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Else, it will drive them cynical in believing that paying taxes honestly is not worthwhile, says Allahabad High Court!

“Speedy and affordable justice is the requirement of the day. But it cannot be achieved until the executive, including taxman, discharge their duties faithfully and honestly within the four corners of law.” – Allahabad HC in Vijay Agrawal vs. CIT (2013)

            In a recent landmark judgment, the Allahabad High Court has championed a worthy cause for the taxpayers by holding that, “An honest taxpayer should not be subjected to unnecessary harassment and an action not warranted in law, which can be of very serious consequence to the taxpayer. If this is allowed to remain without correction, such harassment and browbeating of an honest taxpayer will otherwise drive even such honest tax-payers to become cynical and lead to a situation where taxpayers will get a feeling that paying taxes honestly is not a worthwhile exercise and that tax authorities are a menace to the society, rather than being representatives of the State for enforcing the tax provisions.”

             In the facts of the case of Vijay Agrawal vs. Commissioner of Income-tax which recently came up before the Allahabad High Court, a search had been conducted at the premises of a taxpayer during which cash of Rs. 25 lakhs was seized. The taxpayer succeeded in the block assessments and the said amount of Rs. 25 lakhs thus became refundable to him. However, the said amount was not refunded to him on the ground that there were demands outstanding against a third party who was also named in the search warrant. The taxpayer claimed that he had no relation with the said third party and the fact that there were demands outstanding in that case did not mean that his refund could be blocked. No order was passed on the taxpayer’s application for refund inspite of repeated reminders, which finally provoked the taxpayer to approach the High Court for remedy through a writ petition.

             After hearing the parties, the High Court passed strictures against the approach of the Income-tax Department by observing that, “It is but evident that the Department has failed to discharge its legal obligation in not refunding the seized amount. The argument of the Department that unless a direction is issued, a speaking order shall not be passed on the application for refund of the amount due to him is not appreciated. It shows that the officers of the Income-tax Department are shirking their responsibilities.”


            Stressing on the need for accountability in tax administration, the High Court further remarked that time has come for the heads of the departments to keep a strict vigil on such shirkers and to fix their responsibility. “While it is no doubt true that collection of revenue is a serious matter for the State and the bounden duty of the authorities functioning under the Act is to implement the provisions of the Act, there should be safety and assurance to an honest taxpayer,” observed the High Court.

             Sharply criticizing the revenue official, who failed to take any decision, right or wrong, on the refund application filed by the taxpayer and thus passing on the buck, the High Court held that, “speedy and affordable justice is the requirement of the day. But it cannot be achieved until the executive, including taxman, discharge their duties faithfully and honestly within the four corners of law.”

              Allowing the writ petition of the taxpayers, the High Court observed that the petitioner taxpayers have been unnecessarily driven to this Court to file the present writ petition and the respondent Department have purposely put a defence, merely for the sake of defence. The Court, therefore, ordered that the Department shall be liable to pay cost of Rs.15,000/- for this writ petition to the petitioners. The Court further directed the Department to refund the Rs.25 Lakhs seized from the petitioners along with interest under Section 132 B(4) and further interest under Section 244A, within a period of two months, failing which it would also be liable to pay interest on interest to the taxpayer.


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