SHRI THOMAS MUTHOOR V. THE ASSISTANT COMMISSIONER OF INCOME TAX

WP(C)/13738/2012

AI Insights

The case involves Shri Thomas Muthoot, the petitioner, challenging the conditions imposed by the Commissioner of Income Tax (Appeals) regarding the payment of 50% of the tax demand as a prerequisite for granting an interim stay on the tax assessments for the years 2005-06 to 2007-08. The High Court of Kerala had previously directed the appellate authority to consider the stay petitions, which resulted in the contested condition. The petitioner argued that this condition was onerous and unmanageable, while the respondents defended the condition based on guidelines from the Central Board of Direct Taxes. The court's decision to modify the payment schedule was based on the lack of substantive discussion on the merits of the case in the appellate authority's decision and the procedural requirements outlined in the relevant circulars.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 755924 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 18-06-2012
• Assessment Year: misc
• Other Referred Cases: WPC No.8681/2012
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: T M SREEDHARAN; NISHA JOHN; V P NARAYANAN; BOBY SEKHAR
• Keywords: Assessment Order; Financial stringency; Interim Stay; Quasi-judicial authority
• Section: 143(3); 220(6)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 18TH DAY OF JUNE 2012/28ND JYAISHTA 1934 WP(C).No. 13738 of 2012 (N) --------------------------------------- PETITIONER(S): ---------------------- SHRI THOMAS MUTHOOT MUTHOOT HOUSE, KOZHENCHERRY, PATHANAMTHITTA DISTRICT PIN 689 641. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SMT.NISHA JOHN SRI.V.P.NARAYANAN SMT.BOBY M.SEKHAR RESPONDENT(S): ------------------------ 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1, ENNIKKATTIL ESTATE NEAR KSRTC BUS STATION, THIRUVALLA 689 645. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) 1 AYAKKAR BHAVAN, KAWDIAR, THIRUVANANTHAPURAM 695 003. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18-06-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: MJL WPC.NO:13738/2012 APPENDIX PETITIONER(S) EXHIBITS EXHIBIT P1. TRUE COPY OF ASSESSMENT ORDER AND DEMAND NOTICE DATED 27.12.2011 FOR THE ASSESSMENT YEAR 2005-06 PASSED BY THE FIRST RESPONDENT. EXHIBIT P1(a). TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2006-07 PASSED BY THE FIRST RESPONDENT. EXHIBIT P1(b). TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2007-08 PASSED BY THE FIRST RESPONDENT. EXHIBIT P2. TRUE COPY OF APPEAL MEMORANDUM DATED 10.1.2012 FOR THE ASSESSMENT YEAR 2005-06 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P2(a). TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2006-07 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P2(b). TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2007-08 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P3. TRUE COPY OF STAY PETITION DATED 28.3.2012 FOR THE ASSESSMENT YEAR 2005-06 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P3(a). TRUE COPY OF -DO-FOR THE ASSESSMENT YEAR 2006-07 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P3(b). TRUE COPY OF -DO-FOR THE ASSESSMENT YEAR 2007-08 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P4. TRUE COPY OF NOTICE DATED 2.03.2012 ISSUED BY THE FIRST RESPONDENT. EXHIBIT P5. TRUE COPY OF REPLY DATED 12.3.2012 GIVEN BY THE PETITIONER TO THE FIRST RESPONDENT. EXHIBIT P6. TRUE COPY OF JUDGMENT DATED 4.4.2012 IN WPC NO.8681 OF THIS HON'BLE COURT. mjl WPC.NO:13738/2012 EXHIBIT P7. TRUE COPY OF STAY ORDER IN ITA NO.31/TVLA/11-12 FOR 2005- 2006 DATED 17.5.2012 PASSED BY THE SECOND RESPONDENT. EXHIBIT P7(a). TRUE COPY OF -DO- IN ITA NO.32/TVLA/11-12 FOR 2006-07 -DO- EXHIBIT P7(b). TRUE COPY OF -DO- IN ITA NO.33/TVLA/11-12 FOR 2007-08 -DO- EXHIBIT P8. TRUE COPY OF CIRCULAR F.NO.404/10/2009-ITCC) DATED 1.12.2009 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES. RESPONDENTS' EXHIBITS: NIL /TRUE COPY/ P A TO JUDGE MJL P.R. RAMACHANDRA MENON, J. --------------------------------------- W.P.(C). No.13738 of 2012 ---------------------------------------- Dated this the 18th day of June, 2012 JUDGMENT The assessment finalized by the first respondent under Section 143(3) of the Income Tax Act in the different assessment years 2005-06 to 2007-08 as borne by Ext.P1 series assessment orders are already under challenge in Ext.P2 series appeals preferred before the second respondent. The petitioner has also preferred Ext.P3 series I.As. for stay and since no positive orders were passed in the I.As for stay and since the petitioner was simultaneously confronted with the coercive proceedings, the petitioner approached this Court by filing W.P.