SREEJA.K. V. THE ASSISTANT COMMISSIONER OF INCOME TAX

WP(C)/2570/2011

AI Insights

The case involves a series of writ petitions filed by Sreeja.K., challenging the orders of assessment finalized by the Assistant Commissioner of Income Tax and the Assistant Director of Income Tax against a Trust and its trustees under sections 153 A and 144 of the Income Tax Act, 1961. The assessments were based on undeclared assets and income discovered during a search operation. The petitioners contended that the assessments were made without compliance with the principles of natural justice, specifically citing the non-furnishing of seized documents which hindered their ability to contest the assessments effectively. The respondents argued that the petitioners were given ample opportunity to cooperate but failed to do so. The court, referencing various precedents, concluded that the petitioners should have availed themselves of the statutory remedy of appeal rather than approaching the court directly.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 755912 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 25-07-2012
• Assessment Year: misc
• Other Referred Cases: Income Tax Officer vs. M.Pirai Choodi, Commercial Tax Officer, Irinjalakkuda and others vs. C.U.Mathai, Tolin Rubbers (P) Ltd. vs. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH; P K R MENON
• Assessee Lawyers: GEORGE POONTHOTTAM; K M FIROZ
• Keywords: Appeal; Assessment Order; Best Judgment Assessment; Income Tax; Natural Justice; Penalty; Seized documents
• Section: 144; 142(1); 143(2); 132; 153A; 274; 271(1)(b); 132(4)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM WEDNESDAY, THE 25TH DAY OF JULY 2012/3RD SRAVANA 1934 WP(C).No. 2570 of 2011 (U) -------------------------- PETITIONER: ---------- SREEJA.K., W/O.VALSAN MATATHIL, PROPRIETRES, MALABAR COLLEGE, YOGASALA ROAD KANNUR, MATATHIL HOUSE, MUNDAYAD KANNUR-670006. BY ADVS.SRI.GEORGE POONTHOTTAM SRI.K.M.FIROZ RESPONDENTS: ------------ 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-I, 7TH FLOOR AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001. 2. THE ASSISTANT DIRECTOR OF INCOME TAX, (INV), AAYAKAR BHAVAN, KOZHIKODE-673001. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, (TAXES) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.4.2012, ALONG WITH WP(C) N0.2573/2011 & WP(C) N0.2617/2011, THE COURT ON 25-07-2012 DELIVERED THE FOLLOWING: VK WP(C).No. 2570 of 2011 (U) -------------------------- APPENDIX --------- PETITIONER'S EXHIBITS --------------------- EXT.P1. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2003-04 DATED 31.12.2010 EXT.P2. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2004-05 DATED 31.12.2010 EXT.P3. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2005-06 DATED 31.12.2010 EXT.P4. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2006-07 DATED 31.12.2010 EXT.P5. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2007-08 DATED 31.12.2010 EXT.P6. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2008-09 DATED 31.12.2010 EXT.P7. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2009-10 DATED 31.12.2010 EXT.P8. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2003-04. EXT.P9. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2004-05. EXT.P10. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2005- 06. EXT.P11. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2006- 07. EXT.P12. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2007- 08. EXT.P13. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2008- 09. VK WP(C).No. 2570 of 2011 (U) -------------------------- EXT.P14. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2009-10 EXT.P15. COPY OF THE NOTICE DATED 26.7.2010. EXT.P16. COPY OF THE COMMUNICATION DATED 24.12.2010. EXT.P17. COPY OF THE COMMUNICATION NO.AAPPK5717K DATED 22.12.2010. EXT.P18. COPY OF THE REQUEST DATED 15.9.08 EXT.P19. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2004-05. EXT.P20. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2006-07. EXT.P21. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2007-08. EXT.P22. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2008-09. EXT.P23. COPY OF THE NOTICE ISSUED BY THE 1ST RESPONDENT DATED 27.1.2011. EXT.P24. COPY OF THE COMMUNICATION DATED 31.1.2011. RESPONDENT'S EXHIBITS: NIL ---------------------- / TRUE COPY / P.A. TO JUDGE VK C.K.ABDUL REHIM,J. ------------------------------- WP(C).NOs. 2570,2573 & 2617 of 2011 --------------------------------- Dated this the 25th day of July, 2012 JUDGMENT In all these three writ petitions, challenge is against order of assessments finalised by the 1st respondent against a Trust as well as against the trustees, under section 153 A read with section 144 of the Income Tax Act 1961. Since the grounds raised are identical and all the assessments pertain to income derived from the Trust in question, these cases are considered together and disposed of through a common judgment. Reference to Exhibits is made as in the order in WP(C).2573/2011. 