Relief granted to assessee required to meet tax demand raised on unexplained income

Case Details: Hermes I Tickets (P.) Ltd. v. DCIT - [2022] 135 taxmann.com 339 (Madras)

Judiciary and Counsel Details

• • C. Saravanan, J.
  • S. Sridhar for the Petitioner. 
  • Mrs. Hema Muralikrishnan, Sr. Standing Counsel for the Respondent.

Facts of the Case

Assessee was an International Air Transport Association (IATA) agent engaged in booking tickets for its clients. It receives advance amounts from clients for being paid to various airline companies. During the assessment, the advance amount lying in bank account was added as ”an unexplained income”. AO passed demand order submitting that assessee was negligent in not responding to various notices and the information sought for.

Assessee filed a writ before the Madras High Court, contending that it couldn’t reply to notices in time as two of its officers handling the accounts and Income-tax related issues resigned from the company.

High Court Held

The Madras High Court held that AO passed the order based on the assumption that the amount urging in the assessee’s account during the period was ‘an unexplained income’ of the assessee. There was no dispute that the two officers of the assessee had left, and thus assessee could not reply to notices issued by the AO. Further, the amount of tax payable in terms of the order was a whopping amount of Rs. 866.50 crores. The assessee will have to be wound up to meet this tax liability.

Thus, to give relief to the assessee, the High Court quashed the order subject to the condition that the assessee depositing a sum of Rs. 5 Crores in two equal instalments within two months.