Amtex Software Solutions Pvt. Ltd v. Assistant Commissioner Of Income Tax (Osd) Corporate Range 1, Chennai – 34

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE M.SUNDAR Amtex Software Solutions Pvt. LtdNo.75, Century CentreTTK Road, AlwarpetChennai – 600 018AAFCA0638J.. Petitionervs. 1. Assistant Commissioner of Income Tax (OSD) Corporate Range 1, Chennai – 34. 2. Deputy Commissioner of Income Tax Corporate Circle 1(1) Chennai – 600 034... Respondents Writ Petition filed under Article 226 of the Constitution of India praying for issuance of a Writ ofCertiorari, calling for the records 1[st] respondent in PANNo:AAFCA0638J for Assessment Year 2013-14 and quash the impugnednotice No.NIL under Section 274 read with Section 271(1)(c) ofthe Income Tax Act, 1961 dated 23.12.2016 issued by the 1[st]respondent herein and pass such further or other order or ordersas this Hon'ble Court may deem fit and proper in thecircumstances of the case and thus render justice. This writ petition has been filed, assailing a show causenotice dated 23.12.2016 issued to the writ petitioner callingupon the writ petitioner to show cause as to why an orderimposing penalty under Section 271 of the 'Income Tax Act, 1961' https://hcservices.ecourts.gov.in/hcservices/ ('IT Act' for brevity) should not be passed. To be noted, thispertains to assessment year 2013-14. 2. There is no disputation or disagreement before this Courtthat the aforesaid show cause notice being show cause noticedated23.12.2016,bearingreferenceNo.PAN: (hereinafter 'impugned SCN' for brevity, clarity andconvenience) has been issued under Section 274 of IT Actobviously read with Section 271 of IT Act. 3. 'Show Cause Notice' shall hereinafter be referred to as'SCN' for the sake of brevity, clarity and convenience. 4. This matter is listed under the caption 'FOR ADMISSION'today in the motion list. 5. Ms.Pushya Sitaraman, learned Senior Counsel on behalf ofthe counsel on record for the writ petitioner is before thisCourt. Mr.Naveen Durai Babu, learned Junior Standing Counselfor Income Tax accepts notice on behalf of both the respondents.To be noted, there are two respondents in the instant writpetition and both the respondents are official respondents. 6. In the aforesaid scenario, with the consent of learnedcounsel on both sides, the main writ petition itself is takenup. With the consent of both sides main writ petition is beingheard out and the same is being disposed of. 7. Short facts shorn of unnecessary particulars and detailsor in other words facts that are imperative for appreciatingthis order are as follows: (a) the petitioner is engaged in the businessof export of software and 'Information TechnologyEnabling Services' ('ITES' for brevity) and isregistered as a 'Software Technology Park of India'Unit ('STPI' for brevity) under what is describedas Software Technology Park Scheme. (b) 'Assessment year 2013-14' to whichimpugned SCN pertains shall be referred to as 'saidassessment year'. (c) petitioner filed returns for saidassessment year admitting a total income ofRs.1,60,50,200/-. Case of the petitioner wasselected for scrutiny. After verification ofincome returned and details furnished by petitionerassessee,jurisidictionalAssessingOfficercompleted the assessment under Section 143(3) readwith Section 92CA of IT Act by assessing total income of the petitioner at Rs.2,19,30,080/-,obviously by making certain additions. (d) aforesaid additions made by the AssessingOfficer became subject matter of disputation. Bethat as it may, addition of guest house rent andrelated expenses to the tune of Rs.47,97,932/-became the main bone of contention qua assessmentfor said assessment year. (e) the above matter was carried in appeal bythe writ petitioner assessee to the Commissioner ofIncome Tax (Appeals) by way of a statutory appealand the Appellate Authority, confirmed theadditions. income of the petitioner at Rs.2,19,30,080/-,obviously by making certain additions. (d) aforesaid additions made by the AssessingOfficer became subject matter of disputation. Bethat as it may, addition of guest house rent andrelated expenses to the tune of Rs.47,97,932/-became the main bone of contention qua assessmentfor said assessment year. (e) the above matter was carried in appeal bythe writ petitioner assessee to the Commissioner ofIncome Tax (Appeals) by way of a statutory appealand the Appellate Authority, confirmed theadditions. (f) petitioner assessee carried it to 'IncomeTax Appellate Tribunal' ('ITAT') by way of afurther appeal and the ITAT dismissed the appeal ofthe petitioner assessee confirming the orders ofthe Assessing Officer and the Appellate Authority.This is vide order dated 02.01.2019 made by ITAT inI.T.A.No.399/Chny/2018. (g) to be noted, as mentioned supra, theimpugned show cause notice pertaining to saidassessment year, proposes to levy penalty underSection 271 of the IT Act and the same is dated23.12.2016. This Court is informed that thisimpugned SCN was kept in abeyance owing toaforesaid proceedings/Appeal before the AppellateAuthority and ITAT. (h) after dismissal of the writ petitioner'sappeal before ITAT on 02.01.2019 in the aforesaidmanner, second respondent issued a notice dated28.05.2019 reviving the impugned SCN and callingupon the petitioner assessee to appear before thesecond respondent on 17.06.2019 at 11.45 a.m. Thisis the trigger for the instant writ petition.However, as mentioned supra what has been assailedis impugned SCN, which is dated 23.12.2016. 