2. A brief history of facts is as follows. A search under section 132 was conducted at the premises of the educational institution run by the Trust and at the residences of the Trustees. Various incriminating documents disclosing undeclared assets and income belonging to the petitioners, were seized and taken into custody. A sworn statement was recorded from the petitioner in WP(C).2573/2011 under section 132 (4) of the Act . The case was entrusted to the 1st respondent for completion of WP(C).2570 /2011 & conn. Cases 2 assessments under section 153 A. On 15.7.2009 notices under section 153 A were issued which were served on the petitioner on 21.7.2009. The assessees filed returns pursuant to the notice on 27.8.2009. Thereafter various notices were issued under section 143 (2) and 142(1) for personal hearing as well as for production of documents and for filing statement of assets and liabilities with respect to financial years 2001 -02 to 2008-09. Eventhough appearance was made through authorised representative the petitioners failed to furnish any details, inspite of adjournments sought for. On 8.10.2010 a notice proposing imposition of penalty, under section 271 (1) (b), was issued. Then the petitioners produced 'net wealth statement' on 15.11.2010. Eventhough the cases were posted for personal hearing on 30.11.2010 the petitioners failed to appear. Therefore pre assessment notices proposing finalisation of best judgment assessment was issued on 24.12.2010. Since the petitioners have not responded to the pre-assessment notice also, the assessments were finalised on 31.12.2010, as per Exts.P1 to P7 orders. WP(C).2570 /2011 & conn. Cases 3 3. The impugned orders of assessment are assailed mainly on the ground that the assessments were finalised without compliance of principles of natural justice to the extent of providing reasonable opportunity to the petitioners. Specific contention raised is that, the respondents have failed in furnishing copies of seized documents inspite of request made in this regard. Ext.P18 is copy of a letter submitted to the 2nd respondent on 15.9.2008. It is mentioned in Ext.P18 that the petitioner is in need of photocopies of the seized records in order to prepare cash flow statement and other statements to be submitted. A request was also made for furnishing photocopy of the statement recorded. Case of the petitioners is that, since the respondents have failed in furnishing photocopies of seized records, in compliance with the mandatory provisions contained in section 132 (9), the petitioners were prevented from effectively contesting the assessments. According to the petitioners, since copies of the seized records were not available they were not in a position to file returns or net wealth statement in a true and effective manner. They were also prevented from WP(C).2570 /2011 & conn. Cases 4 substantiating correctness of the returns filed since no correct cash flow statement could be prepared due to lack of availability of records, is the contention. Ext.P26 and P27 letters will indicate that after finalisation of the assessments the petitioners were permitted to take photocopies of the seized records. According to the petitioners, this is a clear indication to the effect that before finalisation of the assessments the petitioners were denied of opportunity for perusal of the seized records and in effectively contesting he assessments. It is contended that the impugned assessments are violative of principles of natural justice and unsustainable in the eye of law. Therefore inspite of availability of alternative statutory remedy, the petitioners are justified in invoking jurisdiction of this court, is the contention. 4. In a statement filed on behalf of respondents the sequence of events after conduct of search is narrated in detail. According to the respondents ample opportunity was afforded to the assessees, but they failed in co-operating with the assessments by not responding to various notices issued. It is specifically pointed out that, inspite of receipt of the pre- WP(C).2570 /2011 & conn. Cases 5 assessment notices there was no response from the side of the petitioners. According to the respondents the request for copies of the seized records was submitted only after completion of the assessments on 17.1.2011. No request for furnishing such copies were submitted to the 1st respondent, after proceedings for finalisation of the assessment was initiated, is the contention. Eventhough receipt of Ext.P18 by the 2nd respondent is admitted, it is contended that the request was not made before the assessing authority after the matter was entrusted with the 1st respondent. It is further contended that the petitioners have never raised any objection at the time when the returns were filed or at the time when net wealth statements were furnished. Therefore, according to the respondents, the contention now raised regarding denial of opportunity is totally baseless. It is contended that there is no sustainable grounds to bye pass the statutory remedy of appeal. 5. Further contention raised by the petitioners is regarding denial of effective opportunity after issuance of pre assessment notice. It is contended that no opportunity to file WP(C).2570 /2011 & conn. Cases 6 objections nor any opportunity of personal hearing was afforded before finalising the assessment. According to learned counsel, the assessments were finalised at a haste on 31.12.2010, after service of notice on the petitioners only on 27.12.2010. It is also contended that pre assessment notices issued were lacking in enumeration of any facts or figures or even the method proposed to be adopted for finalisation of the assessment. 6. Respondents have met with the above contention pointing out the specific provisions contained in section 144(1). The 2nd proviso to section 144(1) specifies that in cases where a notice under section 142(1) has issued prior to making of an assessment, it shall not be necessary to give any opportunity of personal hearing to the assessee as mandated under section 144 (1) (C). Therefore it is contended that, on the basis of failure on the part of the assessees in responding to notices issued under section 142(1) there was no requirement for calling for any objections or for affording any opportunity of personal hearing. 