Travancore Diagnostics Private Ltd. V. The Assistant Commissioner of Income Tax, Circle-1, Kollam

WP(C)/6718/2019

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Travancore Diagnostics Private Ltd., a company providing medical diagnostic services, filed writ petitions against the assessment orders issued by the Assistant Commissioner of Income Tax for the years 2007-08 and 2008-09. The assessments were based on findings from a survey under Section 133A of the Income Tax Act, 1961, which revealed unreported receipts and non-deduction of TDS on payments to doctors. The company had initially filed appeals against these assessments but withdrew them to pursue the writ petitions. The court dismissed the petitions on the grounds of non-maintainability due to the withdrawal of appeals without permission and the failure to challenge the assessments on substantive grounds. The court also addressed the procedural validity of the notices issued under Section 143(2) of the Act, concluding that the notices were valid despite not explicitly citing the section, as the petitioner had participated in the proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 797444 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 21-11-2023
• Assessment Year: misc
• Other Referred Cases: Assistant Commissioner of Income Tax & Another v. Hotel Blue Moon, Padinjarekkara Agencies Pvt. Ltd. v. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: D S SREEKUMARAN; T S THIYADIL; RAMAKRISHNAN; MAHESH
• Keywords: Income tax assessment; Non-issuance of notice; Suppression of receipts; Technical Defects in Appeal
• Section: 147; 148; 143(3); 143(2); 133A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH TUESDAY, THE 21ST DAY OF NOVEMBER 2023 / 30TH KARTHIKA, 1945 WP(C) NO. 6552 OF 2019 PETITIONER/S: M/S.TRAVANCORE DIAGNOSTICS PRIVATE LTD., KAILAS ARCADE, DISTRICT HOSPITAL ROAD, CHAMAKADA, KOLLAM-691 001, REPRESENTED BY MANAGING DIRECTOR, C.CHERIAN,S/O. LATE ABRAHAM, AGED 56 YEARS, RESIDING AT INCHAPPARAYIL, NALANCHIRA, TRIVANDRUM- 695 015 BY ADVS. D.S.SREEKUMARAN SMT.T.S.MAYA (THIYADIL) SHRI.RAMAKRISHNAN P SHRI.MAHESH A RESPONDENT/S: THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1,KOLLAM-691 001 BY ADV SRI.CHRISTOPHER ABRAHAM, SC FOR INCOME TAX DEPARTMENT OTHER PRESENT: SRI.CHRISTOPHER ABRAHAM-SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 21.11.2023, ALONG WITH WP(C).6718/2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) Nos.6552 & 6718/19. 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH TUESDAY, THE 21ST DAY OF NOVEMBER 2023 / 30TH KARTHIKA, 1945 WP(C) NO. 6718 OF 2019 PETITIONER/S: TRAVANCORE DIAGNOSTICS PRIVATE LTD KAILAS ARCADE, DISTRICT HOSPITAL ROAD, CHAMAKADA, KOLLAM 691 001, REPRESENTED BY MANAGING DIRECTOR, C.CHERIAN, S/O LATE ABRAHAM, AGED 56 YEARS, RESIDING AT INCHAPPARAYIL, NALANCHIRA, TRIVANDRUM- 695 015. BY ADVS. D.S.SREEKUMARAN SMT.T.S.MAYA (THIYADIL) SHRI.RAMAKRISHNAN P SHRI.MAHESH A RESPONDENT/S: THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, KOLLAM-691 001. BY ADV SRI.CHRISTOPHER ABRAHAM, SC FOR INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 21.11.2023, ALONG WITH WP(C).6552/2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) Nos.6552 & 6718/19. 3 J U D G M E N T [WP(C) Nos.6552 and 6718 of 2019] The very same petitioner has approached this Court with WP(C) Nos.6552 and 6718 of 2019 impugning the assessment orders, Exts.P8, and consequent demand notices, Exts.P9, in respect of the assessment years 2007-08 and 2008-09, respectively. 