M.A.SAJEEV V. PRINCIPAL COMMISSIONER OF INCOME TAX

WP(C)/22711/2017

AI Insights

The case involves M.A. Sajeev, the legal heir of late M.A. Unneerikutty, who challenged the withdrawal of benefits under the Direct Tax Dispute Resolution Scheme, 2016, concerning penalties imposed under Sections 271D and 271E of the Income Tax Act, 1961. The petitioner had initially approached the tax authorities to settle these penalties by paying 25% of the imposed penalties, as allowed under the scheme. However, the tax authorities later withdrew this settlement, stating that the penalties were not linked to the assessment proceedings. The court, referencing a similar case (W.P.(C) No.6417 of 2017), found that the scheme's benefits should apply to the penalties in question, regardless of their linkage to the assessment proceedings.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 700060 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 12-07-2017
• Assessment Year: misc
• Other Referred Cases: W.P.(C) No.6417 of 2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K M V P ANDALA; N NAGRESH
• Assessee Lawyers: MATHEWS UTHUPPACHAN; TERRY JAMES; SHARAN SHAHIER
• Keywords: Assessment proceedings; Direct Tax Dispute Resolution Scheme; Penalty
• Section: 271D; 271E

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 12TH DAY OF JULY 2017/21ST ASHADHA, 1939 WP(C).No. 22711 of 2017 (L) ---------------------------- PETITIONER(S): ----------------------- M.A. SAJEEV, LEGAL HEIR OF LATE M.A. UNNEERIKUTTY, KALPAKA BUILDING, TOWN HALL ROAD, CALICUT - 673 001. BY ADVS.SRI.MATHEWS K.UTHUPPACHAN, SRI.TERRY V.JAMES, SRI.SHARAN SHAHIER. RESPONDENT(S): ------------------------- 1. PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. 2. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. 3. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001, KOZHIKODE. 4. COMMISSIONER OF INCOME TAX (APPEALS), AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. 5. CENTRAL BOARD OF DIRECT TAXES, NEW DELHI, REP. BY ITS CHAIRMAN. 6. UNION OF INDIA, MINISTRY OF FINANCE, NEW DELHI, REP. BY SECRETARY , MINISTRY OF FINANCE, NEW DELHI. R1 TO R5 BY SRI.K.M.V.P ANDALAI, SC. R6 BY ADV. SRI.N.NAGARESH, ASSIST. S.G. OF INDIA. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12-07-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs. WP(C).No. 22711 of 2017 (L) APPENDIX PETITIONER'S EXHIBITS:- EXHIBIT P1 A TRUE COPY OF THE ASSESSMENT ORDER DATED 21.12.2006 FOR THE ASSESSMENT YEAR 2004-05. EXHIBIT P2 A TRUE COPY OF THE ORDER DATED 29.07.2008 IMPOSING A PENALTY OF RS. 34,940/- UNDER SECTION 271 D. EXHIBIT P3 A TRUE COPY OF THE ORDER DATED 29.07.2008 IMPOSING A PENALTY OF RS. 2,64,805 UNDER SECTION 271 E. EXHIBIT P4 A TRUE COPY OF THE DIRECT TAXES DISPUTE RESOLUTION SCHEME - 2016. EXHIBIT P5 A TRUE COPY OF THE DECLARATION DATED 29.09.12016 IN RESPECT OF SEC 271 D UNDER SECTION 203 OF THE FINANCE ACT IN RESPECT OF THE DIRECT TAX DISPUTE RESOLUTION SCHEME. EXHIBIT P6 A TRUE COPY OF THE DECLARATION DATED 29.09.2016 IN RESPECT OF SEC.271E UNDER SECTION 203 OF THE FINANCE ACT IN RESPECT OF THE DIRECT TAX DIRECT TAX DISPUTE RESOLUTION SCHEME. EXHIBIT P7 A TRUE COPY OF THE FORM 3 CERTIFICATE ISSUED BY THE 1ST RESPONDENTS IN RESPECT OF AMOUNTS DETERMINED TO BE PAYABLE UNDER SECTION 271 D. EXHIBIT P8 A TRUE COPY OF THE FORM - 3 CERTIFICATE ISSUED BY THE 1ST RESPONDENT IN RESPECT OF AMOUNTS DETERMINED TO BE PAYABLE UNDER SECTION 271 E. EXHIBIT P9 A TRUE COPY OF THE COMMUNICATION DATED 28.12.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P7 DECLARATION. EXHIBIT P10 A TRUE COPY OF THE COMMUNICATION DATED 28.12.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P8 DECLARATION. EXHIBIT P11 A TRUE COPY OF THE SAID CIRCULAR DATED 12.09.2016. EXHIBIT P12 A TRUE COPY OF THE SAID CIRCULAR NO.42 OF 2016 DATED 23.12.2016. RESPONDENT'S EXHIBITS:- NIL. //TRUE COPY// P.S. TO JUDGE rs. K.VINOD CHANDRAN, J. --------------------------------------- W.P.(C) No. 22711 of 2017 (L) ---------------------------------------- Dated this the 12th day of July, 2017 JUDGMENT The petitioner's father was imposed with a penalty under Section 271D and 271E of the Income Tax Act, 1961 [for short, the Act]. The petitioner has approached the authority under the provisions of 'The Direct Tax Dispute Resolution Scheme, 2016' as is seen Ext.P4 for payment of 25% of the penalty. The declarations filed by the petitioner is produced as Exts.P5 and P6. The proceedings of the income tax authority in deciding on 25% of the penalty is seen from Exts.P7 and P8. However, later the orders issued at Exts.P7 and P8 were withdrawn by Exts.P9 and P10 finding that the penalty imposed under Sections 271D and 271E of the Act were not linked to the assessment proceedings. The petitioner challenges the said orders. 