‘Income Tax Dept has not Trusted even upon its Lawyers’: Supreme Court Slams Revenue for Delay in Filing SLP [Read Order]

In a recent order, the Supreme Court criticised the Income Tax Department for taking an unduly long time to file its Special Leave Petition (SLP), observing that the Department appeared to have “not trusted even upon its lawyers.”

The court agreed to hear the Revenue’s challenge to the validity of the Income Tax Appellate Tribunal’s (ITAT) remand in the Hyderabad Cricket Association (HCA) charitable expenditure matter.

The dispute arose from assessments for multiple years in which the assessing officer had disallowed several expenditure claims of HCA on the ground that proper bills, vouchers, and confirmations were not produced. The assessing officer made ad-hoc disallowances, questioned cash payments, and also disallowed a donation made by HCA to the Hyderabad Hockey Association.

A disallowance under Section 40(a)(ia) was also made for alleged TDS defaults. HCA appealed these findings and explained that its accounts were audited and that most vouchers had been verified during assessment.

The ITAT observed that the same issues had appeared in earlier years and that, on remand in those years, the assessing officer later accepted the expenditure as genuine. The Tribunal explained that the facts in the present years were similar and that fresh verification was required. It set aside the disallowances and directed the assessing officer to reconsider the matter after allowing HCA an opportunity to place all records.

The Revenue appealed to the Telangana HighCourt. It observed that the ITAT’s decision was confined to factual verification and did not raise any substantial question of law. The appeal was dismissed.

The Revenue then approached the Supreme Court, but the SLP was filed with a delay of 524 days. The Department submitted a better affidavit explaining the delay. It explained that after the High Court’s order, the authorities repeatedly called for scrutiny reports, sought further explanations for the delay, and sent the papers for several rounds of vetting before forwarding them again for drafting the delay application.

The Supreme Court pointed out that this showed an unnecessarily long internal process and added that the Department seemed to have no trust in its own lawyers despite having a team of legal experts.

The Division Bench comprising Justice Pankaj Mithal and Justice Prasanna B. Varale explained that, even though the reasons for delay were not satisfactory, similar matters were already pending before the Court. For that reason, the delay in filing and refiling was condoned, and the case was directed to be tagged with Civil Appeal No. 1294 of 2015.

The issue now before the Supreme Court concerns the Revenue’s challenge to the ITAT’s direction remanding the matter to the assessing officer for fresh factual verification of HCA’s expenditure and its claim of exemption under Section 11 of the Income Tax Act.

The Supreme Court ordered that a copy of its decision be sent to the concerned Commissioner of Income Tax and higher authorities so that corrective steps may be taken. The SLP will now be considered along with the pending appeal.

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