Madras HC Orders Widow to Deposit ₹2.5 Lakh Against ₹57.7 Lakh Demand as pre-deposit on Income from Ancestral Property Sale [Read Order]

In a recent decision, the Madras High Court has directed a widow to deposit ₹2.5 lakh as pre-deposit against a demand of ₹57.7 lakh raised by the Income Tax Department. The court did not support the decision of the department directing the widow to deposit 20% as she is already going through a financial crisis.

The petitioner filed a writ challenging the assessment order issued by the tax authorities on July 30, 2024, which demanded tax on income allegedly derived from the sale of ancestral property.

The income tax authorities classified ₹60.85 lakh as additional income from undisclosed sources under Section 69A of the Income Tax Act, 1961 leading to a demand of ₹57.72 lakh. Aggrieved by this decision, the widow appealed to the Commissioner of Income Tax (Appeals) and requested a stay on the tax demand.

The petitioner’s case is based on the fact that the ancestral property, jointly owned by six family members, was sold for ₹21.85 lakh. Despite this, the income tax department passed an assessment order without proper justification, leading to the inflated tax demand. The petitioner, being a widow and facing financial difficulties, argued that she is unable to pay the 20% of the demand, amounting to ₹11.54 lakh, as directed by the tax authorities.

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During the hearing, K.Vasanthanayagan, the petitioner’s counsel requested the court to consider her financial constraints and reduce the percentage of the demanded payment.

On the other hand, the department’s counsel opposed the reduction but suggested that, if any relief were to be granted, the petitioner should at least be required to pay 15% of the total disputed amount.

Justice Krishnan Ramasamy, considering the petitioner-widow's financial hardship and the fact that she is a widow, found it reasonable to reduce the required deposit and directed the petitioner to pay ₹2.5 lakh instead of the original 20%.

The court granted the petitioner four weeks to make the payment and instructed the tax authorities to stay the recovery of the remaining tax demand until the appeal is resolved.

To Read the full text of the Order CLICK HERE

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