Sreekandan B, aged 59 years, s/o Bhaskaran, Proprietor, M/s Avani Metal Crusher Kottackal V. Union of India, represented by its Secretary, Department of Revenue, Ministry of Finance, Government of India and Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India and Income Tax Officer, Ward 1(2), Thiruvananthapuram and Deputy Commissioner of Income Tax, Central Circle, Income Tax Department and Assistant Commissioner of Income Tax, Central Circle, Income Tax Department

WP(C)/22140/2022

AI Insights

The case involves two writ petitions filed by Sreekandan B, challenging an assessment order and a subsequent penalty imposed by the income tax authorities. The petitioner contested the assessment order on grounds of illegibility and alleged violation of natural justice, claiming that the order was issued without considering his response seeking more time to furnish documents. Additionally, the penalty was challenged as being arbitrary and based on vague provisions of Section 270A of the Income Tax Act, which deals with under-reporting of income. The court found that the assessment order was not issued in violation of natural justice and that the petitioner had adequate remedies through the appellate process, thus dismissing the challenges.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 803248 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 25-07-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: K P PRADEEP; HAREESH; SANAND RAMAKRISHNAN; T THASMI; M J ANOOPA; SANU MALAKEEL
• Keywords: Assessment Order; Misreporting; Natural Justice; Penalty; Under reporting; Illegible document
• Section: 143(3); 270A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. MONDAY, THE 25TH DAY OF JULY 2022 / 3RD SRAVANA, 1944 WP(C) NO. 22140 OF 2022 PETITIONER/S: SREEKANDAN B, AGED 59 YEARS S/O BHASKARAN,PROPRIETOR, M/S AVANI METAL CRUSHER KOTTACKAL, ANAVOOR, P.O, THIRUVANANTHAPURAM- 695124 RESIDING AT RODARIKATHU VEEDU, MAMPAZHAKKARA, PERUMPAZHUTHOOR, NEYYATTINKARA, THIRUVANANTHAPURAM, PIN - 695126 BY ADVS. K.P.PRADEEP HAREESH M.R. SANAND RAMAKRISHNAN T.THASMI M.J.ANOOPA SANU S MALAKEEL RESPONDENT/S: 1 UNION OF INDIA, REPRESENTED BY ITS SECRETARY DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK ,NEW DELHI, PIN - 110001 2 THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK NEW DELHI, REPRESENTED BY ITS CHAIRMAN , PIN - 110001 3 INCOME TAX OFFICER, WARD 1(2),THIRUVANANTHAPURAM, AAYAKAR BHAVAN, 1ST FLOOR, KOWADIAR P.O, THIRUVANANTHAPURAM, PIN - 695003 4 INCOME TAX OFFICER,CENTRAL CIRCLE INCOME TAX DEPARTMENT AAYAKAR BHAVAN, 1ST FLOOR, KOWADIAR P.O,THIRUVANANTHAPURAM , , PIN - 695003 5 DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE INCOME TAX DEPARTMENT, AAYAKAR BHAVAN, 4TH FLOOR, KOWADIAR P.O, THIRUVANANTHAPURAM, PIN - 695003 6 ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE INCOME TAX DEPARTMENT, AAYAKAR BHAVAN, 1ST FLOOR, KOWADIAR P.O, THIRUVANANTHAPURAM , PIN - 695003 SRI. JOSE JOSEPH (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 25.07.2022, ALONG WITH WP(C).23659/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: [WP(C) Nos.22140/2022 & 23659/2021] 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. MONDAY, THE 25TH DAY OF JULY 2022 / 3RD SRAVANA, 1944 WP(C) NO. 23659 OF 2021 PETITIONER/S: SREEKANDAN B.,AGED 59 YEARS S/O. BHASKARAN,PROPRIETOR, M/S. AVANI METAL CRUSHER KOTTACKAL, ANAVOOR P.O.,THIRUVANANTHAPURAM 695 124, RESIDING AT RODARIKATHU VEEDU, MAMPAZHAKKARA, PERUMPAZHUTHOOR, NEYYATTINKARA, THIRUVANANTHAPURAM 695 126. BY ADVS. K.P.PRADEEP HAREESH M.R. NEENA ARIMBOOR RASMI NAIR T. T.T.BIJU T.THASMI M.J.ANOOPA RESPONDENT/S: 1 THE CENTRAL BOARD OF DIRECT TAXES,DEPARTMENT OF REVENUE, MINISTRY OF FINANCE,GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI 110001,REPRESENTED BY ITS CHAIRMAN. 2 INCOME TAX OFFICER,WARD 1 (20, THIRUVANANTHAPURAM, AYAKAR, BHAVAN IST FLOOR, KOWADIAR, P.O. HIRUVANANTHAPURAM 695 003. 3 INCOME TAX OFFICER,CENTRAL CIRCLE INCOME TAX DEPARTMENT AAYAKAR BHAVAN IST FLOOR, KOWADIAR, P.O. THIRUVANANTHAPURAM 695 003. 4 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, INCOME TAX, DEPARTMENT, AAYAKAR BHAVAN, 4TH FLOOR, KOWADIAR P.O. THIRUVANANTHAPURAM 695 003. SRI. JOSE JOSEPH, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 25.07.2022, ALONG WITH WP(C).22140/2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: [WP(C) Nos.22140/2022 & 23659/2021] 3 JUDGMENT [WP(C) Nos.22140/2022, 23659/2021] Petitioner is common in both these writ petitions. 