7. Before adjudicating upon the contentions factual issues , it is to be decided as to whether the writ petition is maintainable WP(C).2570 /2011 & conn. Cases 7 in view of the statutory remedy provided. It is conceded by the petitioners that the impugned orders of assessment are appealable under section 246A. Appeal will lie to the Commissioner of Income tax (Appeals) from an assessment under section 153A as provided under section 246 A (ba) . It is evident that the Commissioner (Appeals) has got every power to alter , modify or cancel the assessment. Obviously the powers are co-extensive with that of the assessing authority. Therefore it cannot be contended that the remedy of appeal provided is not efficacious in any manner. Question whether the impugned assessments are vitiated for denial of opportunity is a matter which can be looked into by the appellate authority. The petitioners can also contend before the appellate authority that the assessments were completed in an arbitrary manner with exorbitant figures, even by placing reliance on copies of the seized records, which are admittedly furnished to the petitioners after completion of the assessments. Considering the settled legal precedents it is to be examined whether there exists any special or extra ordinary circumstances which warrants WP(C).2570 /2011 & conn. Cases 8 interference of this court, despite availability of an effective statutory remedy. I am not in a position to accept contentions regarding existence of any such ground to exercise the discretionary power vested on this court. 8. Standing Counsel appearing for the respondents placed reliance on a recent decision of the Hon'ble apex court in Income Tax Officer vs. M.Pirai Choodi 334(11) ITR 262 (SC). In the said case the Hon'ble Supreme Court observed that the High Courts should not have set aside the entire assessment order on the basis of the contention that opportunity of cross examination was denied to the assessee. It is observed that, on the particular aspect the assessee could have gone in appeal to the Commissioner of Income Tax (appeals). On failure to comply the statutory remedy, the High Courts should not have quashed the assessment, is the observation. In the said case the Hon'ble Supreme Court had given liberty to the assessee to move before the appellate authority. 9. Learned Standing Counsel had also placed reliance on a Division Bench decision of this court in CommercialTax Officer, WP(C).2570 /2011 & conn. Cases 9 Irinjalakkuda and others vs. C.U.Mathai (2012 (51)VST 253 (Ker). In the said case when the assessee had failed to respond to notice of hearing, this court observed that, there was no justification to interfere with the assessment order on the ground of violation of natural justice. The court observed that the only remedy available to the assessee is to file appeal and to contest the matter before the appellate authority. From the side of the respondents reliance was also placed in another decision of this court in Tolin Rubbers (P)Lltd. vs. Assistant Commissioner of Income Tax (Vol.264 (2003) ITR 439). It is held therein that a writ will not normally lie in a case where the assessee can file appeal against the assessment in view of the fact that the appellate authority has got all powers of the assessing officer. 10. In view of he settled legal precedents, I am of the view that the petitioners ought to have filed statutory appeal against the impugned assessments, instead of approaching this court by invoking Article 226. In view of the above findings I am not expressing any view on the merits of contentions raised WP(C).2570 /2011 & conn. Cases 10 regarding denial of opportunity or regarding non furnishing of the copies of the seized documents. Since the matter was pending before this court in these writ petitions since the year 2011 onwards, I am of the view that interest of justice will be served if the petitioners are given liberty to file appeals before the appellate authority. 11. Therefore the writ petitions are disposed of directing the petitioners to file appeal before the Commissioner of Income Tax (appeals) under section 246 (A), within a period of two weeks from the date of receipt of a copy of this judgment. If statutory appeals are filed within the time stipulated as above, the Commissioner of Income Tax (Appeals) having jurisdiction in the matter should entertain those appeals as if they are filed within the statutory limitation period, and shall proceed to dispose of the same on merits. 12. The petitioners will be at liberty to seek appropriate interim relief regarding recovery of amounts covered under the impugned assessments either before the appellate authority or before the assessing officer, as the case may be. In order to WP(C).2570 /2011 & conn. Cases 11 facilitate the petitioners to seek appropriate interim relief, all further steps for recovery of the amounts under the impugned assessments shall be kept in abeyance for a period of 6 weeks from the date of receipt of a copy of this judgment. 13. If the statutory appeals are filed as directed above, the appellate authority shall take all earnest efforts to dispose of the appeals at the earliest, at any rate within a period of four months from he date of receipt of such appeals. 14. It is necessary to observe that this court through various interim orders had stayed all further proceedings with respect to the proposal issued for imposition of penalty under section 271 (1) (c) and such orders were continued till date. I am of the view that in the interest of justice it is necessary to direct the respondents to keep in abeyance finalisation of any such proceedings till the disposal of the appeals, if filed within the time stipulated above. C.K.ABDUL REHIM, JUDGE pmn/ WP(C).2570 /2011 & conn. Cases 12 WP(C).2570 /2011 & conn. Cases 13 "