8. Having set out short facts shorn of unnecessaryparticulars and details or in other words facts that areabsolutely imperative for appreciating this order, this Courtnow proceeds to capture the submissions made by learned SeniorCounsel for the writ petitioner. 9. Learned Senior Counsel for the writ petitioner assailed https://hcservices.ecourts.gov.in/hcservices/ the impugned SCN on the grounds which can be summarised as below: (a) impugned SCN is in a template andtherefore, it is not clear as to whether theimpugned SCN has been issued on the basis that thewrit petitioner has 'concealed particulars ofincome' or 'furnished inaccurate particulars' ofsuch income. (b) in support of the proposition that'concealing particulars of income' and 'furnishingof inaccurate particulars of income' are expressionswhich fall and operate in different realmsCommissioner of Income Tax Vs. SSA's Emerald Meadowsreported in (2015) 94 CCH 0334 KarHC, Commissionerof Income Tax Vs. Samson Perinchery reported in(2017) 392 ITS 4 (Bom), Muninaga Reddy Vs. AssistantCommissioner of Income-TAx reported in (2017) 396ITR 398 (Kar), Principal Commissioner of Income TaxVs. Baisetty Revathi reported in (2017) 398 ITR 88(AP) and T.Ashok Pai Vs. Commissioner of Income Taxreported in (2007) 292 ITR 11W (SC) were pressedinto service. 10. In response to the above submissions, learned Revenuecounsel, who accepted notice on behalf of both the respondentsdrew the attention of this Court to Section 292B of IT Act andsubmitted that no notice, summons or other proceedings issued inpursuance of proceedings of IT Act shall become invalid merelyby reason of any mistake, defect or omission in such notice orsummons. 10. In response to the above submissions, learned Revenuecounsel, who accepted notice on behalf of both the respondentsdrew the attention of this Court to Section 292B of IT Act andsubmitted that no notice, summons or other proceedings issued inpursuance of proceedings of IT Act shall become invalid merelyby reason of any mistake, defect or omission in such notice orsummons. 11. Therefore, Revenue Counsel submitted that it would beappropriate if an opportunity is given to the respondents, toclarify to the noticee i.e., writ petitioner assessee as towhether the impugned SCN is predicated on 'particulars beingconcealed' or 'inaccurate particulars are furnished' or both.Learned Revenue counsel submitted that the Department may begiven an opportunity to clarify this position by way of anaddendum or corrigendum to the impugned SCN and proceedingspursuant to the impugned SCN can be permitted to go onthereafter. 12. This Court has carefully considered the aforesaid rivalsubmissions. Before this Court deals with the rivalsubmissions, it is to be set out that at the hearing, learnedSenior Counsel for writ petitioner submitted that EmeralsMeadows case referred to supra rendered by a Division Bench ofKarnataka High Court was carried to the Hon'ble Supreme Court,the Hon'ble Supreme Court refused to interfere and the Special https://hcservices.ecourts.gov.in/hcservices/ Leave Petition was dismissed. The order dated 05.08.2016 in theSpecial Leave Petition against SSA's Emerald Meadows case readsas follows: 'Delay condonedWe do not find any merit in this petition. Thespecial leave petition is, accordingly, dismissed. Pending application, if any, stands disposed of.' 13. Therefore, it follows that there is no Doctrine ofMerger qua Emerald Meadows case. Besides this, learned SeniorCounsel also pressed into service another judgment rendered by aDivision Bench of Karnataka High Court in Commissioner of IncomeTax Vs. Manjunatha Cotton and Ginning Factory reported in (2013)359 ITR 565 (Karn). According to learned Senior Counsel, thisManjunatha Cotton and Ginning Factory is for the propositionthat when a notice under Section 271(1)(c) of the IT Act isissued in printed form without specifically mentioning whetherthe ground is 'concealment of income' or 'furnishing ofinaccurate particulars', such a notice does not satisfy thegrounds which the noticee has to meet specifically and thereforeshould be construed to be vague. It was urged that no penaltycan be imposed on the assessee on such a vague notice and thatKarnataka High Court judgment i.e., in Manjunatha CottonPrinciple buttress the submission. 