2. In W.P(C). No.23659/2021, petitioner has challenged Ext.P10 order of assessment, issued under Section 143(3) of the Income Tax Act (hereinafter referred to as 'the Act'), on the ground that it is issued in violation of principles of natural justices and that several pages of the order itself are illegible and unreadable. 3. Learned counsel appearing for the petitioner submits that a survey was conducted in respect of the petitioner, who is running a quarry business. It is submitted that several notices were issued to the petitioner and that the petitioner responded to each one of them. It is submitted that the petitioner was issued with Ext.P8 notice on 23.09.2021, calling upon the petitioner to submit originals of certain documents before 03.00 pm on 24.09.2021 and the petitioner submitted Ext.P9 reply seeking a reasonable time to furnish the documents directed to be produced. It is submitted that without considering Ext.P9, the Assessing Officer issued Ext.P10 order of assessment. It is pointed out from Ext.P10 that several of the pages of Ext.P10 order of assessment are illegible and unreadable. It is [WP(C) Nos.22140/2022 & 23659/2021] 4 submitted that the petitioner’s claim for expenses has been rejected arbitrarily and without any basis. It is submitted that Ext.P10 order is without jurisdiction and is liable to be interfered with at this stage under Article 226 of the Constitution of India. 4. In W.P(C.). No.22140/2022, petitioner challenges the order imposing penalty on the basis of the assessment order which is challenged in the other writ petition [W.P(C.). No.23659 of 2021]. The provisions of Section 270A of the Act have also been challenged, by pointing out that it gives arbitrary and uncanalized power to the officer imposing penalty to treat certain actions of the petitioner as under-reporting or misreporting. It is submitted that in every case where certain claim for expenses, deductions etc., are made and the same is denied by the Assessing Officer, almost automatically, proceedings are initiated under Section 270A of the Act which obviously cannot be the intention of that provision. It is also submitted that the provision is vague and too widely worded and is capable of being misused. It is further submitted that since there are various defects in respect of Ext.P10 order of assessment, which have already been raised in the connected writ petition, a penalty order on the basis of such assessment [WP(C) Nos.22140/2022 & 23659/2021] 5 also cannot be sustained. 5. Learned Standing counsel appearing for the Department would submit that several opportunities were given to the petitioner to produce documents and refers to the notices issued to the petitioner from time to time which are part of the records in W.P.(C.). No.23659 of 2021. It is submitted that Ext.P8 notice had required the furnishing of additional documents by 03.00 pm on the day next to issuance of Ext.P8 notice only on account of the fact that the assessment was becoming time barred on 30.09.2021. It is submitted that Ext.P10 order does not warrant interference with it in exercise of the jurisdiction under Article 226 of the Constitution of India ,at least at this stage of the proceedings. It is submitted that that if the petitioner has a case that several pages of Ext.P10 order of assessment order are illegible, the Assessing Officer can be directed to provide a legible copy of Ext.P10 to the petitioner. It is submitted that the petitioner has an adequate remedy against Ext.P10 by way of appeal where all the contentions taken by the petitioner can be considered. 6. Learned Standing counsel also submitted that the order of penalty impugned in W.P.(C.). No.22140 of 2022 was issued under the provisions of Section 270A of the Act, after [WP(C) Nos.22140/2022 & 23659/2021] 6 finding that the provisions were clearly attracted on account of under-reporting/misreporting of income by the petitioner. It is submitted that Ext.P10 order proceeds on the basis that several of the expenses claimed by the petitioner cannot be allowed as they are not supported by sufficient evidence of actual expenditure. It is submitted that this is clearly an instance of under-reporting of income by the petitioner and and therefore, the penalty under Section 270A of the Act was correctly imposed. It is submitted that the petitioner has a remedy against the order imposing penalty before the Appellate Authority and again, as in the case of the assessment order, there is no reason for this Court to interfere with the order of penalty under Article 226 of the Constitution of India. It is submitted that no grounds upon which the provisions of a Statute can be challenged before this Court under Article 226 of the Constitution of India, have been brought out while raising a challenge to the provisions of Section 270A of the Act. It is submitted that even if the contention of the petitioner that the provisions of Section 270A of the Act are widely worded and are capable of misuse are accepted to be true, that by itself cannot be a ground to hold the provision to be constitutionally invalid. [WP(C) Nos.22140/2022 & 23659/2021] 7 7. I have considered the contentions raised. I have perused the documents produced along with W.P.