THE ARUVIKKARA FARMERS SERVICE CO-OPERATIVE BANK LTD.NO.603 V. THE INCOME TAX OFFICER

WA/1437/2018

AI Insights

The case involves the Aruvikkara Farmers Service Co-operative Bank Ltd., which appealed against the judgment of a learned Single Judge that modified an interim order requiring the bank to pay 20% of a demand made under Section 68 of the Income Tax Act, 1961. The bank argued that such a payment would jeopardize its operations, claiming impecunious circumstances. The original demand was based on unexplained cash credits treated as deposits by the bank. The Income Tax Officer had assessed these deposits after the bank failed to provide details of the depositors. The court, while not granting a blanket stay, reduced the deposit requirement to 1% to allow the bank to present its case fully before the First Appellate Authority.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 755161 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 02-08-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: V G ARUN; T R HARIKUMAR; JAIBY PAUL; ARJUN RAGHAVAN; ADITHYA RAJEEV
• Keywords: Co-operative Bank; Conditional stay; Income Tax; Unexplained cash credits; Writ Appeal
• Section: 68; 143

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 2ND DAY OF AUGUST 2018 / 11TH SRAVANA, 1940 WA.No. 1437 of 2018 IN WPC. 15070/2018 AGAINST THE ORDER/JUDGMENT IN WP(C) 15070/2018 of HIGH COURT OF KERALA DATED 29.5.2018 APPELLANT(S)/PETITIONER THE ARUVIKKARA FARMERS SERVICE CO-OPERATIVE BANK LTD.NO.603, REPRESENTED BY ITS MANAGING DIRECTOR-IN-CHARGE, ARUVIKKARA P.O., THIRUVANANTHAPURAM - 695 564. BY ADVS.SRI.V.G.ARUN SRI.T.R.HARIKUMAR SRI.JAIBY PAUL SRI.ARJUN RAGHAVAN SRI.ADITHYA RAJEEV RESPONDENT(S)/RESPONDENTS: 1. THE INCOME TAX OFFICER, WARD-2(3), OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX, RANGE-2, AAYAKAR BHAVAN, KOWDIAR P.O., THIRUVANANTHAPURAM DISTRICT - 695 003. 2. THE COMMISSIONER OF INCOME TAX (APPEALS), AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM - 695 003. BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 02-08-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: jg-10/8 K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- WA No.1437 of 2018 ------------------------------------------- Dated this the 2nd day of August, 2018 J U D G M E N T Vinod Chandran, J. The petitioner, Aruvikkara Farmers Service Co- operative Bank Ltd., is before us in this Writ Appeal against the judgment of the learned Single Judge, which modified the interim order in a first appeal under the Income Tax Act, 1961 (for brevity, the Act), directing payment of 20% of the demand made under Section 68 of the Act; dissatisfied with the conditional order having not been set aside in toto. At the first appellate stage, the Commissioner (Appeals) granted a stay on condition of payment of 50% of the amounts. The learned Single Judge reduced it to 20%. The appellant-Bank is before us claiming impecunious circumstances and the possibility of close-down, if such huge amounts are directed to be paid. 2. The assessments were made after issuance of notice under Section 143 of the Act. The assessee-Bank produced Audit Certificates but did not produce the details of the persons, who have made deposits with it. The Income Tax Officer, drawing adverse inference, treated the deposits as unexplained WA 1437/2018 -2- cash credits and assessed the same under Section 68 of the Act. The assessee filed appeal and then challenged the conditional order as stated above. 3. Before us also the learned Counsel appearing for the assessee vigorously argued for a blanket stay and undertook that the entire details will be produced before the First Appellate Authority. It is pleaded that only due to ignorance, earlier the details were not furnished before the Assessing Officer. The First Appellate Authority, also being entitled to look into the facts, it is undertaken that the details would be furnished and in such circumstances, let there be a consideration of the appeal at the earliest; without any amounts being deposited. 4. The learned Standing Counsel with equal vigor opposed the prayer and submitted that what was attempted to be checked is the laundering of black money, for which the Co-operative Banks are a major conduit. It is also submitted that the assessee having failed to produce the documents; should comply with the demand raised subject only to the appeal. In the present case, considerable reduction has been made and there need not be any further indulgence extended to WA 1437/2018 -3- it, is the contention. The learned Standing Counsel would also submit that verification of the genuineness of the depositors would require some time and may also warrant a report from the Assessing Officer, who could be directed to examine the genuineness on the basis of the details supplied. This necessarily would take time and in the meanwhile there cannot be a blanket stay. 5. Having regard to the rival contentions, especially noticing the fact that the assessee is an Institution in the Co-operative sector and taking note of its members who are from the general public as also from the marginalised sections, we are of the opinion that an opportunity could be afforded to the assessee to produce the details of deposits. 6. To avoid any recalcitrant attitude by the assessee, we directed the learned Counsel to file an affidavit of undertaking, which has been done by the Secretary of the appellant-Bank, in this appeal before us. The affidavit categorically undertakes to produce the details of the deposits before the First Appellate Authority. The assessee would also produce any further details required by the First Appellate Authority or the Assessing Officer on a report being called for by WA 1437/2018 -4- the First Appellate Authority. The same shall be done within the time stipulated by the First Appellate Authority or the Assessing Officer on directions of the First Appellate Authority. In any event, we do not think that a blanket stay can be granted. Considering the entire circumstances as also the failure of the assessee to produce the details at the first stage, we are of the opinion that the assessee will have to make a deposit of 1% of the tax addition made under Section 68 of the Act within a period of one month from the date of receipt of a certified copy of this judgment. The Writ appeal is disposed of with no observation on merits. The consideration of the First Appellate Authority shall be untrammeled by any observation of the learned Single Judge. Writ Petition is allowed leaving the parties to suffer their respective costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE jg "