PARAKKADAVIL MOHAMMED KUNJU ANSARI V. THE INCOME TAX OFFICER,

WP(C)/1470/2019

AI Insights

The case involves Parakkadavil Mohammed Kunju Ansari, the proprietor of M/S. Sherwud Traders, who contested the income tax assessment for the year 2016-17. The petitioner had claimed exemption on the sale of agricultural land, which was scrutinized by the Income Tax Officer, Ward-1, Kottayam. The department issued multiple notices seeking clarification and documentation to substantiate the exemption claim. After the petitioner failed to provide satisfactory evidence, the department completed the assessment, imposing a tax liability of Rs.5,76,29,515. The petitioner challenged this assessment and the subsequent demand notice, arguing that he was not given a personal hearing to explain his returns. The court dismissed the petition, emphasizing that the petitioner had been given ample opportunity to present his case through written responses and that the principles of natural justice were upheld.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 754629 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 04-10-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH; B PRAMOD
• Assessee Lawyers: M P AHAMED; CYRIAC TOM
• Keywords: Agricultural income; Assessment Order; Capital Gains; Exemption Claim; Income Tax
• Section: 143(3); 143(2)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 04TH DAY OF OCTOBER 2019 / 12TH ASWINA, 1941 WP(C).No.1470 OF 2019(G) PETITIONER/S: PARAKKADAVIL MOHAMMED KUNJU ANSARI PROPRIETOR-M/S. SHERWUD TRADERS, PARAKKADAVIL HOUSE, ERUMELI P.O., KOTTAYAM -686509. BY ADVS. SRI.M.P.SHAMEEM AHAMED SRI.CYRIAC TOM RESPONDENT/S: 1 THE INCOME TAX OFFICER, WARD-1, KOTTAYAM, PUBLIC LIBRARY BUILDING, SHASTRI ROAD, KOTTAYAM-686001. 2 UNION OF INDIA REPRESENTED BY REVENUE SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK NEW DELHI-110001. R1 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX R2 BY ADV. SRI.B.PRAMOD THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.1470 OF 2019(G) : 2 : JUDGMENT The petitioner, an individual and an income tax assessee on the rolls of the Income Tax Officer, Ward-1, Kottayam, was engaged in timber business during the financial year 2015-16, corresponding to the assessment year 2016-17. The petitioner had sold about 13 adjacent agricultural plots to the M/s Believers Church, and while filing his return showed the sale consideration as agricultural income which was exempted from tax under the head of Capital Gains. The return submitted by the petitioner for the assessment year in question was subjected to scrutiny through a notice dated 07.07.2017 issued to the petitioner under Section 143(2) of the Income Tax Act. This was followed by another notice dated 23.4.2018, and later by Ext.P3 notice dated 10.7.2018, where the petitioner was asked to furnish information to the queries raised in the annexure to the said notice. While the petitioner submitted Ext.P4 reply to the said query, by Ext.P5 query dated 12.11.2018, the petitioner was asked to produce documents to substantiate his claim in the return that an amount of Rs.17 crores was exempted from income tax under the head Capital Gains as the same was purportedly in respect of sale of agricultural land. The petitioner submitted Ext.P6 reply to the said query, but the department thereafter raised a fresh query seeking evidence in respect of all sources of income declared in the return of income tax for the assessment year 2016- WP(C).No.1470 OF 2019(G) : 3 : 17 (Ext.P7 dated 27.11.2018). The petitioner responded to the said query by Ext.P8 reply dated 6.12.2018. Thereafter, a sworn statement was taken from the petitioner on 10.12.2018 (Ext.P9) and on 19.12.2018, the department through Ext.P10 query, sought for further documents from the petitioner to substantiate his claim with regard to the sources of income and details of expense incurred during the financial year to support his claim in the returns filed by him. The petitioner states that the details sought for in Ext.P10 query were furnished through Ext.P11 reply dated 21.12.2018. Thereafter, an inspection was conducted for verifying the factual aspects, disclosed by the petitioner in his various replies, to substantiate his claim for exemption. Pursuant to the inspection, some clarifications was sought for, which the petitioner furnished through Ext.P14 communication dated 24.12.2018. Thereafter Ext.P15 notice dated 28.12.2018 was issued to the petitioner giving a summary of the proposals of the department for completing the assessment in relation to the petitioner, and since the time limit for completing the assessment under the Income Tax Act was due to expire, the petitioner was asked to submit his explanation, if any, to the said proposal within a day, making it clear that if no reply was received, the assessment would be completed without any further notice. 