Was the income tax department in hurry to achieve its tax collection targets by March 31st, by any means? That's what the Bombay High Court observed while hearing a tax dispute case between the I-T department and Shri Saibaba Sansthan Trust (Shirdi), following which it directed the Central Board of Direct Taxes (CBDT) to conduct a probe against overzealous officers.
The bench of Justice Sandeep Shinde and Justice MS Sanklecha at Bombay High Court, in their order against the I-T department stated, "The entire exercise, here, appears to be only to assist the revenue to collect some amount of taxes prior to March 31, 2018. This is certainly not expected of an Appellate Authority such as the CIT (A) who adjudicates disputes between the Revenue and the Assessee on a regular basis."
The Bombay High Court set aside the order dated March 23, 2018 passed by the Commissioner of Income Tax (Appeals) on the Shirdi Trust's stay application. Not only that, the bench directed the registry to serve a copy of its order upon the CBDT to make an enquiry of certain complaints.
"If the allegations made by the Petitioner (Shirdi Trust) are correct, CBDT will take coercive measures to ensure that its officers, deal with the assessee's fairly and in accordance with the law," the order directed.
The I-T department believes that every cash amount or bullion items donated by anonymous devotees in 'hundi' at Shirdi temple in Maharashtra is 'black money', against which Shri Saibaba Sansthan Trust needs to pay 30 per cent of tax.
For the assessment year of 2015-16, the Deputy Commissioner of Income Tax (DCIT) on December 31, 2017, passed an order under Section 143 (3) of the Income Tax Act, 1961 (the Act) against Shri Saibaba Sansthan Trust determining an amount of Rs 122.04 crore as tax payable.
After series of hearing before CIT (A), in an order dated March 23, 2018, the trust was directed to determine the amount payable on the individual heads of demand at varying percentages of the constituents of demand, aggregating to Rs 122.04 crore.
It resulted in an aggregate amount of Rs 15.16 crore being payable before the balance of the aggregate demand of Rs 122.04 crore could be stayed.
But at the same time, Commissioner of Income Tax (Exemption) also threatened to attach the Shirdi Trust's bank account and reopen past two assessment years' cases.
Before that, on March 20, Shirdi Trust had attended the final hearing of its appeal before the CIT (A), as called for. The trust was heard extensively on merits of its appeal from the order dated December 31, 2017 of the Assessing Officer.
At the conclusion of the hearing on 20th March, 2018, the trust signed an order sheet, prepared by CIT (A), which recorded that the appeal has been finally heard. But on same day, the trust got a telephonic call from the office of the CIT (A) to remain present in the office of the CIT (A) on March 21, 2018 at 10:30am.
Shockingly, at the meeting held on March 21, 2018, the CIT (A) commenced / started the hearing of the stay application filed by the Shirdi Trust along with its appeal. At the end of the day, the CIT (A) informed the trust that that even if the order on the pending appeal is passed on March 27, 2018, it would not be possible to issue the order before March 31, 2018.
On March 22, the Trust's CA received a call from the office of the CIT (E) directing the trust to deposit at least Rs 20 crore before March 31, 2018.
"Further, CIT [Exemption] informed the Shirdi Trust that failing to deposit the amount of at least Rs 20 crore would lead not only to the attachment of the trust's bank accounts but also reopening of the assessment for the past two Assessment Years", the trust complained in its petition.
CBDT directed to probe
The HC found the coercive measures of I-T department "very serious", particularly when the Assessing Officer or the CIT (E) could have dealt with the request of deposit by passing an order on the application under Section 220 (6) of the Act filed by the Shirdi Trust.
In the absence of denial on affidavit by the CIT (A) and CIT (E) the allegations in the petition cannot be discarded. "However it would be best if the Central Board of Direct Taxes (CBDT) carry out the necessary investigation on the above allegations and if there is truth in it, it would take corrective action on the same", the order directed.
The HC made it clear that if the allegations in the petition filed by Shirdi Trust are correct, then such failures on the part of its officers needs to be corrected by the CBDT before it becomes the norm.
The Court observed that failing corrective measures by the CBDT would only result in our entertaining petitions from orders under the Act as the alternative remedy would cease to be an efficacious remedy, if such arm twisting measures dehors application of the law, are adopted by the Revenue.
Thus, the Bombay HC has directed the CBDT to carry out necessary investigation on the allegations made in the petition and if found correct, to take corrective measures to ensure that its officers shall not be overzealous in seeking to recover maximum revenue before March 31 of any financial year in total disregard of the law.