Can Income Tax Authorities be held in contempt of Court in not following their judgments cited before them by the Assessee
ABACUS Case Law Citation
ABCAUS 3387 (2020) (09) HC
Important case law relied upon by the parties:
Parents Association of Students Vs. M.A. Khan and another, 2009 (2) SCC 641
Govindarajulu Mudaliar Vs. Commissioner Income Tax, AIR 1959 SC 248
Sumati Dayal Vs. Commissioner of Income Tax Bangalore, AIR 1995 2109.
I am sure this question must have crossed the minds of many whether an Income Tax Authority can be held guilty of Contempt of Court when they pass an adverse order overlooking the judgment of the High Court/Supreme Court cited by the assesse in their defense. The High Court has clarified the Law in this regard.
In a recent judgment this issue came before the Hon’ble High Court (Single Judge) where Petitioner prayed for initiation of contempt proceedings against the income Tax Authorities for not adhering to the judgment of the Hon’ble Supreme Court.
In the instant case, a contempt petition was filed before the Hon’ble High Court praying for initiation of contempt proceedings against the Income Tax Authorities who were acting in the statutory capacity as Commissioner of Income Tax Appeal and as Principal Commissioner Income Tax.
The Petitioner was a partner in a firm that was working as franchisee of a famous Jewellery Company. During the assessment proceedings, the Assessing Officer (AO) disbelieved the credit notes issued by the said Jewellery House and were added to the income of the firm under section 68 of the Income Tax Act, 1961 (the Act) as unexplained cash credits.
The action of the Assessing Officer was upheld by the Commissioner of Income Tax (Appeals) against which a rectification application was filed by the assessee which was still pending disposal before.
The Petitioner stated that the Section 68 of the Income Tax Act was interpreted by Hon’ble Supreme Court which was reiterated again in another judgment. It was argued that since the later judgement was cited by the petitioner before the Assessing Officer and before the Appellate Authority, it could not have been ignored by the said Income Tax Authorities.
Thus, it was contended that the Assessing Officer and the Appellate Authority both committed contempt of Hon’ble Supreme Court’s judgment and therefore contempt proceedings be initiated against them.
The Hon’ble High Court observed that the petitioner’s firm had nothing to do in the litigation and was not the party in the case relied upon by the Petitioner and neither the Income Tax Authorities arrayed as alleged contemnors were parties to the said judgement rendered by Hon’ble Supreme Court.
The Hon’ble High Court further noted that the Hon’ble Supreme Court in the had observed that only parties to the litigation can be proceeded with under the contempt jurisdiction.
Further, the Hon’ble High Court pointed out that under Section 10 of the Contempt of Courts Act, 1971, it has been specifically provided that the High Court has power to punish for Contempt of “Courts subordinate to the High Court”. The Hon’ble Supreme Court is not a Court subordinate to the High Court.
Accordingly, the contempt petition was dismissed
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