In a significant ruling, the Allahabad High Court has quashed a re-assessment order under section 147/148 of the Income Tax Act, 1961, passed by the income tax department demanding huge amount of tax without any basis. While quashing the order, a bench of Justice Surya Prakash Kesarwani, and Justice Jayant Banerji imposed a cost of Rs. 50 lakhs on the department for the arbitrary actions and abuse of power.
The bench was hearing a petition by the assessee, S R Cold Storage wherein the department, vide, the impugned reassessment order, re-assessed the income of the assessee under Section 147/148 of the Act, 1961 at Rs.13,78,79,020/- by making an addition of Rs.13,67,24,000/- on account of alleged cash deposit by the petitioner in bank account with the Bank of Baroda representing unexplained cash credit under Section 68 of the Act, 1961 and thus created a demand to the tune of Rs.16,90,61,731/- and initiated penalty proceedings under Section 271AAC(1) of the Act, 1961.
After perusing the documents, the Court found that the respondents have acted arbitrarily, without jurisdiction, in breach of principles of natural justice and abused the power conferred under the Act, 1961 and thus created a huge demand of income tax of Rs.16,90,61,731/-.
“We have also found that the reassessment proceedings were without jurisdiction. The information on the basis of which the reassessment proceeding was initiated against the petitioner, has been admitted by the respondent to be incorrect. Despite every effort made by the petitioner and the evidences filed by it to establish that there has been no escapement of income to tax and the information on the basis of which reassessment proceeding has been initiated is unfounded, respondents have not even looked into the reply and evidences filed by the petitioner and even his request for personal hearing through video conferencing was denied. Only a day’s time was granted to the petitioner to submit reply to the show cause notice in reassessment proceedings which the petitioner submitted within time and yet his request for hearing through video conferencing was declined by the respondent No.4. This shows a complete failure to the observance of rule of law on the part of the respondents. A huge demand of Rs.16,90,61,731/- has been created by the resopndents against the petitioner on totally non-existent and baseless ground and that too without any fault or breach by the petitioner,” the Court said.
Quashing the order, the Court held that “the respondents have acted arbitrarily, illegally without jurisdiction, caused harrassment to the petitioner and abused power conferred under the Act, 1961, which resulted in creation of illegal demand of income Tax of Rs.16,90,61,731/-, we find it a fit case to impose cost of Rs.50,00,000/- (Rupees Fifty Lakhs) upon the respondents which shall be deposited by the respondents in the Prime Minister National Relief Fund within three weeks from today.”
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