14. This Court now proceeds to carefully consider thesubmissions made on both sides. 15. The proposition that the grounds of 'concealment ofincome' and 'furnishing of inaccurate particulars' qua Section27(1)(c) of IT Act are clearly distinct expressions and thatthey fall under different realms admits of no exception and madetwo qualification. All the case laws referred to supracertainly lay down this proposition very clearly. 16. To be noted, I had the occasion to pen two judgmentstouching upon ingredients of Section 27(1)(c) and they arejudgment dated 14.06.2018 in T.C.A.No.239/2017 [PrincipalCommissioner of Income Tax Vs. Trisha Krishnan] and a judgmentdated 30.08.2017 in T.C.A.No.440 of 2017 [PrincipalCommissioner of Income Tax 2, Vs. M/s.F L Smidth Limited,]. Tobe noted, these two judgments were penned by me, but for aDivision Bench in Statutory Income Tax Appeals under Section260A of IT Act. This is mentioned only for the purpose ofemphasising that the distinction between the aforesaid twoexpressions is beyond any pale of doubt in the mind of thisCourt . 17. Therefore, there could be no two opinions or disputes 16. To be noted, I had the occasion to pen two judgmentstouching upon ingredients of Section 27(1)(c) and they arejudgment dated 14.06.2018 in T.C.A.No.239/2017 [PrincipalCommissioner of Income Tax Vs. Trisha Krishnan] and a judgmentdated 30.08.2017 in T.C.A.No.440 of 2017 [PrincipalCommissioner of Income Tax 2, Vs. M/s.F L Smidth Limited,]. Tobe noted, these two judgments were penned by me, but for aDivision Bench in Statutory Income Tax Appeals under Section260A of IT Act. This is mentioned only for the purpose ofemphasising that the distinction between the aforesaid twoexpressions is beyond any pale of doubt in the mind of thisCourt . 17. Therefore, there could be no two opinions or disputes about the fact that aforesaid two expressions are distinct andthat they fall under different realms. 18. In Manjunatha Cotton and Ginning Factory case, it hasbeen held that a SCN pertaining to penalty proceedings underSection 27(1)(c) was vague and no penalty can be imposed on thesame, as it did not specifically state whether it is predicatedon the ground of 'concealment of income' or 'furnishing ofinaccurate particulars'. However, this judgment was rendered byKarnataka High Court in a regular tax case appeal after the SCNwas carried to its logical end and post logical end of SCNmatter was carried through a hierarchy of statutory appealsi.e., appellate authority, Tribunal and High Court. In completecontradiction, in the instant case, writ petitioner has assailedthe impugned SCN itself. 19. Be that as it may, what is of utmost relevance is thatnone of the aforesaid case laws, including Manjunatha Cotton andGinning Factory rendered by a Division Bench of Karnataka HighCourt were rendered in matters assailing SCNs. To be noted,matters assailing SCNs in writ jurisdiction fall in a differentcategory and the principles in this regard shall be alluded toby this Court infra. 20. With regard to cases where SCNs were assailed, Hon'bleSupreme Court in a long line of authorities has categoricallyheld that interference in writ jurisdiction though discretionaryshall ordinary not to be exercised for quashing SCNs andjudgment of Hon'ble Supreme Court in Union of India and othersVs. Kunisetty Satyanarayana reported in (2006) 12 SCC 28 issignificant in this regard. Most relevant paragraphs inKunisetty Satyanarayan are paragraphs 15 and 16 and the sameread as follows: '15.Writjurisdictionisdiscretionaryjurisdiction and hence such discretion under Article226 should not ordinarily be exercised by quashing ashow-cause notice or charge-sheet. 16. No Doubt, in some very rare and exceptionalcases the High Court can quash a charge-sheet orshow-cause notice if it is found to be whollywithout jurisdiction or for some other reason if itis wholly illegal. However, ordinarily the HighCourt should not interfere in such a matter.' 21. The rare and exceptional cases where a High Court willquash SCN has also been laid down in a long line of authoritiesand broadly they are cases (a) where SCN can be issued withoutjurisdiction by the authority B) where SCN reopens a well https://hcservices.ecourts.gov.in/hcservices/ settled position of law c) where SCN has prejudged the issue andd) where SCN has been issued with malafides. 16. No Doubt, in some very rare and exceptionalcases the High Court can quash a charge-sheet orshow-cause notice if it is found to be whollywithout jurisdiction or for some other reason if itis wholly illegal. However, ordinarily the HighCourt should not interfere in such a matter.' 