2. It is not in dispute that the petitioner submitted his reply to Ext.P15 notice through Ext.P16 communication of the same date. WP(C).No.1470 OF 2019(G) : 4 : Thereafter, by Ext.P17 order, the assessment in relation to the petitioner for the assessment year 2016-17 was completed by finding that the petitioner was liable to tax in an amount of Rs.5,76,29,515/-. Ext.P18 is the notice of demand issued to the petitioner pursuant to the assessment order. In the writ petition, the petitioner impugns Ext.P17 order and Ext.P18 demand notice, solely on the ground that Ext.P17 order was passed without affording the petitioner sufficient time to explain the contents of his return to the Assessing officer in a personal hearing conducted before the Assessing Officer. It is contended that, had an opportunity been granted to the petitioner, he could have explained the figures furnished by him through the various replies submitted by him, and in as much as the said opportunity was denied to him, Ext.P17 assessment order cannot be legally sustained. 3. A statement has been filed on behalf of the respondent wherein the sequence of events leading to the passing of the assessment order is detailed. It is pointed out that, through the series of queries that were raised on the petitioner by the department, the department was only seeking corroborative evidence for substantiating the claim of the petitioner for exemption of a substantial portion of the income declared by him. It is pointed out that the details sought were essentially for enabling the petitioner to establish that the exemption claim was in respect of agricultural income which would not fall for assessment under the head of WP(C).No.1470 OF 2019(G) : 5 : Capital Gains. It is the stand of the department that the assessment order confirmed a demand of income tax on the petitioner only because he had not succeeded in substantiating his claim for exemption, and further, had not offered any satisfactory explanation for the unaccounted income detected, with any reliable documents and hence there was no prejudice caused to the petitioner on account of no hearing having been extended to him prior to passing the assessment order. It is, in particular, pointed out that, had the petitioner disclosed the true and correct information before the Assessing Officer, as he was obliged to do in terms of the Income Tax Act, there would have been no necessity for the department to issue notices to the petitioner calling for documents to substantiate his claim for exemption. The delay in completing the assessment is therefore stated to be attributable solely to the inaction on the part of the petitioner in not furnishing the necessary details along with the return for the assessment year in question. 4. I have heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the Income Tax Department. 5. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that Ext.P17 is an order passed under Section 143(3) of the Income Tax Act. It is not in dispute before me that the statutory notice under Section 143(2) of the WP(C).No.1470 OF 2019(G) : 6 : Income Tax Act was served on the petitioner on 7.7.2017. It is therefore evident that the statutory preconditions to be adhered to before completing an assessment against the petitioner, had been complied by the department in the instant case. The obligation to disclose, fully and correctly, the income that was earned by the assessee during the assessment period, was on the assessee himself, and if the department had issued notices to the assessee seeking for documents to substantiate his claim for exemption, then that cannot be treated as a new proposal by the department to fasten a liability on the petitioner. Accordingly, there was no obligation