Parasmal Jain v. Income Tax Officer Ward-2 Makrana

`HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 223 / 2011 Parasmal Jain S/o Shri Sugan Chand Jain age about 60 years R/o Botharo Ka Baas, Borawar, District Nagaur. ----Appellant Versus Income Tax Officer Ward-2 Makrana. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Lokesh MathurFor Respondent(s) : Mr. Sunil Bhandari _____________________________________________________ HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATIJudgment / Order 24/01/2018 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeal of the assessee only for statisticalpurposes. 2.While admitting the appeal, this Court framed followingsubstantial question of law :- “Whether the provisions of Section 54F(4) of the Income TaxAct, 1961 are complied with if the assessee deposits theentire net consideration from the sale of an asset in anaccount maintained in any bank instead of depositing thesame in the “capital gains account scheme” maintained withthe prescribed Banks?” 3.Counsel for the appellant has taken us to Section 54F and contended that the requirement is not mandatory in view of thedecision of the Hon'ble Supreme Court in the case ofCommissioner of Central Excise, New Delhi. vs. M/s. Hari Chand Shri Gopal and Ors. reported in AIR 2012 SC (Supp) 743. It wasobserved in para no.24 as under :- 2.While admitting the appeal, this Court framed followingsubstantial question of law :- “Whether the provisions of Section 54F(4) of the Income TaxAct, 1961 are complied with if the assessee deposits theentire net consideration from the sale of an asset in anaccount maintained in any bank instead of depositing thesame in the “capital gains account scheme” maintained withthe prescribed Banks?” 3.Counsel for the appellant has taken us to Section 54F and contended that the requirement is not mandatory in view of thedecision of the Hon'ble Supreme Court in the case ofCommissioner of Central Excise, New Delhi. vs. M/s. Hari Chand Shri Gopal and Ors. reported in AIR 2012 SC (Supp) 743. It wasobserved in para no.24 as under :- "24. The doctrine of substantial compliance is a judicialinvention, equitable in nature, designed to avoid hardship incases where a party; does all that can reasonably expectedof it, but failed or faulted in some minor or in consequentaspects which cannot be described as the “essence” or the“substance” of the requirements. Like the concept of“reasonableness”, the acceptance or otherwise of a plea of“substantial compliance” depends upon the facts andcircumstances of each case and the purpose and object to beachieved and the context of the prerequisites which areessential to achieve the object and purpose of the rule or theregulation. Such a defence cannot be pleaded if a clearstatutory prerequisite which effectuates the object and thepurpose of the statute has not been met. Certainly, it meansthat the Court should determine whether the statute hasbeen followed sufficiently so as to carry out the intent forwhich the stature was enacted and not a mirror image typeof strict compliance. Substantial compliance means “ actualcompliance in respect to the substance essential to everyreasonable objectives of the statute” and the court shoulddetermine whether the statute has been followed sufficientlyso as to carry out the intent of the statute and accomplishthe reasonable objectives for which it was passed. Fiscalstatute generally seeks to preserve the need to complystrictly with regulatory requirements that are importantespecially when a party seeks the benefits of an exemptionclause that are important. Substantial compliance of anenactment is insisted, where mandatory and directoryrequirements are lumped together, for in such case, ifmandatory requirements are complied with, it will be properto say that the enactment has been substantially compliedwith notwithstanding the non-compliance of directoryrequirements. In case where substantial compliance hasbeen found, there has been actual compliance with thestatute, albeit procedurally faulty. The doctrine of substantialcompliance seeks to preserve the need to comply strictlywith the conditions or requirements that are important toinvoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangentialrequirements or requirements that are so confusingly orincorrectly written that an earnest effort at complianceshould be accepted. The test for determining theapplicability of the substantial compliance doctrine has beenthe subject of a myriad of cased and quite often, the criticalquestion to be examined is whether the requirements relateto the”substance” or “essence” of the statute , if so, strictadherence to those requirements is a precondition to giveeffect to that doctrine. On the other hand, if therequirements are procedural or directory in that they are notof the “essence” of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilledby substantial, if not strict compliance. In other words, amere attempted compliance may not be sufficient, bur actualcompliance of those factors which are considered asessential." view to the orderly conduct of business, they may be fulfilledby substantial, if not strict compliance. In other words, amere attempted compliance may not be sufficient, bur actualcompliance of those factors which are considered asessential." 3.1He also relied upon the interpretation put forward by theHigh Court of Punjab and Haryana in a decision reported in 2011LawSuit (P& H) 4921 (Commissioner of Income Tax-II, Chandigarh vs. Jagriti Aggarwal, wherein it is observed as under :- "9.Having heard learned counsel for the parties, we are ofthe opinion that Sub-section (4) of Section 139 of the Act is,in fact, a proviso to Sub-section (1) of Section 139 of theAct. Section 139 of the act fixes the different dates for fillingthe returns for different assessee. In the case of assessee asthe respondent, it is 31[st] day of July of the Assessment Yearin terms of clause (c) of the Explanation 2 to Sub-section 1of Section 139 of the Act, whereas Sub-section (4) of Section139 provides for extension in period of due date in certaincircumstances. It reads as under: (4) Any person who has not furnished a return withinthe time allowed to him under Sub-section (1), orwithin the time allowed under a notice issued underSub-section (1) of Section 142, may furnish the returnfor any previous year at any time before the expiry ofone year from the end of the relevant assessment yearor before the completion of the assessment whicheveris earlier; Provided that where the return relates to a previousyear relevant to the assessment year commencing onthe 1[st] day of April 1988, or any earlier assessmentyear, the reference to one year aforesaid shall beconstrued as a reference to two years from the end ofthe relevant assessment year. (10) A reading of the aforesaid Sub-section would show thatif a person has not furnished the return of the previous yearwithin the time allowed under Sub-section (1) i.e before 31[st]day of July of the assessment year, the assessee can filereturn before the expiry of one year from the end of therelevant Assessment year. (11) The sale of the asset having been taken place on13.01.2006, falling in the previous year 2006-2007. Thus,Sub-section (4) of Section 139 provided extended period oflimitation as an exceptio9n to Sub-section (1) of Section139 of the Act. Sub-section (4) is in relation to the timeallowed to an assessee under Sub-section (1) file return.Therefore, such provision is not an independent provision,but relates to time contemplated under Sub-section (1) of Section 139. Therefore, such Sub-section (4) has to be readalong with Sub-section (1). Similar is the view taken by theDivision Bench of Karnatakajk and Gauhati High Courts inFathima Bai’s case and Rajesh Kumar Jalan’s caserespectively." 4.We have heard learned counsel for the parties. 5.Learned counsel for the department has relied upon Section54 of the Income Tax Act and the Capital Gains Accounts Scheme,1988 framed in exercise of powers under Section 54. Under thesaid Scheme of the Central Government, if an assessee wants tohave a benefit of exemption, opening of the account is mandatory.Clause 2(a) of the Scheme defines "Account" which reads asunder:- "(a) "account" means a deposit account under this Scheme." Admittedly, the appellant has not opened the account underthe Scheme, which is mandatory. Looking to Section 54F of theIncome Tax Act, we are of the opinion that if the benefit ofextension of period is required to be taken, the assessee has toopen a separate bank account as defined in the Scheme. 6.In that view of the matter, the view taken by the Tribunsl isaffirmed. The issue is answered in favour of the department andagainst the assessee. 7.Accordingly, the appeal stands dismissed. (DR. PUSHPENDRA SINGH BHATI)J. (K. S. JHAVERI)J. S.Phophaliya/-54