21. The rare and exceptional cases where a High Court willquash SCN has also been laid down in a long line of authoritiesand broadly they are cases (a) where SCN can be issued withoutjurisdiction by the authority B) where SCN reopens a well https://hcservices.ecourts.gov.in/hcservices/ settled position of law c) where SCN has prejudged the issue andd) where SCN has been issued with malafides. 22. It is nobody's case before this Court that impugned SCNfalls under any one of the exceptions, an adumbration of whichhas been made supra. A perusal of template itself reveals thatit is based on the well settled principle that 'concealment ofincome' and 'furnishing of inaccurate particulars' are distinct.Merely because there is an error of not scoring of one of thetwo or replacing 'or' with 'and' it cannot be gainsaid thatsettled legal principle of distinction between the twoexpressions has been disregarded. As the impugned SCN is in atemplate the error is secretarial in nature and petitioner'scounsel says this is also owing to inadvertence. 23. To be noted, the aforesaid adumbration of exceptions arenot exhaustive and it is only broad heads for the limitedpurpose of disposal of instant writ petition. 24. Furthering the discussion on writ jurisdiction andexercise of this discretionary jurisdiction to quash the SCN, itcomes out clearly from a long line of case laws of Hon'bleSupreme Court, which have been adverted to in aforesaidKunisetty Satyanarayana's case that it is not an absolute rule.It is no doubt a rule of discretion and not a rule ofcompulsion, but it shall be exercised only in rare andexceptional cases. 25. In this regard , this Court also deems it appropriate torefer to two judgments of Hon'ble Supreme Court viz., SatyawatiTandon Case [United Bank of India Vs. Satyawati Tondon andothers reported in (2010) 8 SCC 110] and K.C.Mathew case[Authorized Officer, State Bank of Travancore Vs. Mathew K.C.reported in (2018) 3 SCC 85]. To be noted, Satyawati Tondonprinciple was reiterated in latter of the two i.e., K.C.Mathew.Though Satyawati Tondon case and K.C.Mathew case pertain to therule of alternate remedy, the principle that such rules, thoughare rules of discretion and not a rules of compulsion, should beexercised only in rare and exceptional cases has beenreiterated. More importantly, in Satyawati Tondon case, Hon'bleSupreme Court held that such a rule has to be applied withgreater rigour when it comes to cases involving taxes, CESS,fees etc., In other words, when it comes to fiscal statues,these rules have to be applied with greater rigour and it is tobe applied very strictly with regard to recovery of taxes, CESS,fess etc., Relevant paragraph in K.C.Mathew case is paragraph10 and the same reads as follows: '10. In Satyawati Tondon the High Court had restrainedfurther proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under theSARFAESI Act, the availability of remedy to the aggrieved underSection 17 before the Tribunal and the appellate remedy underSection 18 before the Appellate Tribunal, the object and purposeof the legislation, it was observed that a writ petition oughtnot to be entertained in view of the alternate statutory remedyavailable holding: (SCC pp.123 & 128, Paras 43 & 55) '10. In Satyawati Tondon the High Court had restrainedfurther proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under theSARFAESI Act, the availability of remedy to the aggrieved underSection 17 before the Tribunal and the appellate remedy underSection 18 before the Appellate Tribunal, the object and purposeof the legislation, it was observed that a writ petition oughtnot to be entertained in view of the alternate statutory remedyavailable holding: (SCC pp.123 & 128, Paras 43 & 55) “43. Unfortunately, the High Courtoverlooked the settled law that the High Courtwill ordinarily not entertain a petition underArticle 226 of the Constitution if an effectiveremedy is available to the aggrieved person andthat this Rule applies with greater rigour inmatters involving recovery of taxes, cess, fees,other types of public money and the dues ofbanks and other financial institutions. In ourview, while dealing with the petitions involvingchallenge to the action taken for recovery ofthe public dues, etc., the High Court must keepin mind that the legislations enacted byParliament and State Legislatures for recoveryof such dues are a code unto themselves inasmuchas they not only contain comprehensive procedurefor recovery of the dues but also envisageconstitution of quasi-judicial bodies forredressal of the grievance of any aggrievedperson. Therefore, in all such cases, the HighCourt must insist that before availing remedyunder Article 226 of the Constitution, a personmust exhaust the remedies available under therelevant statute. 