Management Committee Paradeep Port vs. ITO (Orissa High Court)

High Court Seethes With Fury At Dept For “Dirty Games” With Assessees

The assessee, a charitable institution whose income was exempt u/s 11, was granted a certificate of Nil TDS u/s 197 in the earlier years. For FY 2009-10, the assessee’s application for a s. 197 certificate was not processed and so the assessee filed a Writ Petition pursuant to which the Dept. agreed to consider the application and pass an order. The AO thereafter passed an order stating that since the FY 2009-10 had already lapsed, the s. 197 certificate for that FY could not be issued. The assessee filed a Writ Petition to challenge the rejection. The department filed an affidavit in which it claimed, for the first time, that the rejection was because there were demands outstanding against the assessee. HELD by the High Court:

The reason given in the affidavit regarding the arrears outstanding against the assessee is not correct because there were in fact no demands due pursuant to the Tribunal’s order. There is inordinate delay and serious laches on the part of the AO in dealing with the assessee’s application & there is no explanation why the application submitted on 22.06.2009 was taken up for the first time for consideration towards the fag end of FY 2009-10 and rejected on a wrong ground of non-payment of outstanding dues. Such action is in contravention of CBDT’s Circular No.F.No.20/23/67 IT(A-I) which states that application filed by charitable trusts for issuance of Nil/low TDS certificates should be expeditiously processed. The rejection is also in violation of the Court’s earlier order where the department did not raise the stand that the s. 197 certificate could not be issued as the FY was over and instead agreed to consider the issue of the certificate. Obviously the department’s action are not bona fide and does not speak well of its attitude. Mala fides are writ large because new grounds supporting the rejection have been taken in the counter affidavit though such action is not permissible as per Mohinder Singh Gill vs. CEC AIR 1978 SC 851. The Department cannot take advantage of its own inaction and lapses and say that the certificate cannot be issued as the FY is over. Such action would lead to unnecessary complication for the assessee and the parties dealing with it. As held in Dabur India Ltd State of UP AIR 1990 SC 1814, the Govt. cannot be permitted to play “dirty games” with the citizens of the country to coerce them in making payments which the citizens were not legally obliged to make. If any money is due to the Govt., it should take appropriate steps, but it should not take extra legal steps or adopt the course of maneuvering. The Dept. has to be careful in future not to indulge in such avoidable circumstances which create an impression that the intention of the Department is not to help the assessee but to harass them. This matter needs to be inquired into by the concerned CCIT and appropriate action should be initiated against the erring officer.