By Advs.sri.harisankar v. Menon Smt.meera V.menon

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR THURSDAY, THE 4TH DAY OF JANUARY 2018 / 14TH POUSHA, 1939 WP(C).No. 26004 of 2017 PETITIONER RAGHAVAN NAIR 'GOKULAM', VIJAYALAKSHMI MANDIRAM, KANNAMKULAM TEMPLE ROAD, CHALAKUDY EAST, CHALAKUDY P.O., THRISSUR DISTRICT.680 307. BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON RESPONDENTS: 1. THE ASST.COMMISSIONER OF INCOME TAX CIRCLE 2(1), AAYAKAR BHAVAN, SAKTHAN THAMPURAN NAGAR, THRISSUR.680 001. 2. SPECIAL TAHSILDAR (LA) NO.I KOCHI METRO RAIL PROJECT, ERNAKULAM. R1 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R1 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX R2 BY GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04-01-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONER EXHIBITS EXHIBIT P1 COPY OF PROCEEDINGS ISSUED BY THE 2ND RESPONDENT DATED 16.06.2014.EXHIBIT P1(A) COPY OF FORM O.4(B) NOTICE ISSUED BY THE 2ND RESPONDENT DATED 12.12.2013.EXHIBIT P1(B) COPY OF NOTIFICATION ISSUED BY THE GOVERNMENT OF KERALA DATED 15.11.2013.EXHIBIT P2 COPY OF RETURN OF INCOME OF THE PETITIONER FOR THE ASSESSMENT YEAR 2015-16 DATED 24.08.2015.EXHIBIT P3 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DATED 20.09.2016.EXHIBIT P4 COPY OF REPLY FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 17.10.2016.EXHIBIT P5 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DATED 08.02.2017.EXHIBIT P5(A) COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DATED 27.04.2017.EXHIBIT P5(B) COPY OF REPLY FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 10.05.2017.EXHIBIT P6 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DATED 02.06.2017.EXHIBIT P7 COPY OF CIRCULAR NO.36/16 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES DATED 25.10.2016.EXHIBIT P8 COPY OF JUDGMENT IN W.A.NO.1528/16 OF THIS HON'BLE COURT DATED 08.08.2016.EXHIBIT P9 COPY OF REPLY FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 07.07.2016.EXHIBIT P10 COPY OF ORDER IN WP[C]NO.23113/17 OF THIS HON'BLE COURT DATED 24.07.2017. WP(C).No. 26004 of 2017 (A) EXHIBIT P11 COPY OF THE LETTER ISSUED BY THE 1ST RESPONDENT DATED 27.06.2017. EXHIBIT P12 COPY OF THE ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT DATED 14.07.2017. RESPONDENTS EXHIBITS: ANNEXURE R1(A) TRUE COPY OF THE ASSESSEE'S LETTER DATED 12.07.2017 ADDRESSED TO THE FIRST RESPONDENT //TRUE COPY// P.A TO JUDGE bng C.R. P.B.SURESH KUMAR, J - - - - - - - - - - - - - - - - - - - W.P.(c) No.26004 of 2017 - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 4[th] day of January, 2018. JUDGMENT Petitioner is an assessee under the Income TaxAct (the Act) on the rolls of the first respondent. Hereceived a sum of Rs.1,28,43,192/- in the year 2014-'15 byway of compensation for a land acquired from him for theKochi Metro Rail Project. The petitioner, at the relevanttime was under the impression that the capital gainsresulting from the acquisition of the land is exigible to taxunder the Act. Consequently, in the return filed by thepetitioner under the Act for the assessment year 2015-'16,he has, disclosed the capital gains resulting from theacquisition of the said land and paid tax on that basis. Forthe said purpose, the petitioner has worked out theindexed cost of the land reckoning its fair market value ason 01.04.1981 at Rs.50,000/- per cent. 2.The first respondent issued Ext.P3 notice to WP.(C).No.26004/2017 2.The first respondent issued Ext.P3 notice to WP.(C).No.26004/2017 the petitioner under Section 143(2) of the Act for scrutiny ofthe return filed by him. It is mentioned in Ext.P3 notice thatthe deduction claimed by the petitioner under the head'capital gains' is the issue identified for examination. Thepetitioner sent a reply to Ext.P3 notice reiterating that thefair market value of the land as on 01.04.1981 was asdisclosed by him and therefore, the deduction claimed byhim under the head mentioned in the notice is in order. Afterexamining the reply of the petitioner, in terms of Ext.P6communication, the first respondent called upon thepetitioner to produce documents to establish that the fairmarket value of the land as on 01.04.1981 was as claimedby the petitioner. In the meanwhile, in the light of Section96 of the Right to Fair Compensation and Transparency inLand Acquisition, Rehabilitation and Resettlement Act, 2013(the Land Acquisition Act), this Court held in a number ofcases that compensation payable to persons for the landsacquired under the said statute is exempted from payment WP.