Delhi High Court Pulls Up Income Tax Department For Pursuing Tax Dues After Nine-Year Slumber, Quashes Notice

The Delhi High Court has recently pulled up the Income Tax Department for waking up after nine years to pursue tax dues, calling it “difficult nay impossible” to believe such prolonged inaction, and quashed the notice issued to APS Hydro Private Limited.

A division bench of Justice Dinesh Mehta and Justice Vinod Kumar was dealing with a writ petition against a notice dated February 16, 2022, and a follow-up communication issued on May 12, 2022, by the Assistant Commissioner of Income Tax, which treated the taxpayer as being in default under the Income Tax Act.

According to the petitioner, none of the orders raising the demand, whether for rectification, summary assessment, or penalty, had ever been properly served. It claimed it only became aware of the alleged dues when the 2022 notice arrived.

The department, however, maintained that the relevant intimations and orders had been sent over email, but did not point to any specific dates on which such communications were issued.

Looking at the record, the court noted that the demands spanned several assessment years. The earliest went back to February 9, 2013, and the amounts involved ran into lakhs of rupees, yet no recovery steps appeared to have been taken for years.

The court observed:

"In any case we would like to observe that it is difficult nay impossible to believe that despite having a huge pending demand against an assessee since 2013 the department will keep quiet and will get up from its slumber only after 9 years.”

It further observed that even if service by email were assumed, it was against natural conduct for a taxpayer to take no remedial steps in the face of substantial liability.

Accordingly, the court set aside the notice in challenge while clarifying that the Department would be at liberty to initiate fresh proceedings in accordance with law.