55.It is a matter of serious concern thatdespite repeated pronouncement of this Court,the High Courts continue to ignore theavailability of statutory remedies under the DRTAct and the SARFAESI Act and exercisejurisdiction under Article 226 for passingorders which have serious adverse impact on theright of banks and other financial institutionsto recover their dues. We hope and trust thatin future the High Courts will exercise theirdiscretion in such matters with greater caution,care and circumspection.' 26. With regard to the submission of Revenue Counsel thatthe Revenue will clarify as to whether the impugned SCN ispredicated on 'concealment of income' or 'furnishing ofinaccurate particulars' and then proceed, it was submitted that https://hcservices.ecourts.gov.in/hcservices/ the Revenue cannot be now permitted to rectify the error. Inthis regard, Section 292B of IT Act, which has been adverted toand which has been relied on by the Revenue counsel comes to theaid of the Revenue. There is no dispute that the impugned SCNqualifies as a notice within the meaning of Section 292B. Ifthat be so, it cannot be held to be invalid merely by reason ofmistake or defect i.e., mistake or defect of issuing it in atemplate and not scoring of the relevant ground and leaving outthe applicable ground. If it is not a defect of scoring of theinapplicable ground it is a case of using the conjunction 'and'by scoring of 'or', if it is predicated on both grounds. 27. If aforesaid position is clarified and thereafter theimpugned SCN is carried to its logical end, it will satisfy allparameters and ingredients of NJP. 28. This Court is reminded of the observation of Hon'bleSupreme Court in Mumbai International Airport Private LimitedVs. Golden Chariot Airport and another reported in (2010) 10 SCC422, where Hon'ble Supreme Court held that 'action of law is nota game of chess''. Merely because the Revenue has made a moveand there is an error in the move, there is nothing to show thatno opportunity should be given to the Revenue to correct theerror by issuing a corrigendum or addendum and then proceedingwith the matter. After all it is not an irreversible move in agame of chess. 29. In the light of the aforesaid discussion, this Courtpasses the following order: 28. This Court is reminded of the observation of Hon'bleSupreme Court in Mumbai International Airport Private LimitedVs. Golden Chariot Airport and another reported in (2010) 10 SCC422, where Hon'ble Supreme Court held that 'action of law is nota game of chess''. Merely because the Revenue has made a moveand there is an error in the move, there is nothing to show thatno opportunity should be given to the Revenue to correct theerror by issuing a corrigendum or addendum and then proceedingwith the matter. After all it is not an irreversible move in agame of chess. 29. In the light of the aforesaid discussion, this Courtpasses the following order: a) the impugned SCN being SCN dated 23.12.2016bearing reference No.PAN: shall be keptin abeyance for a period of three weeks from thedate of receipt of a copy of this order. b) within the aforesaid three weeks, secondrespondent shall issue a corrigendum/addendum/erratato the impugned SCN clearly setting out the ground/son which impugned SCN was issued i.e., as to whetherit has been issued on the ground that particularshave been concealed or on the ground that inaccurateparticulars of income have been furnished or both.c) aforesaid addendum/corrigendum/errata toimpugned SCN shall be duly served on the writpetitioner with due acknowledgement within theaforesaid three weeks period and from the date ofservice, writ petitioner shall be given anotherthree weeks time to respond to the impugned SCN readwith addendum/corrigendum/errata. d) It is open to the writ petitioner to ask forthe basis on which the impugned SCN is predicated and the basis on which the same has been issued andthe same will be dealt with in a manner known tolaw. e) after receipt of response from the writpetitioner and in the event of writ petitionerchoosing to opt for availing the opportunity ofbeing heard in person, i.e., personal hearing, thesame shall also be granted and the impugned SCNalong with addendum/corrigendum/errata shall becarried to its logical end in accordance with lawafter adhering to all natural justice principles. 30. This Writ Petition is disposed of with the abovedirections. No costs. Consequently,connected miscellaneouspetition is closed. Sd/- Assistant Registrar(CS III) //True Copy// vsmTo Sub Assistant Registrar 1. Assistant Commissioner of Income Tax (OSD) Corporate Range 1, Chennai – 34. 2. Deputy Commissioner of Income Tax Corporate Circle 1(1), Chennai – 600 034. +1cc to Ms.G.Vardini Karthik, Advocate, S.R.No.47291+1cc to the Government Pleader, S.R.No.47753 W.P.No.16140 of 2019and W.M.P.No.15882 of 2019LN(CO)CS/24/07/2019 https://hcservices.ecourts.gov.in/hcservices/