(C).No.26004/2017 of tax under the Act. In the circumstances, in so far as the acquisition of the land of the petitioner was under the saidstatute, the petitioner submitted Ext.P9 reply to Ext.P6notice requesting the first respondent to drop theproceedings initiated against him under Section 143 the Act.Since the first respondent has not considered the requestmade by the petitioner in Ext.P9 reply, the petitioner filedW.P.(C).No.23113 of 2017 before this Court challenging thecontinuance of the proceedings under Section 143 the Act.The said writ petition was admitted on 24.07.2017. ThisCourt also passed an interim order in the said case on24.07.2017 restraining the first respondent from continuingthe proceedings. 3.While so, the petitioner was served withExt.P12 order dated 14.07.2017, by which the firstrespondent has completed the proceedings initiated in termsof Ext.P3 notice raising a demand for Rs.9,95,070/- on thebasis that the cost indexation of the land made by the WP.(C).No.26004/2017 petitioner cannot be accepted and that the fair market valueof the land as on 01.04.1981 can be reckoned only atRs.1,400/- per cent for the purpose of cost indexation.According to the petitioner, after Ext.P6 notice, the firstrespondent had issued Ext.P11 notice also to the petitionerdirecting him to appear before him on 20.07.2017 for thehearing proposed in furtherance to Ext.P3 notice. The caseof the petitioner is that in the light of Ext.P11 notice, Ext.P12order dated 14.07.2017 can only be a pre-dated one issuedmaliciously with a view to defeat W.P.(C).No.23113 of 2017instituted by the petitioner before this Court. It is also thecase of the petitioner that at any rate, Ext.P12 order beingone issued without adverting to the contention taken by thepetitioner that the proceedings are liable to be dropped inthe light of Section 96 of the Land Acquisition Act, the sameis unsustainable. The petitioner, therefore, challengesExt.P12 order in this proceedings on the aforesaid grounds. 4.A statement has been filed on behalf of the WP.(C).No.26004/2017 -5- first respondent. The stand taken by the first respondent in the statement is that though the petitioner was directed toappear for hearing on 20.07.2017 in terms of Ext.P11 notice,the authorised representative of the petitioner had appearedbefore the first respondent on 20.07.2017 itself pursuant tothe said notice and filed a written submission on behalf ofthe petitioner and it is in the said circumstances that Ext.P12order was passed on 14.07.2017. 5. Heard the learned counsel for the petitioner as also the learned Standing Counsel for the firstrespondent. 6. The petitioner does not dispute Ext.R1(A) 4.A statement has been filed on behalf of the WP.(C).No.26004/2017 -5- first respondent. The stand taken by the first respondent in the statement is that though the petitioner was directed toappear for hearing on 20.07.2017 in terms of Ext.P11 notice,the authorised representative of the petitioner had appearedbefore the first respondent on 20.07.2017 itself pursuant tothe said notice and filed a written submission on behalf ofthe petitioner and it is in the said circumstances that Ext.P12order was passed on 14.07.2017. 5. Heard the learned counsel for the petitioner as also the learned Standing Counsel for the firstrespondent. 6. The petitioner does not dispute Ext.R1(A) written submission filed on his behalf by his authorisedrepresentative on 20.07.2017 pursuant to Ext.P11 notice. Ifthat be so, the petitioner cannot be heard to contend,relying on Ext.P11 notice, that the impugned order is a pre-dated one. Apart from the case developed on the strength ofExt.P11 notice, petitioner has not placed on record any WP.(C).No.26004/2017 material to indicate that the impugned order is one issuedafter 24.7.2017 with a pre-date maliciously with a view todefeat W.P.(C).No.23113 of 2017 instituted by the petitionerbefore this Court. In the circumstances, the contention ofthe petitioner that Ext.P12 order dated 14.07.2017 is a pre-dated one issued maliciously with a view to defeat W.P.(C).No.23113 of 2017 , is liable to be rejected. 7.It is seen that even while the petitioner hasan effective alternative remedy by way of appeal againstExt.P12 order under the Act, he has instituted this writpetition challenging the said order in the light of his casethat the same is one rendered maliciously with a view todefeat W.P.