S.R. Cold Storage v. UOI (2022) 448 ITR 37 / 217 DTR 102 / 328 CTR 272/ 289 Taxman 580 (All.)(HC)

S. 147 : Reassessment-Notice-Reasons recorded unfounded-No failure to disclose material facts-Violation of principle of natural justice-Notice without jurisdiction-Strictures-Reassessment done without adhering to the rule of law-Illegal demand and order quashed-Cost of 50,00,000 was awarded on Department-Government to frame Circular-Alternative remedy is not a bar to maintain writ petition. [S. 144B, 148, Art. 226]

 

Reassessment notice was issued on the basis that the huge cash was deposited in the Bank where as no cash was deposited in to the BankThat despite the assessee’s specific submission that it had not deposited any cash in the bank account with Bank of Baroda, the respondents had neither considered the reply nor had recorded any reasons for its rejection and passed the order. On writ allowing the petition the Court held that the Department created a huge demand on the basis of false 7 factually incorrect information without considering the response of the assessee.  Court held that failure to record reasons, failure to consider admissible evidence or consideration of inadmissible evidence renders the order unsustainable.   Court also observed that it is settled law that if a public functionary acts maliciously or oppressively and the exercise of power results in harassment and agony then it is not an exercise of power but its abuse. No law provides protection against it. Harassment by public authorities is socially abhorrent and legally impermissible and causes more serious injury to society. In modern society no authority can arrogate to itself the power to act in a manner which is arbitrary. Court awarded cost of Rs.50,00,000/- and further the Government was directed to frame a Circular to ensure the following:

  1. To ensure that all necessary steps are taken within one month and a mechanism is developed and is put in place within one month so that assessees may not be harassed and may not suffer on account of their own fault of the department in its data-base/portal.
  2. To provide a mechanism and put it in place within one month from today that the information fed on database/ portal is verified in reality and not as an empty formality before initiating proceedings under Section 148A/ 148/147 of the Act, 1961 so that on one hand bona fide assessees may not face harassment and on the other hand tax evaders may not escape due to lapses of departmental officers.
  3. To consider to develop a mechanism of the accountability of the officers who either do not observe statutory provisions of the Act, 1961 or fail to discharge their quasi-judicial function or act in complete breach of principles of natural justice (AY. 2017-18)