Old Tax Demands Invalid Without Records; High Court Applies Doctrine of Laches

The petitioner challenged old tax demands relating to AY 2001–02 to 2003–04, which suddenly reappeared in 2023 as outstanding on the income-tax portal along with recovery notices. The total demand was around Rs. 33.41 lakh.

The petitioner argued that these demands were either already settled or related to matters decided in its favour long ago. It also pointed out that after nearly two decades, it no longer had the records to verify or contest the claims. Importantly, the department itself could not produce any assessment orders, appellate records, or proof of service to support the demands.

Central Issue: Whether the Revenue can recover tax demands after a long delay without producing supporting records and whether such action is legally sustainable.

HC’s Ruling: The High Court allowed the petition and quashed the demands and recovery notices. It held that reviving such old claims after more than 20 years, without any supporting material, was wholly unjustified. The Court applied the doctrine of laches, noting that unreasonable delay defeats the right to enforce a claim.

The Court observed that it would be unfair to expect taxpayers to preserve records indefinitely to defend against stale demands, especially when the department itself fails to maintain basic documents. Emphasising that the Revenue must act within a reasonable time and maintain proper records, the Court concluded that such delayed recovery proceedings cannot be sustained in law.

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