2. The learned Standing Counsel appearing for the department relies on Ext.P11 clarification issued by the Central Board of Direct Taxes. 3. The issue is no longer resintegra, as the same has been decided by this Court in W.P.(C) No.6417 of 2017 dated 26.05.2017. The contention taken before the learned single Judge was similar and relied on words used in the scheme which took in the payment of W.P.(C) No. 22711 of 2017 (L) 2 tax, interest and penalty as levied under the Act. The department and the CBDT was of the opinion, that only if penalty is imposed as a direct consequence of the assessment proceedings and linked to the interest leviable, would it be covered under the Scheme. 4. This Court on a consideration of the issue found so: 7. On a consideration of the facts and circumstances of the case and the submissions made across the bar, I find from a perusal of Ext.P4 Amnesty Scheme that, the Scheme contemplates the making of a declaration of tax arrears, which phrase is defined as meaning an amount of tax, interest or penalty determined, inter alia, under the Income Tax Act, and in respect of which an appeal is pending before the appellate authority as on 29.02.2016. The Scheme also envisages that, in the case of a pending appeal related only to penalty,the amount payable by an eligible declarant would be 25% of the minimum penalty leviable, along with the tax and interest payable on the total income finally determined. It is not in dispute that, in the instant case, the declarations submitted by the petitioners were in respect of penalties that were imposed on them by the authorities concerned. It is also not in dispute that in the declaration, the petitioners had offered to pay 25% of the mandatory penalties that were imposed on them. The contention of the Department is essentially that, inasmuch as there is a reference to a payment of tax and interest payable on the total income finally determined, along with 25% of the minimum penalty leviable, the Scheme must be intended to cover W.P.(C) No. 22711 of 2017 (L) 3 only such penalties as have been imposed on an assessee along with the assessment order. The clarification of the CBDT in the context of a penalty order under Section 271(C) or 271 (C) (A) of the Income Tax Act also suggests that, such penalties, as are not linked to assessment proceedings, would not be covered under the Scheme. On an overall consideration of the Scheme, however, I do not see any scope for such a restrictive interpretation of the ambit of the Amnesty Scheme, in the manner suggested by the learned counsel for the respondents. Firstly, the definition of tax arrears does not exclude a situation where the dispute of an assessee is only in respect of a penalty that has been determined against him under the Income Tax Act. Secondly, while the procedure envisaged includes the filing of a declaration solely in respect of penalty, the Scheme suggests that when a declaration is only with regard to penalty, the obligation of the declarant is to pay 25% of the minimum penalty levied, and also to pay the tax and interest payable on the total income finally determined for the assessment year in question. The object of the Scheme appears to be to ensure that, while a person seeking an Amnesty Scheme only in respect of the penalty that is imposed on him, avails the benefit of the Scheme to that extent, it should also be ensured that the said declarant discharges the tax and interest liability under the Income Tax Act for the assessment year in question. In other words, a person, who defaults on the tax and interest liability under the Income Tax Act for the assessment year, cannot claim the benefit of amnesty in respect of the penalty alone. It is also significant to note that the exclusions from the Scheme, that are enumerated in Section 208 of the Finance Act, W.P.(C) No. 22711 of 2017 (L) 4 2016, also do not expressly provide for the exclusion of a declaration, such as those filed in the instant writ petition, where the amnesty is sought only in respect of a penalty that is imposed under the Income tax Act. Thus, I find that, the reasons stated in Exts.P8, P9 and P10 intimations served on the petitioners cannot be legally sustained to deny the petitioners the benefit of Ext.P4 Amnesty Scheme. 5. Going by the authoritative pronouncement, this Court is of the opinion that, there is no scope for restricting the interpretation given to the scheme and that the penalty as levied under Sections 271D and 271E of the Act also could be settled under the Scheme. Hence, Exts.P9 and P10 are set aside. In such circumstance, the first respondent shall process the application on the basis of interpretation as laid down by this Court in the afore cited judgment and pass fresh orders in accordance with the directions therein. Sd/- K.VINOD CHANDRAN JUDGE AMV/15/07/2017 "