Mere Reiteration of Order Not Wilful Disobedience: Delhi HC Drops Contempt Proceedings Against Principal Commissioner [Read Order]

The Delhi High Court, in a recent case, disposed of contempt proceedings initiated against a Principal Commissioner of Income Tax, holding that her order, while similar to a previously set-aside one, was not a case of 'willful disobedience' as it was based on CBDT circulars and an application of mind.

The contempt proceedings arose from an order passed by Ms. Anuradha Misra, the then-Principal Commissioner of Income Tax, in a stay application filed by assessee Dhruva Goel. The assessee had challenged a tax demand of over ₹8 crores and sought a stay of the demand pending appeal.

The PCIT rejected the stay application, directing the assessee to pay 20% of the demand per CBDT circulars. This order was set aside by a Division Bench of the High Court, which observed that the PCIT had not furnished any reasons for not exercising discretion in the assessee's favor and directed her to pass a fresh, reasoned order.

Pursuant to this direction, the PCIT passed another order with similar directions, which was again challenged by the assessee. The High Court, observing that the second order was a "mere reiteration" of the first set-aside order, initiated contempt proceedings, forming a prima facie opinion that the PCIT had willfully disobeyed its directions.

The counsel for the PCIT argued that the second order was not devoid of reasons, as it was based on specific CBDT circulars and an assessment of the assessee's sound financial condition. He submitted that the PCIT had tendered an unconditional apology and relied on Supreme Court precedents to argue that an error of judgment, without an improper motive, does not amount to contempt.

The Delhi High Court, while referring to the definition of 'civil contempt' under the Contempt of Courts Act, stated that the disobedience must be 'willful' and done with a 'bad motive'. The Court examined the PCIT's order and found that it did reflect an application of mind, as it was predicated on the mandatory CBDT circulars and the assessee's financial capacity.

The Court concluded that there was no evidence of an evil intent or a deliberate attempt to defy its previous order. The Delhi High Court held that the essential ingredient of 'willful disobedience' was missing and dropped the contempt proceedings against the retired Principal Commissioner.

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