on the department to afford yet another hearing to the petitioner before passing the assessment order. In the instant case, the various queries raised by the department after perusing the reply given by the assessee to the notice issued under Section 143(2) of the Income Tax Act would clearly reveal that the department was only seeking for the documents that would substantiate the claim of the petitioner assessee for exemption in respect of a substantial portion of the income that was declared by him in the return. Ultimately, by Ext.P17 assessment order, all that the department did, was to deny the claim for exemption of the petitioner assessee, and while doing so, the department was not obliged to grant any hearing to the petitioner over and above the opportunities that had already been extended to the petitioner to respond to the specific queries raised by the department. In my view, there cannot be a mechanical application of the principles of natural justice in every case and the necessity of affording a hearing to an WP(C).No.1470 OF 2019(G) : 7 : assessee, in order to comply with the rules of natural justice, must be examined on the facts of each case. On the facts of the instant case, I do not find any prejudice having been caused to the petitioner through the denial of a personal hearing since, although the petitioner has a case that he could have submitted additional documents, he ought to have done so within the time granted to him by the department and, further, no such documents have been produced in the writ petition. Resultantly, I do not find Ext.P17 order to be vitiated by a non compliance with the rules of natural justice, or by any other jurisdictional error, so as to warrant an interference with the said order in these proceedings under Art.226 of the Constitution of India. The writ petition in its challenge against the said order and Ext.P18 demand notice fails, and is accordingly dismissed. The learned counsel for the petitioner would submit that he would require some time to move the appellate authority in an appeal against Ext.P17 order. Taking note of the said submission of the learned counsel for the petitioner, I direct that if the petitioner prefers an appeal against Ext.P17 order, before the appellate authority, within six weeks from today, then the appellate authority shall consider and pass orders in the appeal, on merits, after hearing the petitioner. In order to enable the petitioner to move the appellate authority, I direct that recovery steps for recovery of amounts confirmed against the petitioner by Ext.P17 assessment order/Ext.P18 demand notice shall be kept in abeyance for the above said WP(C).No.1470 OF 2019(G) : 8 : period of six weeks. I also make it clear that nothing in this judgment shall stand in the way of the petitioner seeking a rectification of factual mistakes in Ext.P17 assessment order before the assessing authority. Sd/- Sab A.K.JAYASANKARAN NAMBIAR JUDGE WP(C).No.1470 OF 2019(G) : 9 : APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 COPY OF THE STATEMENT OF INCOME ALONG WITH ACKNOWLEDGMENT OF FILING THE INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2016-17. EXHIBIT P2 COPY OF THE NOTICE DATED 07.07.2017. EXHIBIT P3 COPY OF THE NOTICE DATED 10.07.2018 ISSUED U/S 142(1) OF INCOME TAX ACT. EXHIBIT P4 COPY OF THE REPLY DATED 18.07.2018. EXHIBIT P5 COPY OF THE LETTER DATED 12.11.2018. EXHIBIT P6 COPY OF THE REPLY DATED 21.11.2018 ALONG WITH E-PROCEEDINGS ACKNOWLEDGMENT. EXHIBIT P7 COPY OF THE SUMMONSES DATED 27.11.2018. EXHIBIT P8 COPY OF THE REPLIES DATED 16.12.2018. EXHIBIT P9 COPY OF THE STATEMENT RECORDED FROM THE PETITIONER. EXHIBIT P10 COPY OF THE LETTER DATED 19.12.2018 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P11 COPY OF THE REPLY FILED IN RESPONSE TO LETTER DATED 21.12.2018 ALONG WITH E- PROCEEDINGS ACKNOWLEDGMENT. EXHIBIT P12 COPY OF THE LETTER DATED 20.12.2018. EXHIBIT P13 COPY OF THE EMAIL DATED 24.12.2018 WITH ATTACHMENTS. EXHIBIT P14 COPY OF THE REPLY TO LETTER DATED 20.1.2018 UPLOADED ON 26.12.2018. EXHIBIT P15 COPY OF THE SHOW CAUSE NOTICE DATED WP(C).No.1470 OF 2019(G) : 10 : 28.12.2018. EXHIBIT P16 COPY OF THE REPLY TO SHOW CAUSE NOTICE DATED NIL. EXHIBIT P17 COPY OF THE ASSESSMENT ORDER DATED 31.12.2018. EXHIBIT P18 COPY OF DEMAND NOTICE DATED 31.12.2018. "