(C.). No.23659/2021. While it is true that several of the pages in Ext.P10 order are illegible and unreadable, I find it difficult to hold that Ext.P10 order was issued without affording a sufficient opportunity for the petitioner. Ofcourse, if an order is issued in violation of principles of natural justice, then notwithstanding the availability of an alternative remedy, it will be open to this Court to interfere with such proceedings in exercise of jurisdiction under Article 226 of the Constitution of India. However, since I have no reason to hold that Ext.P10 order was issued in violation of principles of natural justice, I decline to interfere with Ext.P10. 8. Coming to the challenge to the order imposing penalty, I am of the view that at least in the first instance, it is for the petitioner to avail the appellate remedy against the order imposing penalty. The grounds on which a statutory provision can be challenged, under our constitutional scheme are:- (i) Violation of Fundamental Rights; (ii) Lack of legislative competence; and (iii) Violation of basic structure. [WP(C) Nos.22140/2022 & 23659/2021] 8 Prima facie, there appears to be merit in the contention raised by the learned Standing Counsel for the Department that, no ground upon which a statutory provision can be challenged before this Court has been brought out while raising a challenge to Section 270A of the Act. However, in the light of the order that I propose to pass, I do not intend to make a final judgment on the constitutional validity of Section 270A of the Act as it is not necessary at least at this stage of the proceedings. That question will be left open to be decided in appropriate proceedings, in a later stage, if necessary. These writ petitions will therefore, disposed of, in the following manner:- (i) On application of the petitioner, the 4th respondent in W.P(C.). No.23659 of 2021shall issue a legible copy of Ext.p10 to the petitioner. The petitioner shall file such an application within a period of ten days from the date of receipt of a copy of this judgment and the 4th respondent shall issue a legible copy of Ext.P10 order within ten days thereafter; (ii) The period within which the petitioner has to file an appeal against Ext.P10 order before the First Appellate Authority shall be computed only from the date on which a legible copy of Ext.P10 is served to the petitioner as above; [WP(C) Nos.22140/2022 & 23659/2021] 9 (iii) If the petitioner files an appeal against Ext.P10 order, within the statutory time period along with an application for stay, further steps to recover any amount due under Ext.P10 shall be kept in abeyance till a decision is taken on the stay petition by the Appellate Authority; (iv) The penalty order (Ext.P14) impugned in W.P.(C.). No.22140 of 2022, can also be challenged by filing an appeal before the First Appellate Authority. Since the imposition of penalty arises out of the demand in Ext.P10 order of assessment in W.P.(C.). No.23659 of 2021, the limitation for filing an appeal against Ext.P14 order of penalty shall also counted from the date on which a legible copy of Ext.P14 order is served on the petitioner in terms of the directions issued above; (v) If the petitioner files an appeal against Ext.P14 order within the statutory time period calculated in the manner indicated above, along with an application for stay, the proceedings for recovery of any amount imposed as penalty will be kept in abeyance till a decision is taken on the stay petition by the First Appellate Authority; [WP(C) Nos.22140/2022 & 23659/2021] 10 (vi) The contentions taken by the petitioner regarding the Constitutional validity of Section 270A of the Act are left open to be adjudicated later, if necessary. The writ petition is disposed of as above. sd/- GOPINATH P. JUDGE ajt [WP(C) Nos.22140/2022 & 23659/2021] 11 APPENDIX OF WP(C) 23659/2021 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE NOTICE NO. ITBA/AST/S/143(2)/2020-21/1028041375(1) UNDER SECTION 143(2) OF THE INCOME TAX DATED 23.09.2020 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER. Exhibit P2 TRUE COPY OF THE NOTICE NO. ITBA/AST/F/143(1)/2020-21/1030281379 (1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 2.02.