High Court Imposes Fines 50K to 2 Pr.CIT & AO for Frivolous Appeal


For a quite long time, taxpayers are facing the frivolous appeal by Revenue authorities to various High court. This unmindful action by Income Tax Authorities cost taxpayers money , time and mental agony. CBDT has time and again tried to salvage the situation by issuing guidelines and circulars to lower the number of appeals through various instructions and circulars. In the past, many high courts have also commented and in many cases put a cost on income tax officials for frivolous appeals to high courts.

But the latest order by Karnataka High court is quite different and exemplary because the court has not only put the cost on the assessing officer who filed a Writ petition, but two Principal Commissioners have also been personally fined and ordered to pay from their own resources and not from the government exchequer.

What was the issue

Epson India filed a demand stay application before ITAT, Bengaluru as it had filed an appeal against the order of DRP in its case.The Division Bench of the ITAT granted the stay against the recovery of the demand from the respondent-assessee which, as per the impugned order was to the extent of Rs.22.17 Crores, against which the assessee had already paid a sum of Rs.3.32  Crores.

Assistant Commissioner of Income Tax, Circle-2(1)(2), Bengaluru, challenging the interim stay order passed by the Income Tax Appellate Tribunal (‘ITAT’) filed a writ petition before Karnataka High Court.

Karnakata High Court has made scathing remarks against the authorities who challenged the interim stay of demand by ITAT. These are summarized below:

  1. .. The ITAT, perhaps to serve the interest of the Revenue , leaned to some extent in favour of Revenue for the time being subject to the final decision of the appeal itself and chose to pass this order, which brought to the kitty of Revenue more than a sum of Rs.5.00 Crores against a  prima  facie  unsustainable  demand  of  Rs.22.17 Crores, still the Revenue did not feel satisfied and instead of pursuing hearing of the appeal before the ITAT, chose to file the present writ petition before this Court which is absolutely misconceived remedy availed by them.   Were these officials trying to prove their superior wisdom over the wisdom of Tribunal and already rendered precedent or overawe the Tribunal by the intervention of the higher constitutional courts, even on a misconceived petition?[Para 13 ]
  2. t further shows a non-application of mind on the part of the Principal Commissioner, while sanctioning the filing of this writ petition before this Court. [para 15]

High Court concluded by personal cost to the tax authorities who approached High Court challenging interim stay order by ITAT

  1. Therefore, in the considered opinion of this Court, the present writ petition deserves to be dismissed with exemplary costs on the officials involved in filing of this writ petition.  The costs are quantified at Rs.50,000/- to be  paid  by  each  of  the  Principal  Commissioner  of Income Tax-2, Bengaluru Mr.Yogesh Pande, who has filed the response Affidavit justifying the filing of this writ    petition,    the    Principal    Commissioner    who sanctioned filing of this writ petition and the Assistant Commissioner of Income Tax, Circle-2 (1)(2), Bengaluru Ms.Preeth Ganapathy, who has filed this writ petition and the said costs will be paid by these officials from their personal resources and not from the Government fund within a period of two months from today to the Legal Services Authority of the State, to be utilized for the cause of poor litigants.

Download Karnataka High Court Order