MS.GRIHALAKSHMI FILMS, CALICUT V. JOINT COMMISSIONER OF INCOME TAX, RANGE 1, CALICUT

WP(C)/6417/2017

AI Insights

The case involves Ms. Grihalakshmi Films, a petitioner engaged in film production and distribution, who sought relief under the Direct Tax Dispute Resolution Scheme, 2016 for penalties imposed under various sections of the Income Tax Act. The penalties were related to violations of sections concerning the acceptance and repayment of loans/deposits and non-filing of required statements. The Principal Commissioner of Income Tax refused to process the petitioner's application under the Amnesty Scheme, leading to the filing of this writ petition. The court examined the definitions and provisions of the Amnesty Scheme and found that the petitioners were eligible for the benefits under the scheme, as their penalties were not linked to any specific assessment proceedings but were standalone penalties.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 755437 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 26-05-2017
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM; K M V PANDALAI
• Assessee Lawyers: P RAGHUNATH; PREMJIT NAGENDRAN
• Keywords: Amnesty Scheme; Income Tax; Penalties; Direct Tax Dispute Resolution Scheme, 2016
• Section: 271D; 271E; 269SS; 269T; 272A(2)(C); 285B

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 26TH DAY OF MAY 2017/5TH JYAISHTA, 1939 WP(C).No. 6417 of 2017 (B) --------------------------- PETITIONER(S): ------------- MS.GRIHALAKSHMI FILMS, KTC BUILDING, Y.M.C.A. ROAD, CALICUT - 673001, REPRESENTED BY P.V. GANGADHARAN, PARTNER. BY ADVS.SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENT(S): -------------- 1.JOINT COMMISSIONER OF INCOME TAX, RANGE 1, KOZHIKODE. 2.PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT-673001. 3.COMMISSIONER OF INCOME TAX, (APPEALS), AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT-673001. 4.CENTRAL BOARD OF DIRECT TAXES, NEW DELHI, REPRESENTED BY CHAIRMAN, CBDT, NEW DELHI. 5.UNION OF INDIA, MINISTRY OF FINANCE, NEW DELHI, REPRESENTED BY SECRETARY, MINISTRY OF FINANCE, NEW DELHI. BY ADVS. SRI.CHRISTOPHER ABRAHAM, SRI.K.M.V.PANDALAI, THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26-05-2017, ALONG WITH WPC. 6418/2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: EL WP(C).No. 6417 of 2017 (B) --------------------------- APPENDIX PETITIONER(S)' EXHIBITS ----------------------- P1 TRUE COPY OF THE ORDER U/S 271D DATED 23/07/2012 P2 TRUE COPY OF THE ORDER U/S 271E DATED 23/07/2012 P3 TRUE COPY OF THE ORDER U/S 272A(2) (C) DATED 23/07/2012 P4 TRUE COPY OF THE DIRECT TAXES DISPUTES RESOLUTION SCHEME, 2016 P5 TRUE COPY OF THE DECLARATION IN FORM 1 UNDER RULE 3 (1) OF THE RULES IN RESPECT OF EXHIBIT-P1 P6 TRUE COPY OF THE DECLARATION IN FORM 1 UNDER RULE 3 (1) OF THE RULES IN RESPECT OF EXHIBIT-P2 P7 TRUE COPY OF THE DECLARATION IN FORM 1 UNDER RULE 3 (1) OF THE RULES IN RESPECT OF EXHIBIT-P3 P8 TRUE COPY OF THE INTIMATION DATED 28/12/2016 RE: EXHIBIT-P5 DECLARATION P9 TRUE COPY OF THE INTIMATION DATED 28/12/2016 RE. EXHIBIT-P6 DECLARATION P10 TRUE COPY OF THE INTIMATION DATED 28/12/2016 RE: EXHIBIT-P7 DECLARATION P11 TRUE COPY OF THE CIRCULAR NO. 33 DATED 12/09/2016 P12 TRUE COPY OF THE CIRCULAR NO. 42 DATED 23/12/2016 RESPONDENT(S)' EXHIBITS ----------------------- NIL TRUE COPY P.S. TO JUDGE EL (CR) A.K.JAYASANKARAN NAMBIAR, J. ............................................................. W.P.(C).Nos.6417 & 6418 of 2017 ............................................................. Dated this the 26th day of May, 2017 J U D G M E N T As both these writ petitions involve a common issue in respect of sister units, they are taken up together for consideration and disposed by this common judgment. For the sake of convenience, the reference to facts and exhibits is from W.P.(C). No.6417 of 2017. 2. The petitioners are assessees under the Income tax Act, engaged in the production and distribution of cinematographic films and other allied activities. The grievance of the petitioners in these writ petitions is against the refusal by the 2nd respondent - Principal Commissioner of Income Tax to process an application that was preferred by them for obtaining the benefit of the Direct Tax Dispute Resolution Scheme, 2016 (hereinafter referred to as 'the Amnesty Scheme') in respect of penalties that were imposed on the petitioner under Sections 271D, 271E and 272A (2) (C) of the -2- W.P.