E.O.LAWRANCE V. UNION OF INDIA

WP(C)/25817/2017

AI Insights

The case revolves around a writ petition filed by E.O. Lawarance challenging the interest levied under Section 158BFA of the Income Tax Act, 1961, due to delayed filing of tax returns following a search and seizure operation by the Income Tax Department. The petitioner argued that the delay was caused by the department's failure to provide seized documents necessary for filing the returns on time. The court examined the procedural history, including the settlement with the Settlement Commission and subsequent demands for tax and interest, and found that the petitioner had not adequately challenged the procedural steps or the substantive orders at the appropriate times, leading to the dismissal of the petition.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 722337 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 14-11-2017
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Anjum M.H. Ghaswala and others, Mahavir Manakchand Bhansali v. Commissioner of Income Tax, Commissioner of Income Tax v. J.H. Gotla
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P K MENON; JOSE JOSEPH
• Assessee Lawyers: PREETHA NAIR
• Keywords: Income Tax; Interest Levy; Search and seizure; Settlement commission; Document Demand
• Section: 142(1); 119; 158BC; 158BFA; 132(8)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN TUESDAY, THE 14TH DAY OF NOVEMBER 2017/23RD KARTHIKA, 1939 WP(C).No. 25817 of 2017 (B) ---------------------------- PETITIONER: ----------- E.O.LAWARANCE, EDAKKALATHUR HOUSE,WELCOME VILLA,GURUVAYOOR RAOD, POONKUNNAM,THRISSUR DIST,PIN-680002. BY ADV. SMT.PREETHA S.NAIR RESPONDENT(S): -------------- 1. UNION OF INDIA, REPRESENTED BY ITS SECRETARY,DEPARTMENT OF REVENUE, MINISTRY OF FINANCE,NORTH BLOCK,NEW DELHI-110001. 2. CENTRAL BOARD OF DIRECT TAXES, MINISTRY OF FINANCE,DEPARTMENT OF REVENUE, NORTH BLOCK,NEW DELHI-110001. 3. PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, REVENUE BUILDING,I.S.PRESS ROAD,KOCHI-682018. 4. TAX RECOVERY OFFICER, OFFICE OF THE PRINCIPLE COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN,S.T.NAGAR,THRISSUR-680001. BY ADV. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14-11-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.V. WP(C).No. 25817 of 2017 (B) ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS ----------------------- EXHIBIT P1 A TRUE COPY OF THE 158BC NOTICE DATED 08.01.1999 EXHIBIT P2 A TRUE COPY OF THE SEC.141(1)NOTICE DATED 14.02.2000 EXHIBIT P3 A TRUE COPY OF THE REPLY DATED 02.03.2000 EXHIBIT P4 A TRUE COPY OF THE ORDER OF THE BLOCK ASSESSMENT COMPLETED UNDER SEC.158 BC FOR THE BLOCK PERIOD ENDED 28.09.1998 DATED EXHIBIT P5 A TRUE COPY OF THE ORDER OF THE SETTLEMENT COMMISSION DATED.24.10.2001 EXHIBIT P6 A TRUE COPY OF THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE-2,ERNAKULAM DATED 20.02.2002 EXHIBIT P7 A TRUE COPY OF THE JUDGMENT IN THE WRIT APPEAL NO.2757 OF 1998 DATED 07.04.2003 EXHIBIT P8 A TRUE COPY OF THE COMMUNICATION DATED 29.03.2004 ON THE SALES TAX DEPARTMENT THE REQUEST EXHIBIT P9 A TRUE COPY OF THE SETTLEMENT COMMISSION'S ORDER DATED 22.09.2004 EXHIBIT P10 A TRUE COPY OF THE PETITION DATED 05.12.2009 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P11 A TRUE COPY OF THE ORDER OF THE 2ND RESPONDENT DATED 01.09.2010 EXHIBIT P12 A TRUE COPY OF THE REVIEW PETITION DATED 21.12.2010 EXHIBIT P13 A TRUE COPY OF THE NOTICE DATED 14.08.2015 EXHIBIT P14 A TRUE COPY OF THE PETITION DATED 26-10-2016 EXHIBIT P15 A TRUE COPY OF THE LETTER OF THE 4TH RESPONDENT DEMANDING INTEREST UNDER SEC.158BFA DATED 21.11.2016. EXHIBIT P16 A TRUE COPY OF THE DEMAND NOTICE DATED 29.05.2017 EXHIBIT P17 A TRUE COPY OF THE PETITION UNDER SEC.220(2A) DATED 31.07.2017 EXHIBIT P18 TRUE COPIES OF THE CHALLAN DATED 30.6.2017 EXHIBIT P19 TRUE COPIES OF THE CHALLAN DATED 5.7.2017. WP(C).No. 25817 of 2017 (B) ---------------------------- EXHIBIT P20 TRUE COPY OF THE COMMUNICATION TO THE COMMISSIONER OF INCOME TAX COCHIN DATED 13.11.1998 FOR RELEASE OF TWO COMPUTERS SEIZED FROM THE PETITIONER'S OFFICE. EXHIBIT P21 TRUE COPY OF THE REQUEST FOR GRANTING EXTENSION OF TIME TO FILE RETURN TO THE DEPUTY COMMISSIONER OF INCOME TAX DATED 2.2.1999. EXHIBIT P22; TRUE COPY OF THE REQUEST TO THE DEPUTY DIRECTOR OF INVESTIGATION