The Income Tax department on Wednesday told the Madras High Court that Central Board of Direct Taxes had amended its 2018 circular regarding withdrawal of appeals, in cases where the tax effect is less than ₹1 crore and therefore, a tax appeal preferred by the department against V.K. Sasikala in 2008 cannot be withdrawn.
Appearing before the second Division Bench of Justices T.S. Sivagnanam and Sathi Kumar Sukumara Kurup, senior standing counsel for IT department T.R. Senthil Kumar submitted a copy of the amended circular and pointed out that two new clauses had been added in it.
As per the amendment, tax cases should be contested on merits and not withdrawn if addition to assessments was based on information received from law enforcement agencies such as Central Bureau of Investigation, Directorate of Enforcement, Directorate of Revenue Intelligence, Serious Fraud Investigation Office, Directorate General of Goods and Services Tax Intelligence and so on.
In the case of Ms. Sasikala, the IT department had found her to have suppressed her real income for the assessment year 1994-95 based on a report of Directorate of Vigilance and Anti Corruption (DVAC) which had successfully prosecuted her in a disproportionate assets case. Though DVAC, being a State agency, had not been specifically mentioned in the amended circular, it's report could be considered as an external source of a law enforcement agency, he argued.
Even otherwise, the second clause, added to the circular through the amendment, states that tax cases need not be withdrawn if prosecution launched by the department was already pending before the court concerned. Therefore, the 2008 appeal preferred by the IT department before the High Court, against an order passed in favour of Ms. Sasikala by the Income Tax Appellate Tribunal, cannot be withdrawn, he contended.
After hearing him and perusing the amended circular, the judges decided to take up the appeal for final hearing sometime next week.
