Allahabad High Court Directions to Enquire Conduct of AO - need to be modified

[CA DEV KUMAR KOTHARI]

Directions of High Court to enquire about bonafide conduct only of Assessing Officer seems infructuous because addition made by AO was confirmed by CIT(A), it was deleted by Tribunal but revenue appealed before High court so other officers conduct should also be enquired.

Commissioner Of Income Tax Vs.  Intezar Ali [2013 (8) TMI 704 - ALLAHABAD HIGH COURT]

Scope of this write-up:

This write-up is limited to the scope of covering implications of the directions of honorable High Court to cause an enquiry into the conduct and motives of Shri Yaduvansh Yadav, Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner (sic. Respondent before High Court).

Brief facts are as follows:

The assessee sold certain rural agricultural land, which is not capital asset and did not give rise to taxable capital gains.

The consideration received by assessee as per registered conveyance deed executed by assessee in favor of buyer was Rs.20 lakh.

However, assessee deposited substantial amount in bank in cash on the day of registration of deed.

AO made addition of Rs.77,80,000/- in respect of cash deposited during the year in bank account rejecting contentions and evidences of assessee that the amount was received in cash from buyer of land, and he produced evidences in form of (a) statement of witnesses to deed, (b) bank managers statement and affidavit that on request of assessee he kept bank branch open for extended hours and money was deposited by assessee which he received on the date of registration of deed (c) complaint made to registering authorities that actual consideration was higher but in deed it was shown at low amount and (d) that the area rate of land was much higher and that justified statement of cash received from the buyer.

The CIT(A) did not accept written submission and evidences and agreed with the AO and confirmed addition.

On appeal of assessee the Tribunal allowed appeal of assessee and held that sufficient evidences have been produced which lead to conclusion that the amount of cash deposit was part of sale consideration of land and not unexplained money.

The High Court confirmed decision of Tribunal and dismissed appeal of revenue.

Directions of the High court:

In paragraph 14 of the judgment the High Court has held as follows:

“14. We, therefore, find it appropriate to direct the Registrar General of the Court to forward a copy of this judgment to the Chairman of the Central Board of Direct Taxes to cause an enquiry into the conduct and motives of Shri Yaduvansh Yadav, Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner.

As per above directions the High Court has asked CBDT to cause an enquiry in conduct and motives of AO. As per information of the author such directions are rare if not totally unprecedented. Such directions can go a long way in reducing unjust orders being passed by AO and other authorities. If an officer is afraid of enquiry and punishment for his wrong deeds then era of high-pitched assessment orders will be over.

However, in this case, with due respect author feels that , unfortunately, seemingly an inadvertent error of the High Court has taken place. We find that in this case addition was made by the AO and the same were confirmed by the CIT(A). Therefore, so far AO is concerned, he is covered by order of CIT(A) which says AO is correct.

The Tribunal held in favor of assessee. Then CIT directed to file an appeal before High Court. Therefore, it can be said that CIT was also of view that addition was correctly made. Therefore, his action in filing of appeal before the High Court also supports the AO that AO was correct or he has acted in bonafide manner.

The honorable High Court has directed for an enquiry about conduct of the AO only. However, in the given circumstances action of CIT(A) could be enquired for the same reasons as considered by the honorable High court because the CIT(A) confirmed order of the AO.

Then the action of team of IT Department which dealt with scrutiny of order of Tribunal and counsels who recommended filing of appeal before the High Court can be subject matter of an enquiry. Why in the given facts and circumstances appeal was filed by revenue before the High court.

Filing of an appeal without proper ground and home work simply causes wastage of public money and valuable time of honorable Courts. This must come to an end.

The honorable Allahabad High court can pass an order modifying to enquire about conduct of AO, the CIT(A), CCIT and other officers and counsels who took decision to file an appeal before the High Court.

Why a petty AO who made addition to protect interest of revenue should suffer when other senior officers have supported his order by their actions in course of appeal and filing of appeal before High court.