2. The petitioner is a Private Limited Company registered under the Companies Act, 1956, having diagnostics lab at Kollam and a branch at Kottarakkara. It provides medical diagnostics, including MRI Scan, CT Scan, Ultrasound Scan, X-ray and laboratory test services, in both the labs to the patients. The petitioner-assessee had filed return of its income in respect of the assessment years 2007-08 and 2008-09 on 31.10.2007 and 30.11.2008, declaring total income of Rs.2,09,670/- and Rs.1,10,710/-, respectively. A survey under WP(C) Nos.6552 & 6718/19. 4 Section 133A of the Income Tax Act, 1961 (“Act”, for short) was conducted on 24.9.2009 in the premises of the petitioner. During the course of the survey, it was found that it had suppressed receipts for conducting MRI, CT Scans etc. It had also paid commission and interpretation charges (professional fees) to the Doctors without TDS. As it was noticed that the income chargeable to tax had escaped assessment due to suppression of receipts, notices under Section 148 of the Act were issued to the petitioner on 21.3.2013 and 28.3.2014 for the assessment years 2008-09 and 2007-08, respectively. In response to the said notices, the petitioner had filed revised return showing the very same income, on 5.2.2014 and 13.10.2014, respectively. The cases were posted for hearing and Sri.D.Sreekumar, the authorised representative of the assessee, had appeared on the dates fixed and produced necessary details. WP(C) Nos.6552 & 6718/19. 5 3. The assessments for the years 2009-10 and 2010-11 were completed by taking gross receipts at 261.194% of the declared receipts. The same was arrived at by relying on the materials found at the time of survey under Section 133A of the Act. During the assessment years 2007-08 and 2008-09 also, it was proposed to adopt the gross receipts based on the same lines adopted for the assessment years 2009-10 and 2010-11. A pre-assessment letter was issued to the petitioner-assessee on 21.3.2014 proposing to adopt gross collection of Rs.2,18,65,905/- for the assessment year 2008-09, and after deduction of the expenses claimed in the Profit and Loss Account, the rest of the income was treated to be as the escaped assessment. Similarly, the gross collection for the assessment year 2007- 08 was assessed at Rs.2,39,88,872/-, and after deduction of the expenses claimed in the Profit and Loss Account, the rest of the income was treated to be the escaped assessment. Assessments for both WP(C) Nos.6552 & 6718/19. 6 these assessment years were completed under Section 143(3) read with Section 147 of the Act, and thereafter notices for payment of the tax and penalty were issued, which have been challenged in these writ petitions. 4. The petitioner had filed appeals against these assessment orders before the Commissioner of Income Tax (Appeals) [CIT(A)]. When these appeals were pending before the CIT(A), the petitioner had approached this Court by filing WP(C) Nos.3788/2019 and 3867/2019. However, this Court permitted the petitioner to withdraw those writ petitions to cure technical defects and file afresh, vide its judgment dated 5.3.2019, which reads as under: “J U D G M E N T [ WP(C) 3788/2019, WP(C).3867/2019 ] The petitioner's counsel seeks permission to withdraw the writ petitions to cure, what he calls, the technical defects, and file afresh. Permission granted. The writ petitions are dismissed as withdrawn” WP(C) Nos.6552 & 6718/19. 7 Thereafter, the petitioner filed these two writ petitions. However, in the meantime, the petitioner had withdrawn the appeals filed against the impugned assessment orders, before the CIT(A). Paragraph No.10 of WP(C) No.6552/2019, which is relevant in respect of withdrawal of the appeals pending before the CIT(A), would read as under: “10. The petitioner filed first appeal before the Commissioner of Income-tax (Appeals), Trivandrum on 5.5.2015 against the Exhibit P8 assessment order, which is withdrawn for the sake of pursuing the writ petition to avoid parallel proceedings as directed. The petitioner had made request to the Commissioner of income-tax (Appeals) so many times to hear the appeal. (No opportunity has been offered for hearing the case to the petitioner).” Paragraph No.10 of WP(C) No.6718/2019 is also with the same lines as afore. The petitioner has not mentioned that this Court had granted any permission or direction to withdraw the appeals before the CIT(A) to pursue the writ petitions filed before this Court. The petitioner had on its WP(C) Nos.6552 & 6718/19. 