(C).Nos.6417 & 6418 of 2017 Income Tax Act. The facts in these writ petitions would indicate that, for the assessment years 2007-2008, the petitioners had declared a Net Loss and the assessments were completed by accepting the returns filed by the petitioners. The 1st respondent Joint Commissioner of Income Tax, however, noticed that the petitioners had occasioned a violation of the provisions of Sections 269SS, 269T and 285B of the Income Tax Act by accepting loans/deposits otherwise than by way of account payee cheques and/or draft, by repaying loans/deposits, otherwise than by way of account payee cheques and/or draft and by not filing statements as required by Section 285B regarding the film production carried on by them. The notices issued to the petitioners culminated in orders of penalty that were imposed on the petitioners under Sections 271D, 271E and 272A (2) (C) of the Income Tax Act. The petitioners, aggrieved by the orders of penalty passed against them, preferred appeals before the Commissioner of Income Tax (Appeals), the 3rd respondent herein and the said appeals are stated to be pending. While so, by Ext.P4 Amnesty Scheme, the petitioners identified an opportunity to settle the disputed penalty amounts under the provisions of the Amnesty Scheme. It is pointed out that under the Scheme, a declarant, who files a -3- W.P.(C).Nos.6417 & 6418 of 2017 declaration before the designated authority in respect of tax arrears or specified tax could, notwithstanding anything contained in the Income Tax Act or any other law for the time being in force, settle the matter by paying, in the case of a disputed penalty, 25% of the minimum penalty levied, along with the tax and interest payable on the total income finally determined. The phrase 'tax arrear' is defined in the Amnesty Scheme as meaning the amount of tax, interest or penalty determined under the Income Tax Act or the Wealth-tax Act, in respect of which an appeal is pending before the Commissioner of Income Tax (Appeals) or the Commissioner of Wealth-tax (Appeals) as on the 29th day of February, 2016. For ease of reference the relevant provisions are extracted hereunder: “201. (1) In this Scheme, unless the context otherwise requires,- (a) xxx (b) xxx (c) xxx (d) xxx (e) xxx (f) xxx (g) xxx -4- W.P.(C).Nos.6417 & 6418 of 2017 (h) “tax arrear” means, the amount of tax, interest or penalty determined under the Income-tax Act or the Wealth-tax Act, in respect of which appeal is pending before the Commissioner of Income-Tax (Appeals) or the Commissioner of Wealth-tax (Appeals) as on the 29th day of February. 202. Subject to the provisions of this Scheme, where a declarant files, on or after the 1st day of June, 2016 but on or before a date to be notified by the Central Government in the Official Gazette, a declaration to the designated authority in accordance with the provisions of section 203 in respect of tax arrear, or specified tax, then, notwithstanding anything contained in the Income-tax Act or the Wealth-tax Act or any other provision of any law for the time being in force, the amount payable under this Scheme by the declarant shall be as under, namely:- (I) in case of pending appeal related to tax arrear being- (a) tax and interest, (i) In a case where the disputed tax does not exceed ten lakh rupees, the whole of the disputed tax and the interest on disputed tax till the date of assessment or reassessment, as the case may be; or (ii) in any other case, the whole of disputed tax, twenty-five per cent of the minimum penalty leviable and the interest on disputed tax till the date of assessment or reasssessment, as the case may be; (b) penalty, twenty-five per cent of the minimum penalty leviable and the tax and interest payable on the total income finally determined. -5- W.P.(C).Nos.6417 & 6418 of 2017 (II) In case of specified tax, the amount of such tax so determined.” 