On The Other Hand, The Learned Standing Counsel Appearing v. Particular Year For Which The Assessment Is Being Made

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: 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. 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. 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. 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. 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 12[th] day of August, 2016 J U D G M E N T These writ petitions are filed challenging assessment ordersand the consequent demand made by the Income Tax Departmentinvoking 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 thepetitioners. The entire arrears of salary was deposited in theProvident Fund and the petitioners claimed exemption fromdeduction under Section 88 of the Act. Though initially orders werepassed granting benefits to the petitioners, later the assessmentwas reopened by issuance of notice under Section 148 r/w. Section147 of the Act and it was held that the petitioners will be entitled toget exemption only for that particular year and cannot claimbenefits for those years for which arrears of salary had been spreadover. 3. The main contention urged by the petitioners is that inrespect of similarly situated persons, the appellate authority of theIncome Tax Department as well as this Court had taken a view thatthe assessment cannot be reopened in terms of Section 147 and148 of the Act. The learned counsel relies upon the judgment inWrit Appeal No.726/2007 and connected cases. It is submitted that when the Division Bench of this Court had observed in similarinstances that proceedings under Section 147 cannot be taken toreopen the assessment the orders of CIT (Appeals) which weredecided against the Department, the same principle has to beadopted as far as the petitioners' case are also concerned. 4. On the other hand, the learned Standing Counsel appearing 3. The main contention urged by the petitioners is that inrespect of similarly situated persons, the appellate authority of theIncome Tax Department as well as this Court had taken a view thatthe assessment cannot be reopened in terms of Section 147 and148 of the Act. The learned counsel relies upon the judgment inWrit Appeal No.726/2007 and connected cases. It is submitted that when the Division Bench of this Court had observed in similarinstances that proceedings under Section 147 cannot be taken toreopen the assessment the orders of CIT (Appeals) which weredecided against the Department, the same principle has to beadopted 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 inthe matter. It is pointed out that as far as the judgment in WritAppeal No.726/2007 is concerned, those are cases in which after anassessment order had been passed, the matter was carried inappeal before the Commissioner of Income Tax (Appeals) who hadgiven the benefit of exemption to the assessees. Thereafter, theDepartment had initiated proceedings under Section 147 r/w.Section 148 of the Act and in such circumstances, Division Benchheld that the Department cannot reopen the assessment. It issubmitted that as far as the law is concerned, it is well settled bythis Court in Kerala Electricity Officers Federation and Others v. Central Board of Direct Taxes and Others [2005] 279 ITR482 (Ker) in which this Court after considering the question ofexemption under Section 88 of the Act in similar situations held thatthe amount received as arrears of salary, even if deposited in the PFaccount, is not entitled for full exemption whereas exemption will beavailable for the arrears of salary received in respect of the particular year for which the assessment is being made. 5. Having regard to the aforesaid arguments raised on eitherside, I am of the view that as far as the petitioners case isconcerned, it is a case where assessment has been reopened asprovided under Section 147 and 148 of the Act even before adecision had been taken in the appeal. Therefore the judgment inWrit Appeal No.726/2007 and connected cases has no application tothe present case. 6. The the next question is whether the petitioners are entitledto challenge the assessment orders on the ground that thepetitioners are entitled to claim the benefit of exemption or whetherthe reopening of the assessment in terms of Section 147 and 148 isbad in law. 7. Section 147 reads as under : “147. If the Assessing Officer has reason to believe that anyincome chargeable to tax has escaped assessment for anyassessment year, he may, subject to the provisions ofsections 148 to 153, assess or reassess such income andalso any other income chargeable to tax which has escapedassessment and which comes to his notice subsequently inthe course of the proceedings under this section, orrecompute the loss or the depreciation allowance or anyother allowance, as the case may be, for the assessmentyear concerned (hereinafter in this section and in sections148 to 153 referred to as the relevant assessment year):Provided that where an assessment under sub-section (3) ofsection 143 or this section has been made for the relevant assessment year, no action shall be taken under this sectionafter the expiry of four years from the end of the relevantassessment year, unless any income chargeable to tax hasescaped assessment for such assessment year by reason ofthe failure on the part of the assessee to make a returnunder section 139 or in response to a notice issued undersub-section (1) of section 142 or section 148 or to disclosefully and truly all material facts necessary for hisassessment, for that assessment year.” assessment year, no action shall be taken under this sectionafter the expiry of four years from the end of the relevantassessment year, unless any income chargeable to tax hasescaped assessment for such assessment year by reason ofthe failure on the part of the assessee to make a returnunder section 139 or in response to a notice issued undersub-section (1) of section 142 or section 148 or to disclosefully and truly all material facts necessary for hisassessment, for that assessment year.” 8. In an instance where the Department comes to a conclusionthat the tax has escaped assessment for any assessment year, it iswell within the powers of the Department to issue notice underSection 148 within the specified time. Insofar as the petitioners areconcerned, notices had been issued within the specified time on thebasis that there is reason to believe that the tax has escapedassessment. Under such circumstances, there is no jurisdictionalerror on the part of the Department in issuing notice under Section147 r/w. Section 148 of the Act. 9. The next question is whether the petitioners are entitled forany exemption as provided under Section 88 of the Act for theentire amount of arrears of salary received by them and depositedwith the Provident Fund. Apparently, the petitioners could havepreferred an appeal against the impugned orders. But they havenot chosen to do so and had approached this Court. The law is nowwell settled as held by this Court in Kerala Electricity OfficersFederation and Others v. Central Board of Direct Taxes and 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 willbe justified in interfering with the impugned orders. There being nomerit in the contentions urged, these writ petitions are dismissed. Sd/- A.M. SHAFFIQUE, JUDGE AV