8 own volition withdrawn the appeals filed before the CIT(A) and approached this Court with these writ petitions. On this sole ground alone, these writ petitions are liable to be dismissed. However, this Court obliges to deal with the other contentions raised by the learned counsel for the petitioner. 5. The next submission advanced on behalf of the learned counsel for the petitioner is that the petitioner was not issued notice under Section 143(2) of the Act before proceeding to finalise the assessments under Section 143(3) read with Section 147 of the Act. The submission is that in the absence of valid notice under Section 143(2) of the Act, the subsequent proceedings and assessment orders passed under Section 143(3) read with Section 147 are in nullity and, therefore, are liable to be quashed. Learned counsel for the petitioner has placed reliance on the decision of the Hon'ble Supreme Court in the case of Assistant WP(C) Nos.6552 & 6718/19. 9 Commissioner of Income Tax & Another v. Hotel Blue Moon [(2010) 3 SCC 259 : 321 ITR 362]. 6. On the other hand, Sri.Christopher Abraham, learned Standing Counsel for the Income Tax Department, has raised objection with regard to maintainability of these writ petitions. He has stated that once the petitioner has challenged the assessment orders in appeals before the CIT(A) under Section 246 of the Act, there was no occasion for him to approach this Court challenging the very same assessment orders. It is further submitted that the petitioner had withdrawn the appeals without there being any order/direction from this Court to pursue the writ petitions. He, therefore, submits that these writ petitions are not maintainable and are liable to be dismissed. 7. Learned Standing Counsel for the Revenue has further submitted that the petitioner had been served with notices, Annexures-R(a) and R(b), and the petitioner had participated in the proceedings, WP(C) Nos.6552 & 6718/19. 10 which is evident from the order sheet before the assessing officer [Annexure-R(c)]. He submits that what is relevant is the substance of the notice and not the format. In Annexure-R(a), the provision of Section 143(2) of the Act is not mentioned, but that itself would not invalidate the notice. The petitioner had received the notice and participated in the proceedings and, therefore, under the provisions of Sections 292B and 292BB of the Act, neither the notice nor the assessment orders can be said to be in violation of the provisions of Section 143(2) or any other provisions of the Act and the Rules framed thereunder. Once the petitioner had participated in the proceedings and never raised an objection for non-service of the notice of assessments, it cannot contend before this Court that the impugned assessment orders are in violation of the statutory prescription or bad in law, in any manner. WP(C) Nos.6552 & 6718/19. 11 8. Learned Standing Counsel for the Revenue has also stated that the facts of these cases are distinguishable from the facts of the case in Hotel Blue Moon (supra), wherein notice was not served on the assessee. But, here, the petitioner was served with notice, which has not been disputed. What is being disputed is the format of the notice and not the substance of the notice. It is also not in dispute that after issuance of notice in Annexure- R(a), the petitioner had participated in the proceedings. 