TRICHUR DATED 2.2.1999 TO ISSUE COPIES OF THE SEIZED RECORDS AND DOCUMENTS. EXHIBIT P23: TRUE COPY OF THE PROCEEDINGS OF THE COMMISSIONER OF INCOME TAX COCHIN UNDER SECTION 132(8) OF THE INCOME TAX ACT DATED 17.3.1999. EXHIBIT P24; TRUE COPY OF THE COMMUNICATION TO THE DEPUTY COMMISSIONER OF INCOME TAX (INVESTIGATION) DATED 19.4.1999 REQUESTING FOR ISSUE OF COPIES OF SEIZED RECORDS. EXHIBIT P25 TRUE COPY OF THE COMMUNICATION TO THE COMMISSIONER OF INCOME TAX COCHIN DATED 5.7.1999 FOR RELEASE OF SEIZED RECORDS AND COMPUTER. EXHIBIT P26 TRUE COPY OF THE COMMUNICATION TO THE COMMISSIONER OF INCOME TAX COCHIN DATED 11.11.1999 REQUESTING FOR RELEASE OF SEIZED RECORDS. EXHIBIT P27 TRUE COPY OF THE DETAILS OF TAX AND INTEREST PAID. RESPONDENT(S)' EXHIBITS NIL ----------------------- /TRUE COPY/ K.V. P.S.TO JUDGE K. VINOD CHANDRAN, J. ---------------------------------- W.P(C). No.25817 of 2017 [B] ---------------------------------- Dated this the 14th day of November, 2017 JUDGMENT The petitioner in the writ petition has challenged Exts.P11 & P16 orders. Ext.P11 is an order passed by the Central Board of Direct Taxes [for brevity, CBDT] in an application filed under Section 119 of the Income Tax Act, 1961 [for brevity, the Act]. Ext.P16 is a demand notice issued by the Income Tax Authorities based on the settlement arrived in Ext.P5 by the Settlement Commission. The learned counsel for the petitioner submits that the challenge is confined to the interest levied under Section 158BFA of the Act and the ground raised is of the delay in W.P(C). No.25817 of 2017 [B] 2 filing the returns as provided under Section 158 BC not attributable to the petitioner/assessee. 2. The learned counsel first puts forth the brief facts to indicate the proceedings which eventually concluded with order of the Settlement Commission and the levy under Section 157BFA. A search of the petitioner's premises was conducted by the Sales Tax Department on 30.07.1998 and certain documents and computers seized. An independent search and seizure was conducted by the Income Tax Department on 28.09.1998 wherein again materials and documents were seized. The documents seized by the Sales Tax Department was also requisitioned under Section 152A of the Income Tax Act. 3. A notice under Section 158 BC, Ext.P1 was issued for the block period. The notice was dated 08.01.1999 and a time of 45 days was provided to W.P(C). No.25817 of 2017 [B] 3 the assessee to file the return for the block period. Within the time so provided, the assessee filed Exts.P21 & P22 applications dated 02.02.1999 requesting the documents seized to be handed over to the petitioner for facilitating the filing of a return within the period stipulated. Ext.P23 is relied upon to show that the Department had the documents with them but did not hand over the same to the petitioner. Again, the petitioner, of course beyond the period as provided under Section 158BC, made requests, produced at Ext.P24 to P26 for supply of the documents. The entreaties made before the Department having not been responded favourably, the petitioner was forced to file a return on 01.05.2000 beyond the period as provided under Section 158 BC. The interest now levied under Section 158BFA is for the period up to W.P(C). No.25817 of 2017 [B] 4 01.05.2000, from the date of expiry of the 45 days period provided under Section 158 BC. 4. The petitioner was then issued with Ext.P2 notice under Section 142(1). A reply was also filed as per Ext.P3. An assessment order was passed at Ext.P4, upon which the petitioner approached the Settlement Commission under Chapter XIX-A of the Act. The Settlement Commission passed Ext.P5 order and a consequential demand was also raised at Ext.P6. The interest under Section 158BFC levied was Rs.16,29,669/-, which was automatic. 5. Later the petitioner approached the CBDT for waiver of the interest levied under Section 158BFA by an application under Section 119, which was rejected as per Ext.P11. A consequential demand was raised under Ext.P16, which prompted the petitioner to approach this Court under W.P(C). No.25817 of 2017 [B] 5 Article 226 of the Constitution of India. It is submitted by the learned counsel for the petitioner that the request made by the petitioner before the authorities under the Act, for documents to facilitate a proper filing of the return, for the block period, was not responded to. Ext.P23 clearly indicates that the documents where with the Income Tax Department. Despite that, the documents were never supplied to the petitioner and hence the petitioner was disabled from filing a proper return within the time prescribed. 