Recently, the CBDT has sent a strong message to all unscrupulous AOs that it will no longer tolerate their shenanigans of harassing taxpayers with a view to extort bribes. The usual modus operandi of such AOs to conduct roving inquiries and threaten to make huge additions unless hapless taxpayers agree to pay a bribe. The CBDT has put an end to this nefarious practice by directing that all cases whereas limited scrutiny is converted into a full scrutiny should be backed with an order sheet in which reasons are given. The approval of Principal CIT has also been made a precondition. An officer who defied this directive has been placed under suspension as his action gave rise to a “very strong suspicion of mala fide intentions”.

Section 119 of the Income-tax Act, 1961 empowers the Board to issue orders, instructions and directions to all the Income tax authorities and all other persons employed in the execution of the Act and such persons and authorities are bound to observe and follow such orders, instructions and directions.

The taxing authorities cannot challenge the correctness of the circular, which is binding on them. This is clear from the judgment of the Supreme Court in Paper Products Ltd. v. CCE [(2001) 247 ITR 128], wherein the Court has held that “apart from the fact that the circulars issued by the Central Board of Customs and Excise, its power under section 37B of the Central Excise Act, 1944 are binding on the Department, the Department is precluded from challenging the corrections of the said circulars even on the ground of the same being inconsistent with statutory provisions. So far as the Department is concerned, whatever action it has to take, the
same will have to be consistent with the circular which is in force at the relevant point of time”.

Therefore, the Allahabad High Court in Bella Singh Dault Singh v. CIT [(1966) 62 ITR 250] has correctly observed that in spite of drawing attention of AO to the circular, the AO refuses to comply with its terms, the Commissioner (Appeals) or the Appellate Tribunal would be justified in setting aside the order on the ground that Assessing Officer has failed to carry out the direction contained in the circular.

Many such instances could be pointed out that the AO either does not follow the law or circular in right spirit and tries to harass the assessee for the obvious reason. An officer who habitually overassesses or threatens to overassess with a motive to
collect an illegal tribute apparently does not suffer in any way but assessees suffer a lot.

In fact long ago, CBDT had issued a Circular No. 14 (XL 35) dated April 11, 1955, wherein it has directed the Assessing Officer as under:

“Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should : —

(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;

(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.

In reality the instructions or circulars which are beneficial to assessee are rarely followed and assessees are harassed for oblique purposes. Therefore, we request the members to draw the attention of the Chairman of CBDT to such nefarious activities of the AO.

At this juncture, we must also appreciate the bold and courageous decision taken and attitude shown by CBDT to instil confidence in the minds of the assessees.

Hence, the Assessing Officer should be accountable for their actions under the law. The officer should be given a black mark or reprimanded and provided stiff snags on their promotions. This would also help in reduction of number of appeals as well as rampant corruption.


H. N. Motiwalla
Joint Editor

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