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. Exhibit P3 TRUE COPY OF THE REPLY DATED 03.02.2021 SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT. Exhibit P4 TRUE COPY OF THE NOTICE NO. ITBA/AST/F/142(1)/2021-22/1035612351(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 15.09.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. Exhibit P4 (a) TRUE COPY OF THE NOTICE NO. ITBA/AST/F/142(1)/2021-22/1035610749(1) UNDER SECTION 142(21OF THE INCOME TAX DATED 15.09.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. Exhibit P5 TRUE COPY OF THE REPLY DATED 24.09.2021 SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT. Exhibit P6 TRUE COPY OF THE NOTICE NO. ITBA/AST/F/142(1)/2021-22/1035701673(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 18.09.2020 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. VIA EMAIL. Exhibit P7 TRUE COPY OF THE REPLY DATED 18.09.2021 SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT. Exhibit P8 TRUE COPY OF THE NOTICE NO. ITBA/AST/F/142(1)/2021-22/1035823526(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 23.09.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. Exhibit P9 TRUE COPY OF THE REPLY DATED 24.09.2021 SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT. [WP(C) Nos.22140/2022 & 23659/2021] 12 Exhibit P10 TRUE COPY OF THE ASSESSMENT ORDER NO. AYBPS3648F/AY 2019-21 ISSUED FRO THE YEAR 2019-20 BY THE 4TH RESPONDENT. Exhibit P11 TRUE COPY OF THE LETTER NO. ITBA/COM/F/17/2021-22/1036076394(1) DATED 30.09.2021 ISSUED BY THE 4TH RESPONDENT. Exhibit P12 TRUE COPY OF THE STATEMENT OF COMPUTATION OF INCOME FOR 2019-20 IN AHYBPS3648F DATED 29.09.2021 ISSUED BY THE 4TH RESPONDENT. Exhibit P13 TRUE COPY OF THE DEMAND NOTICE FOR 2019-20 IN AYBPS3648F DATED 30.09.2021 ISSUED BY THE 4TH RESPONDENT. [WP(C) Nos.22140/2022 & 23659/2021] 13 APPENDIX OF WP(C) 22140/2022 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE NOTICE NO ITBA/AST/S/143(2)/2020-21/1028041375(1) UNDER SECTION 143(2) OF THE INCOME TAX DATED 23-09- 2020ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER Exhibit P2 TRUE COPY OF THE NOTICE NO ITBA/AST/F/142(1)/2020-21/1030281379(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 02-02- 2021 ISSUED BY THE 4THRESPONDENT TO THE PETITIONER Exhibit P3 TRUE COPY OF THE REPLY DATED 03-02-2021 SUBMITTED BY THE PETITIONER BEFORE THE 5TH RESPONDENT Exhibit P4 TRUE COPY OF THE NOTICE NO ITBA/AST/F/142(1)/2021-22/1035612351(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 15-09- 2021 ISSUED BY THE 4THRESPONDENT TO THE PETITIONER Exhibit P 4(a) TRUE COPY OF THE NOTICE NO ITBA/AST/F/142(1)/2021-22/1035610749(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 15-09- 2021 ISSUED BY THE 4THRESPONDENT TO THE PETITIONER Exhibit P5 TRUE COPY OF THE REPLY DATED 24-09-2021 SUBMITTED BY THE PETITIONER BEFORE THE 5TH RESPONDENT Exhibit P6 TRUE COPY OF THE NOTICE NO ITBA/AST/F/142(1)/2021-22/1035701673(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 18-09- 2021 ISSUED BY THE 4THRESPONDENT TO THE PETITIONER VIA EMAIL Exhibit P7 TRUE COPY OF THE REPLY DATED 18-09-2021 SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT Exhibit P8 TRUE COPY OF THE NOTICE NO ITBA/AST/F/142(1)/2021-22/1035823526(1) UNDER SECTION 142(1) OF THE INCOME TAX DATED 23-09- 2021 ISSUED BY THE 4THRESPONDENT TO THE PETITIONER Exhibit P9 TRUE COPY OF THE REPLY DATED 24-09-2021 SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT [WP(C) Nos.22140/2022 & 23659/2021] 14 Exhibit P10 TRUE COPY OF THE ASSESSMENT ORDER NO AYBPS3648F/ AY 2019-20 ISSUED FOR THE YEAR 2019-20 BY THE 5TH RESPONDENT Exhibit P11 TRUE COPY OF THE STATEMENT OF COMPUTATION OF INCOME FOR 2019-20 IN AYBPS3648F DATED 29-09- 2021 ISSUED BY THE 5TH RESPONDENT Exhibit P12 TRUE COPY OF THE DEMAND NOTICE FOR 2019-20 IN AYBPS3648F DATED 30-09-2021 ISSUED BY THE 5TH RESPONDENT Exhibit P13 TRUE COPY OF THE REPLY DATED 17-03- 2022SUBMITTED BY THE PETITIONER BEFORE THE 6TH RESPONDENT Exhibit P14 TRUE COPY OF THE PENALTY ORDER DATED 26-03- 2022 IN NO ITBA/PNL/F/270A/2021- 22/1041612271(1) ISSUED BY THE 6TH RESPONDENT Exhibit P15 TRUE COPY OF THE DEMAND NOTICE NO ITBA/PNL/S/156/2021-22/1041550755(1) DATED 25-03-2022 IN PENALTY ORDER ISSUED FOR THE YEAR 2019-20 BY THE 6TH RESPONDENT TO THE PETITIONER Exhibit p16 TRUE COPY OF THE RELEVANT PAGES OF THE FINANCE ACT, 2016 "