(C).No.23113 of 2017 pending before this Court.Though it is found that Ext.P12 order is not one issuedmaliciously as contended by the petitioner, in so far as thisCourt entertained W.P.(C).No.23113 of 2017 and interdictedthe first respondent from proceeding further in the matter,and in so far as this Court admitted this writ petition WP.(C).No.26004/2017 -7- challenging Ext.P12 order even while the petitioner has an alternative remedy by way of appeal against the same, I amof the view that it may not be appropriate now to relegatethe petitioner to avail the alternative remedy available tohim against Ext.P12 order. In the circumstances, I proposeto examine the correctness of Ext.P12 order in thisproceedings itself. 8.As noted above, the impugned order ischallenged on the ground that the proceedings underSection 143(2) of the Act, which culminated in Ext.P12 order,is without jurisdiction, in the light of Section 96 of the LandAcquisition Act. 9.The learned Standing Counsel for the firstrespondent does not dispute the fact that in the light ofSection 96 of the Land Acquisition Act, no tax is leviable onthe capital gains resulting from the acquisition of land underthe said statute. The learned Standing Counsel also does notdispute the fact that the only point on which Ext.P12 order WP.(C).No.26004/2017 8.As noted above, the impugned order ischallenged on the ground that the proceedings underSection 143(2) of the Act, which culminated in Ext.P12 order,is without jurisdiction, in the light of Section 96 of the LandAcquisition Act. 9.The learned Standing Counsel for the firstrespondent does not dispute the fact that in the light ofSection 96 of the Land Acquisition Act, no tax is leviable onthe capital gains resulting from the acquisition of land underthe said statute. The learned Standing Counsel also does notdispute the fact that the only point on which Ext.P12 order WP.(C).No.26004/2017 has been issued is that the fair market value of the land ason 01.04.1981 adopted by the petitioner for cost indexationcannot be accepted. Nevertheless, it was contended by thelearned Standing Counsel that in so far as the petitioner hasdisclosed the capital gains resulting from the acquisition ofland in the return filed by him and paid tax on that basis, inthe absence of a revised return, the assessing officer isprecluded from considering the question whether thepetitioner is liable to pay tax on the said capital gains. Thelearned counsel relied on the decision of the Apex Court inGoetze (India) Ltd v. Commissioner of Income-Tax[(2006) 284 ITR 323 (SC)], in support of the said contention.10.The short question arising for consideration,therefore, is whether in the absence of a revised return, theassessing officer is precluded from considering, in aproceedings under Section 143 of the Act, the contention ofthe assessee that the capital gains disclosed in the returnfiled by him is not exigible to tax and that therefore, there WP.(C).No.26004/2017 cannot be any assessment on the basis that the deductionclaimed by him under that head is not admissible. 11.It is beyond dispute that the powers of theassessing officers under the Act are quasi-judicial in natureand they are duty bound, therefore, to act fairly in thedischarge of their functions. They are also invested with theauthority to do justice to the assessees. True, in a givencase where the self assessment made by an assessee isproposed to be revised on the ground that the deductionmade him in the return under a particular head isinadmissible, the assessing officer, in the absence of arevised return, would proceed on the basis of the factsdisclosed by the assessee in the return. But, in a casewhere it is apparent on the face of the record that theassessee has included in his return, an income which isexempted from payment of income tax, on account ofignorance or by mistake, according to me, the assessingofficer is bound to take into account the said fact in a WP.