CHENNAI: All further proceedings pursuant to a notice of March 31, 2016 of the Assistant Commissioner of Income-Tax (AC, IT), Chennai, against former Union Minister P Chidambaram, his wife and senior advocate Nalini, son and industrialist Karthi and daughter-in-law Srinidhi and a grand-daughter with regard to exemption from income tax for the produce from 200 acres coffee estate in Coorg in Karnataka, has been stayed by the Madras High Court.
Justice Rajiv Shakder granted the stay on Wednesday while entertaining a batch of writ petitions from Chidambaram and his family members challenging the notice and a consequential re-assessment order dated December 30, 2016, of the official.
According to Chidambaram, he received income from the coffee estate, which had been inherited by him when he was 11 years old in 1956. The property was divided into five, i.e. 40 acres each. They sold the coffee as raw one, after pulping and drying as the same was necessary to prevent deterioration and for preservation. They did not cure the coffee.
Under Rule 7B(1) of Income Tax Rules, income derived from the sale of coffee grown and cured by the seller alone should be computed as income and 25 per cent of the same should be paid as income tax. This rule was not applicable to petitioners, as they did not cure coffee and therefore, claimed exemption of the entire income to the tune of Rs 15.26 lakh from the sale of coffee and pepper during the accounting year 2008-2009 as agricultural income under section 10(1) of the IT Act, in the return filed for 2009-10.
However, after six years, the AC, IT, on March 31 issued the notice stating he had reason to believe that income chargeable towards tax for the assessment year 2009-10 had escaped assessment. By another order dated December 30, the AC, IT, sought to re-assess the income for 2009-10. Notices had been issued demanding Rs 5 lakh each from the petitioners. Hence, the present batch of petitions.
Senior counsel Vijay Narayan submitted that the order, received at 4.45 pm on December 29, asked the petitioners to appear at 10.30 am the next day i.e. December 30 without giving sufficient time.
As per the orders of the apex court, the assessing officer has to furnish reasons for re-opening the case, whereas in the present case, no such reasons were given. Even the objections raised by the petitioners had not been considered before proceeding with the order, he further argued and sought to quash the notice, and order of re-assessment and consequential demand notices.