Allahabad High Court in Kunj Power Project Pvt. Ltd. Vs Union of India & Ors has let off revenue officers with a warning. These officers had attached the bank accounts of the petitioners even before a reply could be filed to the notice.
The Hon’ble Court observed that the behavior of the tax officers violated the instructions contained in CBEC Circular No 103 dated 1st July, 2008 and sought explanation from them. On the explanation received from the revenue officers, the Court observed : “We perused the replies and we find that the reasons indicated by them is a mere afterthought and an eye-wash. New grounds have been taken to justify their action which in our opinion was not available.” The Court however stopped short of calling the action “malafide”
In this case, when oral instructions of the tax officers to reverse the Cenvat credit was not followed by the petitioner, they issued a notice under Section 73 for Rs. 1.15 Crores. But even before a reply could be filed, they went ahead and attached the bank accounts without giving an opportunity to the petitioner to respond.
The Allahabad High Court has set aside the orders and allowed the petition with costs. The Court also directed that the matter to be heard and decided and further directed the Registry to send a copy of the High Court order to the CBEC to issue instruction so “that the powers under Rule 3 should be exercised with utmost care and caution and should not be exercised frivolously.”
The Finance Minister and his colleagues have been speaking about tax terrorism and bringing down the aggression in tax administration. It is difficult to believe that an officer in the rank of Commissioner is unaware that recovery proceedings cannot begin unless adjudication and other appellate remedies available to a tax payer are exhausted. It is equally difficult to believe that a Commissioner would deliberately act against specific instructions from the CBEC.
So what exactly happened here? If the Finance Ministry is really interested in introducing fair play into tax administration, it is precisely such instances which need to be examined to find out exactly what were the reasons for the high-handed behavior. Will disciplinary action be taken against such officers?