(C).No.26004/2017 proceedings under Section 143 of the Act. In other words, ifthe capital gains on a transaction is exempted from paymentof tax, the assessing officer has a duty to refrain fromlevying tax on the said capital gains and the assessingofficer cannot, in such cases, refuse to grant relief underSection 143 of the Act to the assessee on the technical pleathat the assessee has not filed a revised return. It is sosince the paramount duty of the assessing officer is tocomplete the assessments in accordance with law. It is allthe more so in the light of the mandate under Article 265 ofthe Constitution that no tax shall be levied or collectedexcept by authority of law. I am fortified in the aforesaidview by the observations made by the Apex Court inCommissioner of Income Tax, Bhopal v. ShellyProducts and another[(2003) 5 SCC 461]. Paragraph 36of the judgment of the Apex Court in the said case readsthus: “36. We cannot lose sight of the fact that the failure orinability of the Revenue to frame a fresh assessment should not place “36. We cannot lose sight of the fact that the failure orinability of the Revenue to frame a fresh assessment should not place the assessee in a more disadvantageous position than in what hewould have been if a fresh assessment was made. In a case wherean assessee chooses to deposit by way of abundant caution advancetax or self-assessment tax which is in excess of his liability on thebasis of return furnished or there is any arithmetical error orinaccuracy, it is open to him to claim refund of the excess tax paid inthe course of assessment proceeding. He can certainly make such aclaim also before the authority concerned calculating the refund.Similarly, if he has by mistake or inadvertence or on account ofignorance, included in his income any amount which is exemptedfrom payment of income tax, or is not income within thecontemplation of law, he may likewise bring this to the notice of theassessing officer, which if satisfied, may grant him relief and refundthe tax paid in excess, if any. Such matters can be brought to thenotice of the authority concerned in a case when refund is due andpayable, and the authority concerned, on being satisfied, shall grantappropriate relief.In cases governed by Section 240 of the Act, anobligation is cast upon the Revenue to refund the amount to theassessee without his having to make any claim in that behalf. Inappropriate cases therefore, it is open to the assessee to bring factsto the notice of the authority concerned on the basis of the returnfurnished, which may have a bearing on the quantum of the refund,such as those the assessee could have urged under Section 237 ofthe Act. The authority concerned, for the limited purpose ofcalculating the amount to be refunded under Section 240 of the Act,may take all such facts into consideration and calculate the amountto be refunded. So viewed, an assessee will not be placed in a moredisadvantageous position than what he would have been, had anassessment been made in accordance with law.” (underlinesupplied). WP.(C).No.26004/2017 In the instant case, the petitioner has not filed a revised return when he was made to understand that he has noliability to pay tax on the capital gains resulting from theacquisition of land. The reason is obvious that the timeprescribed under the Act for submission of revised returnhad expired by that time. The case of the petitioner, in thecircumstances, is only that he shall not be penalised forhaving paid tax in terms of his return, on account ofignorance, on an income not exigible to tax. When thematerials on record are analysed in the above background, Ihave no hesitation to hold that Ext.P12 order, which isimpugned in the writ petition, is a clear case where the firstrespondent has penalised the petitioner for having paid taxon an income which is not exigible to tax. The said order, inthe circumstances, is liable to be interfered with. 12.The question arose in Goetze (India) Ltd(supra) was whether an assessee could make a claim fordeduction other than by filing a revised return. As noted The question arose in Goetze (India) Ltd WP.(C).No.26004/2017 above, the question in the case on hand is whether theassessing officer is precluded from considering an objectionas to his authority to make an assessment under Section143 of the Act merely for the reason that the petitioner hasincluded in his return an amount which is exempted frompayment of tax and that he could not file a revised return torectify the said mistake in the return. The decision of theApex Court in Goetze (India) Ltd(supra)has, therefore, noapplication to the facts of the present case. In the circumstances, the writ petition is allowed and Ext.P12 order is quashed to the extent it assesses thepetitioner to capital gains resulting from the acquisition ofland mentioned therein. Sd/- P.B.SURESH KUMAR, JUDGE. bng