AO to Be Punished With One-Week Imprisonment for Not Withdrawing Demand Despite Order of HC

Case Details: Prashant Chandra vs. Harish Gidwani Deputy Commissioner of Income Tax - [2024] 165 taxmann.com 471 (Allahabad)

Judiciary and Counsel Details

• Irshad Ali, J.
• Mudit Agarwal, Anand Prakash Sinha, Radhika Singh, Counsels, for the Appellant.
• Neerav Chitravanshi, Kushagra Dikshit, Manish Mishra, Counsels, for the Respondent.

Facts of the Case

The assessee changed his place of business from Lucknow to New Delhi. The Assessing Officer (AO) at Lucknow made an assessment for the assessment year 2011-12. The assessee challenged said assessment before the High Court. The High Court quashed the assessment and held that after the business change from Lucknow to New Delhi, the income tax authorities at Lucknow did not have the jurisdiction to assess the assessee at Lucknow.

However, the AO at Lucknow did not withdraw the demand, which continued to be displayed on the income tax web portal for about 7 years and 7 months. It was only after it was pointed out before the High Court during the hearing of the application that the outstanding demand on the web portal had been causing grave humiliation to the assessee, who was being treated as a defaulter of income tax by the financial institution and the credit worthiness of the assessee had also been seriously impacted which had deprived the assessee in several ways.

Aggrieved-assessee filed a contempt application before the Allahabad High Court.

High Court Held

The High Court held that disobedience of this Court’s order strikes at the very root of the rule of law on which the judicial system rests. The rule of law is the foundation of a democratic society. The judiciary is the guardian of the rule of law. Hence, it is not only the third pillar but also the central pillar of the democratic State.

If the judiciary is to perform its duties and functions effectively and remain true to the spirit with which they are sacredly entrusted to it, the dignity and authority of the Courts have to be respected and protected at all costs. Otherwise, the very cornerstone of our constitutional scheme will give way, and with it, the rule of law and civilised life in society. That is why it is imperative and invariable that the Court’s orders are to be followed and complied with.

Civil contempt is punishable with imprisonment as well as fine. In a given case, the court may also penalise the party in contempt by ordering him to pay the costs of the application, and a fine can also be imposed upon the contemnor.

Considering the facts and circumstances of the case, the charges framed were found to be proved against the opposite party. This Court also ruled that the action of the opposite party was not only contemptuous but also malicious. He took care of the money of the applicant in spite of the clear direction of this Court, and there was no justifiable reason for the said action.

If DCIT’s action is considered in the background by the allegations made against him, it was his purposeful act to harass the applicant in spite of the order of the writ Court. Unnecessarily, mens rea is not required to be proved in a case of contempt. Still, in the present case, the violation is willful, deliberate, and coupled with the intention and motive to harass the applicant. Accordingly, a fine of Rs. 25,000, along with simple imprisonment for a period of one week, was awarded.

List of Cases Referred to

• T.N. Godavarman Thirumulpad (102) through the Amicus Curiae v. Ashok Khot and another; (2006) 5 SCC 1 (para 22),
• Patel Rajnikant Dhulalbai and another v. Patel Chandrkant Dhulabhai and others; (2008) 14 SCC 561 (para 22),
• Principal Commissioner of Income Tax v. M/S I-Ven Interactive Ltd., Mumbai [Civil Appeal No. 8132 of 2019] (para 44),
• P.C. Sen v. Unknown, AIR 1970 SC 1821 (para 44)
• Raza Textiles Ltd. v. CIT [1987] 34 Taxman 130/[1989] 178 ITR 496 (Allahabad) (para 44).