Court Criticizes Income Tax Department for Delayed Recovery, Allows Company to Contest Demands Without Time Constraints
In a significant judgment, the Delhi High Court has quashed a nine-year-old tax demand notice against APS Hydro Private Limited, criticizing the Income Tax Department for its prolonged inaction in initiating recovery proceedings. The court's ruling comes in response to a writ petition filed by APS Hydro, challenging the demand notice dated February 16, 2022, and a corresponding order from May 12, 2022. The bench, comprising Justices Dinesh Mehta and Vinod Kumar, expressed skepticism over the department's claim that the company was served with the necessary orders and intimations via email.
The court observed that it was unlikely for an assessee with substantial tax liabilities to ignore remedial measures, suggesting that the department's delay in acting on the demands dating back to 2013 was unjustified. The judgment highlighted the department's failure to pursue the outstanding demands, which totaled several lakhs of rupees, only waking from its slumber after nearly a decade.
In a detailed order, the court allowed APS Hydro a 90-day window to file objections or seek statutory remedies against the demands outlined in the impugned notice, effectively extending the limitation period. The company can now approach the Jurisdictional Assessing Officer to request relevant documents and information, which must be supplied within 15 days of the request.
Furthermore, APS Hydro has been granted the opportunity to make submissions regarding interest liability under Section 220 of the Income Tax Act, 1961. The court directed the Assessing Officer to consider these submissions and record findings in accordance with the law.
The bench also clarified that if the Income Tax Department wishes to initiate fresh proceedings under Section 220, they are free to do so, provided it is in compliance with the law.
This judgment underscores the importance of timely action by tax authorities and reinforces the right of taxpayers to contest outdated and unexplained demands. Legal experts view this as a significant ruling that could influence future cases where taxpayers face similar delays from tax authorities.
Bottom Line:
Income Tax - Quashing of demand notice - Natural conduct of assessee questioned in light of huge pending tax liabilities - Department's delay in initiating recovery proceedings considered unjustified - Assessee allowed to file objections or seek statutory remedies without limitation constraints.
Statutory provision(s): Sections 220(1), 154, 143(1)(a), 271(1)(c) of the Income Tax Act, 1961
APS Hydro Private Limited v. Union of India, (Delhi)(DB) : Law Finder Doc id # 2877969