6. When after repeated reminders, the Income Tax Department failed to supply the copies, the petitioner had, on his own, filed a return dated 01.05.2000. The delay was caused only due to the irresponsible attitude of the Department and the refusal to supply the documents, which is a W.P(C). No.25817 of 2017 [B] 6 necessary mandate under the Act, as also an essential attribute of the principles of natural justice. The delay in filing the return hence was not attributable to the assessee and the Department alone was responsible for the same. In such a situation, there could have been no levy of interest under Section 158BFA, which is only as a consequence of the delay in filing the return and relatable to the delay occurred from the statutory period. The Department could not have made an unjust enrichment causing hardship to the petitioner is the specific contention raised. 7. The learned counsel for the petitioner has relied on Commissioner of Income Tax v. Anjum M.H. Ghaswala and others [2001 252 ITR (1)] to contend that the Settlement Commission could not have waived the interest, which was automatic W.P(C). No.25817 of 2017 [B] 7 under Section 158BFA. The only remedy available to the petitioner in such a circumstance was under Section 119 before the CBDT, which as is noticed by the Hon'ble Supreme Court had the authority to issue orders providing for waiver of such interest as imposed by the Act. In a similar circumstance on identical facts where the delay in filing a return on search and seizure effected was attributable to the Department for reason of the documents having not been supplied, Mahavir Manakchand Bhansali v. Commissioner of Income Tax [(2017) 396 ITR 226 Bom] held in favour of the assessee. The Division Bench of the High Court of Bombay relied on a judgment of the Hon'ble Supreme Court in Commissioner of Income Tax v. J.H. Gotla [(1985) 4 SCC 343] to set aside the levy under Section 158BFA. The proposition as laid down by the Hon'ble Supreme Court squarely W.P(C). No.25817 of 2017 [B] 8 applies to the case of the petitioner. The petitioner has to be given waiver of the interest levied under Section 158BFA on the ground of the delay in filing the return not being attributable at all to the assessee. 8. The learned Standing Counsel Government of India [Taxes] asserts that the waiver petition under Section 119 was not maintainable before the CBDT. This Court also under Article 226 of the Constitution of India could not enter into such issues of waiver while considering the order of the CBDT. The CBDT has absolutely no jurisdiction to entertain the application and there could be no further consideration of the waiver, on grounds of hardship or otherwise. The learned Standing Counsel also would specifically point out the chronological order in which the proceedings were taken, to further decline W.P(C). No.25817 of 2017 [B] 9 consideration on the ground of the levy under section 158BFA having become final long back. The return was filed by the petitioner on 01.05.2000 and the assessment order was passed on 31.10.2000. Immediately thereafter the petitioner approached the Settlement Commission. The order of the Settlement Commission at Ext.P5 was passed on 24.10.2001. The consequential computation of the tax and interest at Ext.P6 was made on 20.02.2002. The petitioner did not challenge the levy and the order of the Settlement Commission has become final. 9. A reading of Ext.P6 would indicate that the petitioner was granted four quarterly installments starting from 15.12.2001 to pay off the amounts. The petitioner again approached the Settlement Commission for extension of period in 2004, which by Ext.P9 dated 14.09.2004 was W.P(C). No.25817 of 2017 [B] 10 allowed for six months. The petitioner having not paid up the amounts approached the CBDT long thereafter in the year 2009 by an application dated 05.12.2009. By Ext.P11, the application was rejected on 01.09.2010. The present writ petition was filed on the demand being raised by Ext.P16 dated 29.05.2017. The challenge being confined to Exts.P11 & P16 as is seen from the reliefs, the learned Standing Counsel asserts the levy under Section 158BFA, cannot be at this point of time after more than seven years be interfered with. The challenge against Ext.P16 also cannot survive for reason of it being only a consequential order of an order passed by the Settlement Commission long back in the year 2001. 