9. Learned Standing Counsel for the Revenue has placed reliance of the Division Bench judgment of this Court in the case of Padinjarekkara Agencies Pvt. Ltd. v. Commissioner of Income Tax [398 ITR 381 (Ker.)], in which it has been said that if the assessee was aware of the issue to be answered and sufficient opportunity of hearing was afforded, even non-issuance of notice under Section 143(2) of the Act would become immaterial WP(C) Nos.6552 & 6718/19. 12 and the assessment order issued in such cases cannot be said to be in violation of the statutory provisions. 10. I have considered the submissions of both sides and perused the writ petitions/records. 11. The first question which falls for consideration is whether these writ petitions are maintainable. From the facts of the present case, it appears that the petitioner had filed appeals before the CIT(A) against the impugned assessment orders and also filed writ petitions against the same, as mentioned above. Later on the petitioner withdrew those writ petitions on the ground of curing “technical defects”. This Court had permitted only to cure the technical defects, if any, and to file writ petitions afresh. However, this Court had not granted any liberty to the petitioner to withdraw the appeals filed before the CIT(A). I am of the view that withdrawal of the appeals by the petitioner filed before the CIT(A) WP(C) Nos.6552 & 6718/19. 13 against the assessment orders, was not because of the liberty granted by this Court, but on his own volition. The petitioner could have challenged the assessment orders on merits, but it wanted to advantage of some technical issues and, therefore, instead of contesting the assessment orders on merits, the petitioner approached this Court. Hence, I do not find that these writ petitions are maintainable. 12. Be that as it may, the next contention of the petitioner regarding non-service of notice under Section 143(2) of the Act is also liable to be rejected. In as much as the petitioner was issued notice in Annexure-R(a) and in pursuance to the said notice, the petitioner had participated in the proceedings for re-opening of the assessment orders, which is evident from the order sheet maintained before the assessing officer. Therefore, if the notice, Annexure-R(a) did not mention the provision under Section 143(2) of the WP(C) Nos.6552 & 6718/19. 14 Act, the same would not become invalid because of non-mentioning of the provision of Section 143(2). What is relevant is notice of hearing and the petitioner was issued notice of hearing. In substance, the notice in Annexure-R(a) was a notice under Section 143(2). Therefore, I find no substance in the submission of the learned counsel for the petitioner that the petitioner was not served with notice under Section 143(2) of the Act, and therefore, the subsequent proceedings and assessment orders had become bad in law and are liable to be set aside. The judgment cited by the learned counsel for the petitioner in the case of Hotel Blue Moon (supra) is distinguishable on the facts of the present case. The technical issue raised by the petitioner is also not present in the facts of these cases. Therefore, these writ petitions are not maintainable and are liable to be dismissed. WP(C) Nos.6552 & 6718/19. 