue and which is recoverable legally. In the event they find that the officers' satisfaction has to be based on certain prerequisites being complied with, then, whether such requirements and requisites are complied with, has to be ascertained by them. It was some other officer who has already initiated the steps or measures and the present official has merely taken the consequential and conclusive steps. Before taking drastic measures and addressing communications, it was duty of this official to ascertain whether there was a notice of demand, that is valid, that its legality and validity is also based on satisfaction of the procedural requirements being fulfilled and whether indeed these procedural requirements are complied with. If he does not do it, he must face the consequences;

++ the file which has been handed over to this Court, on perusal, would reveal that several documents and papers therein are scattered. There is no proper indexing and pagination. If demands are generated electronically as is now stated, then, equally that technology should enable them to generate proof and evidence of service and other procedural requirements being complied with. The Ministry level officials including the departmental heads will have to work in coordination and cooperation. They must weed out promptly and expeditiously inefficient and corrupt officials and those who are deadwood. There is absolutely no denial of the factual statements made in the Writ Petition. There is no dispute with regard to the legal position. In such circumstances, the order under challenge is quashed and the Department is directed to grant the refund determined for the A.Ys 1993-1994 and 1995-1996 together with applicable interest within three months. If that amount is yet not released but is sought to be adjusted against demands which are also not taken to their logical conclusion, then, the Revenue must suffer the consequences in law. In addition, costs of Rs 1.5 lakhs has been imposed on the Department, which is to be apportioned between the officer who is present in Court and the officer who was his predecessor.

(See 2019-TIOL-18-HC-MUM-IT)