10. As to the jurisdiction of the CBDT Section 119 of the Act has to be looked into. The learned counsel for the petitioner has relied on W.P(C). No.25817 of 2017 [B] 11 Section 119(2)(a) so as to assert the maintainability of the petition before the CBDT, which is extracted hereunder: “(2) Without prejudice to the generality of the foregoing power- (a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of Sections 139, 143, 144, 147, 148, 154, 155, [158BFA], [sub-section (1A) of Section 201, sections 210, 211, 234A, 234B, 234C] 271 and 273 or otherwise), general or special orders in respect of any class of incomes or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is W.P(C). No.25817 of 2017 [B] 12 of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information.” 11. A reading of the provision would show that the CBDT has been conferred with the power to pass general or special orders in respect of any class of incomes or classes of incomes setting forth directions or instructions to the Income Tax Authorities for better management of the work relating to assessment or collection of revenue or initiation of proceeding in the imposition of penalties and also relaxation of the specific provisions mentioned therein, including Section 158BFA. This is not a case in which any such general or special orders have been issued by the CBDT. The petitioner does not have a case that there are any orders issued by the CBDT granting relaxation of the interest as W.P(C). No.25817 of 2017 [B] 13 payable under Section 158BFA. 12. As has been pointed out by the learned Standing Counsel for the Department, the CBDT has issued Circular exempting interest under Section 234A, 234B and 234C invoking the powers conferred under Section 119(2) of the Act. The Circular constitutes authorities to consider such exemption or waiver and also provides the modalities and the grounds on which such waiver has to be granted. This Court is inclined to accept the contention of the Department that individual cases are not contemplated of consideration under Section 119(2)(a). One can also refer to the other provisions in sub-clauses (b) & (c) of Section 119 (2), wherein any case or class of cases are referred to. An application could be moved under sub-clause (b) or (c) by any individual assessee, but however only with W.P(C). No.25817 of 2017 [B] 14 respect to the specific matters enumerated thereunder. In such circumstance, this Court does not find any jurisdiction on the CBDT to consider waiver of interest of an individual assessee as levied by the Settlement Commission under Section 119(2)(a). 13. The argument of the petitioner is that even the Hon'ble Supreme Court in Anjum M.H. Ghaswala [supra] has found that the Settlement Commission does not have the power and jurisdiction for reducing or waiving the interest as imposed under the statute. A reading of the decision would indicate that though the Settlement Commission could not have waived the interest as levied under Section 158BFA the finding was only to the effect that only the CBDT could pass orders by which waiver or reduction of interest could be considered by the appropriate W.P(C). No.25817 of 2017 [B] 15 authorities constituted by the CBDT. This does not deviate at all from the proposition as stated by this Court earlier as to general or special orders being passed by the CBDT for such waiver of interest levied under Section 158BFA. There being no such order passed by the CBDT; the petitioner could not have as an individual assessee approached the CBDT for waiver of interest. 