3. A perusal of the Scheme also indicates that a declaration under Section 202 of the Finance Act, 2016, governing the Amnesty Scheme is to be made, by the applicant seeking the benefit of the Scheme, before the designated authority in the prescribed form and in the prescribed manner and, on the application of the declarant being considered in terms of the Scheme, the pending appeals with regard to the tax dispute would stand automatically withdrawn. Section 208 of the Finance Act, 2016, which provides for exclusions from the operation of the Scheme reads as follows: “208. The provisions of this Scheme shall not apply- (a) in respect of tax arrear or specified tax,- (i) relating to an assessment year in respect of which an assessment has been made under Section 153A or 153C of the Income-tax Act or assessment or reassessment for any of the assessment years, in consequence of a search initiated under Section 37A or requisition made under Section 37B of the Wealth-tax Act if it relates to any tax arrear; -6- W.P.(C).Nos.6417 & 6418 of 2017 (ii) relating to an assessment or reassessment in respect of which a survey conducted under section 133A of the Income-tax Act or section 38A of the Wealth-tax Act, has a bearing if it relates to any tax arrear; (iii) relating to an assessment year in respect of which prosecution has been instituted or or before the date of filing of declaration under section 202; (iv) relating to any undisclosed income from a source located outside india or undisclosed asset located outside India; (v) relating to an assessment or reassessment made on the basis of information received under an agreement referred to in section 90 or section 90A of the Income-tax Act, if it relates to any tax arrear;” Thus, an overall reading of the Scheme indicates that the intention is to grant an amnesty to a declarant, who declares his details with regard to disputed tax, interest or penalty, and the amnesty is to be granted to the extent contemplated in the Amnesty Scheme. 4. In the instant case, while the petitioners submitted their declarations in the prescribed form before the designated authority, by Exts.P8, P9 and P10 intimations served on them, they were informed that the declarations submitted by them could -7- W.P.(C).Nos.6417 & 6418 of 2017 not be processed since, as per the Amnesty Scheme, the tax arrears in the case of penalty necessarily referred only to such penalty as was linked to the total income finally determined. It was pointed out that, inasmuch as the penalties that were imposed of the petitioners, were not linked to any assessment proceedings, the petitioners could not have preferred a declaration under the Amnesty Scheme referred above. In the writ petitions, the petitioners impugn the said intimations served on them, and seek a direction to the 2nd respondent designated authority to process the declarations filed by them in accordance with Ext.P4 Amnesty Scheme. 5. A statement has been filed on behalf of the respondents 1 to 3, wherein the stand taken in Exts.P8 to P10 intimations served on the petitioners is sought to be justified based on the clarificatory Circulars issued by the Central Board of Direct Taxes (CBDT) which purport to clarify the scope of Ext.P4 Amnesty Scheme. In particular, it is reiterated that the petitioners would not be entitled to the benefit of the Amnesty Scheme since the penalties imposed on them were not linked to any assessment proceedings, which determined the total income and the tax -8- W.P.(C).Nos.6417 & 6418 of 2017 payable thereon. 6. I have heard the learned counsel appearing for the petitioners in both the writ petitions as also the learned Standing counsel appearing for the respondents. 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 -9- W.P.(C).Nos.6417 & 6418 of 2017 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 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 -10- W.P.(C).Nos.6417 & 6418 of 2017 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, 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. Resultantly, I quash Exts.P8, P9 and P10 intimations in both the writ petitions and direct the 2nd respondent to process Exts.P5, -11- W.P.(C).Nos.6417 & 6418 of 2017 P6 and P7 declarations submitted by the petitioners in both the writ petitions expeditiously and in terms of Exts.P4 Scheme, as clarified in this judgment. Needless to say, the processing of the declarations as directed shall be untrammelled by Exts.P11 and P12 Circulars that have been issued by the CBDT. The 2nd respondent shall pass orders, after processing the declarations, within a period of six weeks from the date of receipt of a copy of this judgment, after hearing the petitioners. Sd/- A.K.JAYASANKARAN NAMBIAR JUDGE mns/26.05.17 -12- W.P.(C).Nos.6417 & 6418 of 2017 "