T.SHYMA V. INCOME TAX OFFICER

WP(C)/145/2008

AI Insights

The case involves T. Shyma, a lecturer at S.N. College, Kollam, who challenged the income tax assessments made by the Income Tax Department regarding arrears of salary. The primary legal issue was whether the assessments could be reopened under Sections 147 and 148 of the Income Tax Act, 1961, and whether the petitioners were entitled to exemptions under Section 88 for the arrears deposited in the Provident Fund. The court examined previous judgments and the specific circumstances of the case, ultimately deciding that the reopening of the assessment was lawful and that the exemptions claimed were not applicable for the years in which the arrears were spread over.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 699910 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 12-08-2016
• Assessment Year: misc
• Other Referred Cases: Kerala Electricity Officers Federation and Others v. Central Board of Direct Taxes and Others [2005] 279 ITR 482 (Ker)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: GEORGE GEORGE
• Assessee Lawyers: S HANEEFF
• Keywords: Arrears of Salary; Assessment Reopening; Exemption Claim; Income Tax; Provident fund
• Section: 147; 148; 88

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 12TH DAY OF AUGUST 2016/21ST SRAVANA, 1938 WP(C).No. 145 of 2008 (P) -------------------------- PETITIONER(S): ------------- T.SHYMA, LECTURER (SELECTION GRADE), DEPARTMENT OF CHEMISTRY, S.N.COLLEGE, KOLLAM., RESIDING AT 'BODHI', MUNDAKKAL WEST, KOLLAM. BY ADV. SRI.S.MUHAMMED HANEEFF RESPONDENT(S): -------------- 1. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, OFFICE OF THE ADDL.COMMISSIONER OF INCOME TAX, KOLLAM RANGE. 2. COMMISSIONER OF INCOME TAX (APPEALS), AYAKAR BHAVAN, KAVADIAR, THIRUVANANTHAPURAM. BY SRI.GEORGE K. GEORGE, SC THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12-08-2016, ALONG WITH WPC. 6751/2008 & WPC.8946/2008 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: msv/ WP(C).No. 145 of 2008 (P) ------------------------- APPENDIX PETITIONER(S) EXHIBITS: ----------------------- EXT.P1: TRUE COPY OF THE ORDER IN ITA NO.130-Q/2004-05 DTD.9.2.2005 PASSED BY THE 2ND RESPONDENT. EXT.P2: TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL, KOCHI BENCH DTD.11.7.1996. EXT.P3: TRUE COPY OF THE ASSESSMENT ORDER ALONG WITH DEMAND NOTICE FOR THE PERIOD 2004-2005 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE PETITIONER. EXT.P4: TRUE COPY OF THE INTERIM ORDER OF DTD.19.12.2006 IIN WP(C) NO.33616/2006 OF THIS HON'BLE COURT. RESPONDENT(S)' EXHIBITS: ------------------------ NIL //TRUE COPY// P.S.TO JUDGE Msv/ A.M. SHAFFIQUE, J. -------------------------------------- W.P.(C).Nos.145, 6751 & 8946 of 2008 --------------------------------------------------------- Dated this, the 12th day of August, 2016 J U D G M E N T These writ petitions are filed challenging assessment orders and the consequent demand made by the Income Tax Department invoking Section 147 and 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short). 2. The issue relates to the arrears of salary obtained by the petitioners. The entire arrears of salary was deposited in the Provident Fund and the petitioners claimed exemption from deduction under Section 88 of the Act. Though initially orders were passed granting benefits to the petitioners, later the assessment was reopened by issuance of notice under Section 148 r/w. Section 147 of the Act and it was held that the petitioners will be entitled to get exemption only for that particular year and cannot claim benefits for those years for which arrears of salary had been spread over. 3. The main contention urged by the petitioners is that in respect of similarly situated persons, the appellate authority of the Income Tax Department as well as this Court had taken a view that the assessment cannot be reopened in terms of Section 147 and 148 of the Act. The learned counsel relies upon the judgment in Writ Appeal No.726/2007 and connected cases. It is submitted that W.P.(C).Nos.145, 6751 & 8946 of 2008 2 when the Division Bench of this Court had observed in similar instances that proceedings under Section 147 cannot be taken to reopen the assessment the orders of CIT (Appeals) which were decided against the Department, the same principle has to be adopted as far as the petitioners' case are also concerned. 4. On the other hand, the learned Standing Counsel appearing for the respondents submits that there is factual difference arising in the matter. It is pointed out that as far as the judgment in Writ Appeal No.726/2007 is concerned, those are cases in which after an assessment order had been passed, the matter was carried in appeal before the Commissioner of Income Tax (Appeals) who had given the benefit of exemption to the assessees. Thereafter, the Department had initiated proceedings under Section 147 r/w. Section 148 of the Act and in such circumstances, Division Bench held that the Department cannot reopen the assessment. It is submitted that as far as the law is concerned, it is well settled by this Court in Kerala Electricity Officers Federation and Others v. Central Board of Direct Taxes and Others [2005] 279 ITR 482 (Ker) in which this Court after considering the question of exemption under Section 88 of the Act in similar situations held that the amount received as arrears of salary, even if deposited in the PF account, is not entitled for full exemption whereas exemption will be available for the arrears of salary received in respect of the W.P.(C).Nos.145, 6751 & 8946 of 2008 3 particular year for which the assessment is being made. 5. Having regard to the aforesaid arguments raised on either side, I am of the view that as far as the petitioners case is concerned, it is a case where assessment has been reopened as provided under Section 147 and 148 of the Act even before a decision had been taken in the appeal. Therefore the judgment in Writ Appeal No.726/2007 and connected cases has no application to the present case. 6. The the next question is whether the petitioners are entitled to challenge the assessment orders on the ground that the petitioners are entitled to claim the benefit of exemption or whether the reopening of the assessment in terms of Section 147 and 148 is bad in law. 7. Section 147 reads as under : “147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant W.P.(C).Nos.145, 6751 & 8946 of 2008 4 assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.” 8. In an instance where the Department comes to a conclusion that the tax has escaped assessment for any assessment year, it is well within the powers of the Department to issue notice under Section 148 within the specified time. Insofar as the petitioners are concerned, notices had been issued within the specified time on the basis that there is reason to believe that the tax has escaped assessment. Under such circumstances, there is no jurisdictional error on the part of the Department in issuing notice under Section 147 r/w. Section 148 of the Act. 9. The next question is whether the petitioners are entitled for any exemption as provided under Section 88 of the Act for the entire amount of arrears of salary received by them and deposited with the Provident Fund. Apparently, the petitioners could have preferred an appeal against the impugned orders. But they have not chosen to do so and had approached this Court. The law is now well settled as held by this Court in Kerala Electricity Officers Federation and Others v. Central Board of Direct Taxes and W.P.(C).Nos.145, 6751 & 8946 of 2008 5 Others, which squarely applies to the facts of the present case. In the said view of the matter, I don't think that this Court will be justified in interfering with the impugned orders. There being no merit in the contentions urged, these writ petitions are dismissed. Sd/- A.M. SHAFFIQUE, JUDGE AV "