14. In fact the decision examined the scope of Section 119 (a) in the context of the issue as to whether the Commission could exempt interest under that provision in the following manner: “As per this definition, it is clear that the power of settlement is vested in the Commission in regard to a particular case pertaining to an assessee, maybe for one or more years while the power of relaxation contemplated under section 119(2)(a) can be exercised only in regard to W.P(C). No.25817 of 2017 [B] 16 class of cases or class of incomes. It is not open to be used in regard to any particular person or case contemplated under the definition of the expression “case” In Section 245A.” 15. The decision of the Bombay High Court in Mahavir Manakchand Bhansali [supra] is in an income tax appeal, wherein the Division Bench of the High Court found that the delay in filing a return under Section 158BC being not attributable to the assessee and demonstrably being that attributable to the lethargy of the Department, there could be an exclusion of the period in which the delay was caused for the purpose of computing the interest under Section 158BFA. The Supreme Court decision, which was relied upon by the High Court of Bombay also indicates that when plain literal interpretation of the statutory provisions produces a manifestly unjust result, W.P(C). No.25817 of 2017 [B] 17 not intended by the legislature then the Court would modify the language so as to achieve the intention of the legislature. 16. There could be no dispute in the said proposition but it would be applicable in the present case, if and only if the petitioner had challenged the order of the Settlement Commission before this Court. Then the situation would have been different. There is no such challenge and the petitioner cannot also challenge the order of the Settlement Commission at this stage when the order itself was passed in the year 2001. As has been pointed out by the learned Standing Counsel Anjum M.H. Ghaswala [supra] puts it beyond the pale of doubt that the interest leviable under Section 158BFA is automatic and is a necessary consequence of the statute, which arises on a delay being committed in filing a return under W.P(C). No.25817 of 2017 [B] 18 Section 158BC. The Settlement Commission cannot also waive interest since though Chapter XIXA of the Act, is held to be a complete code in itself, providing for a different scheme of assessment, reassessment has to be under the provision of the IT Act. It is hence without doubt that a waiver of the statutory prescription cannot be made by the Settlement Commission nor by the Appellate Authorities but could only be done by a special or general order of the CBDT constituting specific authorities for consideration and laying down guidelines and modalities for such consideration. 17. The chronological facts put forth by the learned Standing Counsel also is of significance since the order of the Settlement Commission is of the year 2001. The consequential demand as per the Settlement Commission's order is of the year W.P(C). No.25817 of 2017 [B] 19 2002. The petitioner was granted four quarterly installments starting from 15.12.2001 by the Settlement Commission. The same has not been complied with. Later again, the petitioner was before the Settlement Commission seeking further time, which was granted as per Ext.P9. The payments were not made even within such extended period. The petitioner in all these years never challenged the order of the Settlement Commission or the imposition of penalty under Section 158BFA. The petitioner's contention that the petitioner could not have challenged it in any other Forum cannot be countenanced since a challenge could have been maintained before this Court. 18. The petitioner approached the CBDT after almost a decade from the orders of the Settlement Commission. The CBDT, as has been found, has W.P(C). No.25817 of 2017 [B] 20 absolutely no jurisdiction to entertain the waiver application of an individual assessee from interest levied under Section 158BFA. The CBDT rejected the prayer made of waiver of the interest as levied by the Settlement Commission as per Ext.P11, which cannot be interfered with by this Court. The CBDT lacks jurisdiction to consider such waiver of interest in individual cases. In such circumstance, this Court does not find any reason to interfere with the orders at Exts.P11 & P16 and the petitioner is liable to pay the interest under Section 158BFA as provided in the statute. The writ petition would stand dismissed. No costs. Sd/- K. VINOD CHANDRAN, JUDGE. //True Copy// P.A. to Judge sp/14/11/17 "