Chennai: In a relief to P Chidambaram, the Madras High Court quashed an order of the Income Tax department seeking payment of tax by the former finance minister and his family on income from a coffee estate owned by them for a 2008-09 financial year after re-assessing it.

Justice T S Sivagnanam yesterday quashed March 31, 2016, demand notice and the consequential December 30 reassessment order issued by the assistant commissioner of Income Tax, Chennai, seeking payment of about Rs 6 lakh from Chidambaram and others.

He was allowing petitions by Chidambaram and his family members challenging the notice and the reassessment order.

The matter relates to the petitioners claiming exemption of entire income from the sale of coffee and pepper from their estate in Coorg in Karnataka in 2008-09 as agricultural income under section 10(1) of the Income Tax Act, which was allowed then.

The I-T department had issued the demand notice saying there was a reason to believe that income chargeable to tax had escaped assessment.

Challenging this, the petitioners alleged that the I-T department’s action in reopening the assessment and reassessing the income for 2008-09 six years later was illegal and arbitrary and made only with an intention to defame them.

Besides Chidambaram, the senior Congress leader’s son Karti, daughter-in-law Srinidhi and wife Nalini are the other petitioners.

They submitted that income from the sale would attract tax only if they were involved in curing coffee. But they only sold raw coffee seeds and proceeds of the sale of which was an agricultural income exempted under the I-T Act.

They further claimed there were several hundreds of coffee growers whose income had been exempted from tax on this ground.

The reassessment order was issued without disposing of their objections to the reopening of assessment and without passing a speaking order, the petitioners contended adding this was in violation of the law laid down by the Supreme Court.

Justice Sivagnanam, in his order, said as stated in a Supreme Court verdict the obligation on the part of the assessee does not extend beyond fully and truly disclosing all primary facts and it was for the assessing officer to take an inference on facts and law based on such disclosure.

The respondent’s submission that the reassessment was made since his predecessor did not come to a proper inference on the facts disclosed (on agricultural income) was no ground to reopen the matter, he said adding it only reflected a change of opinion.

Further, there was no allegation against the petitioners that they had not disclosed fully and truly all material facts necessary for assessment for that year, the judge said.

“The impugned proceedings, namely, the notice for reopening and the consequential assessment orders are held to be illegal, unsustainable and a clear case of change of opinion and the impugned proceedings are quashed,” he ordered.