The Bombay High Court has recently reprimanded the Income Tax Department. Underlining the importance of judicial discipline, the High Court has asked the authorities to return Rs 16 lakh to the lawyer. The Air Intelligence Unit (AIU) seized the money from a Mumbai-based lawyer who was about to go to the Supreme Court to appear in two cases. A bench of Justices KR Sriram and FP Pooniwala said, “It is of utmost importance that the revenue authorities are bound by the decision of the appellate authority.” The Income Tax Appellate Tribunal (ITAT) in May accepted the lawyer’s explanation that it was professional income received from his clients on which he later paid tax. The High Court observed that the order of the Tribunal was binding on the Additional Commissioner and the officers subordinate to him. The High Court’s bench said, ‘The principle of judicial discipline requires that the orders of the higher appellate authority are obeyed by the subordinate officers.

Advocate Ram Mendadkar has been practicing law for more than 25 years. Ram Mendadkar had filed a petition in the High Court seeking the return of his illegally confiscated money. The AIU had intercepted Mendadkar at the Delhi airport in July 2018 and found Rs 16 lakh in currency notes of Rs 2,000, Rs 500 and Rs 100 in his luggage. The department said it was unexplained income.

Interest will be charged after May 12

After the ITAT ruled in his favor, the High Court directed the Income Tax Department to return the entire Rs 16 lakh seized from Mendadkar by August 31. The High Court said that if IT failed in this, it would have to pay interest on it from May 12.

Lawyer was going to Delhi

Mendadkar said the cash was for fees to be paid to the lawyer on record in the Supreme Court for two clients. He was going to appoint a senior advocate for both the cases. His petition did not mention the name of the senior advocate he wanted to appoint.

Dispute over money

The lawyer said that his clients had deposited around Rs 6 lakh in cash and Rs 17 lakh by check in April 2018 as his professional fees. The IT assessing counsel and the Commissioner (Appeals) rejected his explanation, but the ITAT looked at his professional fee account and was satisfied that the amount had been accounted for.

High Court said – highly objectionable

Mendadkar said that the Commissioner of Income Tax cannot seek clarification about the source of money from his client. The Income Tax Department opposed Mendadkar’s plea and requested the High Court not to entertain the ITAT order which was erroneous considering the justification given by the CIT(A). After the High Court called it highly objectionable, the officer withdrew the affidavit.

Training instructions for officers

The High Court order said, ‘If the officers of the Income Tax Department are allowed to continue in this manner, it will only result in undue harassment to the taxpayers and chaos in the administration of tax laws. It is expected that the Union Ministry of Finance, Income Tax and Central Director, Direct Taxes will conduct orientation to train their officers suitably.