15 13. Considering the provisions of Sections 292B and 292BB of the Act, when the petitioner had participated in the proceedings in pursuance to the notice issued in Annexure-R(a), the petitioner, after finalisation of the assessment orders, cannot take the plea that the assessment orders are incorrect on the ground of non-mentioning of the provision of Section 142(3) in the notice. The assessment orders cannot be challenged on just technical ground, in view of the express provision of Sections 292B and 292BB of the Act. 14. In view of the above, I find no substance in these writ petitions, which are hereby dismissed. The appeals filed before the CIT(A), which were withdrawn by the petitioner to pursue these writ petitions, are directed to be restored. If the records of those appeals are not available before the CIT(A), the petitioner can file copies of the earlier appeals within a period of fifteen (15) days from today and pursue the appeals, in WP(C) Nos.6552 & 6718/19. 16 accordance with law. If the petitioner re-files appeals as directed above, the CIT(A) should decide the same, in accordance with law, on merits, without entering into the question of limitation. All the grounds raised herein are open to the petitioner to be agitated in the appeals before the appellate authority. However, the appellate authority should decide the appeals, on merits, uninfluenced by any of the observations made herein by this Court. Pending interlocutory application, if any, in these writ petitions stands dismissed. Sd/- DINESH KUMAR SINGH JUDGE jg WP(C) Nos.6552 & 6718/19. 17 APPENDIX OF WP(C) 6718/2019 PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF LEASE DEED DATED 28.3.2008 EXHIBIT P1 TRUE COPY OF FORM NO 16A DATED 23.6.2009 EXHIBIT P2 TRUE COPY OF CIT (A) ORDER IN ITA NO 15/CIT(A) TVM/ 13-14 DATED 25.3.2014 FOR THE AY 2009-10 EXHIBIT P3 TRUE COPY OF CIT (A) ORDER IN ITA NO 14/CIT(A) TVM/ 13-14 DATED 25.3.2014 FOR THE AY 2010-11 EXHIBIT P4 TRUE COPY OF ITAT'S ORDER IN ITA NOS.289 AND 290/COCH/2014 DATED 12.2.2015 FOR THE AY 2009-10 & 2010-11 EXHIBIT P5 TRUE COPY OF JUDGMENT IN ITA NO 221/2015 DATED 19.10.2016 EXHIBIT P6 TRUE COPY OF NOTICE U/S 148 DATED 21.3.2013 ISSUED BY THE RESPONDENT EXHIBIT P7 TRUE COPY OF LETTER DATED 5.2.2014 OF THE PETITIONER EXHIBIT P8 TRUE COPY OF ASSESSMENT ORDER DATED 31.3.2014 EXHIBIT P9 TRUE COPY OF DEMAND NOTICE DATED 31.3.2014 EXHIBIT P10 TRUE COPY OF REMAND REPORT OF THE RESPONDENT DATED 6.10.2015 EXHIBIT P11 TRUE COPY OF NOTICE OF RESPONDENT DATED WP(C) Nos.6552 & 6718/19. 18 23.1.2019 RESPONDENT'S EXHIBITS EXHIBIT R(a) TRUE COPY OF NOTICE DATED 04-10-2013 EXHIBIT R(b) TRUE COPY OF NOTICE DATED 28-11-2013 EXHIBIT R(c) TRUE COPY OF THE PRE-ASSESSMENT NOTICE DATED 21-03-2014. EXHIBIT R(d) TRUE COPY OF THE ORDER SHEET CONTAINING ENTRIES REGARDING APPEARANCES BY THE AUTHORISED REPRESENTATIVE. WP(C) Nos.6552 & 6718/19. 19 APPENDIX OF WP(C) 6552/2019 PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF LEASE DEED DATED 28.03.2008 EXHIBIT P1(a) TRUE COPY OF FORM NO.16A DATED 23.06.2009 EXHIBIT P2 TRUE COPY OF CIT (A) ORDER IN ITA NO.15/CIT (A)/TVM/13-14 DATED 25.03.2014 FOR THE AY- 2009-10 EXHIBIT P3 TRUE COPY OF CIT (A) ORDER IN ITA NO.14/CIT (A)/TVM/13-14 DATED 25.03.2014 FOR THE AY- 2010-11 EXHIBIT P4 TRUE COPY OF ITAT'S ORDER IN ITA NOS.289 AND 290/COCH/2014 DATED 12.02.2015 FOR THE AY 2009-10 & 2010-11 EXHIBIT P5 TRUE COPY OF JUDGMENT IN ITA NO.221/2015 DATED 19.10.2016 OF THIS HON'BLE COURT EXHIBIT P6 TRUE COPY OF NOTICE U/S 148 DATED 28.03.2014 ISSUED BY THE RESPONDENT EXHIBIT P7 TRUE COPY OF LETTER DATED 13.10.2014 OF THE PETITIONER EXHIBIT P8 TRUE COPY OF ASSESSMENT ORDER DATED 31.03.2015 EXHIBIT P9 TRUE COPY OF DEMAND NOTICE DATED 31.03.2015 EXHIBIT P10 TRUE COPY OF REMAND REPORT OF THE RESPONDENT DATED 06.10.2015 WP(C) Nos.6552 & 6718/19. 20 EXHIBIT P11 TRUE COPY OF NOTICE OF RESPONDENT DATED 23.01.2019 RESPONDENT'S EXHIBITS EXHIBIT-R(A) TRUE COPY OF THE LETTER DATED 04.02.2015 EXHIBIT-R(B) TRUE COPY OF NOTICE U/S 143(2) DATED 18-03- 2015 EXHIBIT-R(C) TRUE COPY OF THE ORDER SHEET CONTAINING ENTRIES REGARDING APPEARANCES BY THE AUTHORISED REPRESETATIVE. 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