(C).No.8681/2012, which culminated in Ext.P6 judgment, whereby this Court directed the appellate authority to consider and pass orders on I.As for stay. 2. Pursuant to the above direction, the second respondent considered Ext.P3 series petitions for stay and passed Ext.P7 series orders granting interim stay, subject to satisfaction of 50% of the liability by way of instalments, of course after giving credit W.P.C. No. 13738 of 2012 -2- to the amount already stated as satisfied. The petitioner has satisfied the first instalment, coming to a total of nearly Rs. 35 lakhs and is now before this Court, challenging the condition imposed by the appellate authority to avail the benefit of interim stay, contending that the same is onerous and rather impossible to be performed. The respondents have filed a statement through their Standing Counsel seeking to sustain the condition imposed upon the petitioner. Reference is also made to the Circular issued by the Central Board of Direct Taxes, bearing No.1914 dated 2.12.1993, stipulating the “guidelines for granting interim stay” and it is stated that the matter has been considered and dealt with accordingly. 3. Sri. T.M. Sreedharan, the learned Sr. counsel appearing for the petitioner submits that the contents of the statement do not reconcile with the aspects as dealt with by the appellate authority in Ext.P7 series interim orders. There is absolutely no discussion with regard to the merits involved, but for simply observing that there is 'no financial stringency'. It has been simply ordered to satisfy 50% of the demand in '5' equated monthly instalments. The learned Standing Counsel appearing W.P.C. No. 13738 of 2012 -3- for the department submits that the merit of the case can be considered and decided only after considering the entire materials on record, in the course of finalization of the appeals. Because of the heavy backlog, it is not possible for the appellate authority to have it finalized immediately as sought for by the petitioner and the petitioner has to wait in the queue. 4. After hearing both the sides, this Court finds that the main dispute is in respect of the disallowance made under Section 40(a)(ia) in the assessment completed under Section 143 (3). In spite of the case projected by the petitioner in the appeals when the question of granting interim stay was considered by the appellate authority, nothing on merits has been considered as evident from Ext.P7 series orders. The observation as given in paragraph '6' of the said order is in the following terms: “As regards merits of the issues raised in the grounds of appeal, nothing can be said at this juncture without hearing the grounds of appeal and examining the issues thoroughly.” Admittedly, the merits have not been considered and what is considered is only the 'financial stringency', which has been dealt W.P.C. No. 13738 of 2012 -4- with in paragraph '7' of the order, holding that appellant has not been able to make out any case of financial stringency. This requirement does not appear to be as a “guideline” or relevant norm to be followed, as given in the 1993 Circular, crux of which has been extracted by the respondents in paragraph '3' of their statement. The applicability of the said Circular has been considered again even in the year 2009 and the position has been clarified vide Ext.P8, Board's letter dated 1.12.2009. As a matter of fact, under the head 'Guidelines for Staying Demand', various circumstances and requirements have been stipulated, also in respect of a petition filed under Section 220(6) of the Income Tax Act and necessity for the Assessing Officer to consider all these facts and to pass a speaking order. 5. No doubt, the appellate authority is to discharge the function as a 'quasi judicial authority', who has to consider and decide whether or not any condition is to be imposed and if so, to what extent and why? In the absence of any such discussion, when such authority declares that 50% has to be satisfied, it cannot but be held as without proper application of mind. 6. After hearing both the sides and after going through the W.P.C. No. 13738 of 2012 -5- materials on record and also taking note of the nature of the contentions raised by the petitioner, more so in view of the settled position of law on the point in approaching the issue with proper application of mind, this Court finds that the condition imposed by the appellate authority upon the petitioner requires modification. Taking note of the fact that, the petitioner has already satisfied the first instalment, which comes to nearly Rs.35 lakhs, this Court directs the petitioner to satisfy the next instalment as well, as ordered by the appellate authority vide Ext.P7 order, with in two weeks, on which event the petitioner will continue to have the benefit of interim stay, throughout the pendency of the appeal. Writ petition is disposed of. P.R. RAMACHANDRA MENON, JUDGE. Kp/- "