Principal Commissioner Of Income Taxcentral – I v. Shri M.kiran Kumar

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 05.01.2021 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMANDTHE HONOURABLE MS.JUSTICE R.N.MANJULA Tax Case Appeal No.496 of 2020 Principal Commissioner of Income TaxCentral – I,No.108, Nungambakkam High Road,Chennai – 600 034. ...Appellant Vs Shri M.Kiran Kumar,123, Usman Road,T.Nagar, Chennai – 600 017.PAN: ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 29.10.2020 made in S.P.No.184/Chny/2020 inITA.No.3374/Chny/2019 on the file of the Income Tax AppellateTribunal, Madras 'C' Bench, for the assessment year 2015-16. Preferred against the order of the Commissioner of Income Tax(Appeals)-18. Chennai, order dated 14/11/2019 made inITA.No.510/16-17DinITBA/AP2/H/250/2019-2020/1020398688(1)preferred against the order of the Assistant Commissioner ofIncome Tax, Central circle-4(4), Chennai order dated 30/12/2016made in PAN.NO.ACHPM22476 for the Assessment year 2015-2016. For Appellant:Mr.T.R.Senthil Kumar Senior Standing Counsel For Respondent :Mr.Baskar JUDGMENT (Judgment was delivered by T.S.Sivagnanam,J) This appeal, filed by the Revenue under Section 260A of theIncome Tax Act, 1961 ('the Act' for brevity), is directedagainst the order dated 29.10.2020 passed by the Income TaxAppellate Tribunal, Madras "C" Bench ('the Tribunal' forbrevity) in S.P.No.184/Chny/2020 in ITA.No.3374/Chny/2019 forthe assessment year 2015-16. 2. The Revenue has raised the following substantialquestions of law for consideration: “1. Whether the Appellate Tribunal wascorrect in extending the stay beyond a periodof 185 days, when the delay in disposing of theappeal is attributable to the assessee, whichis contrary to Section 254(2A) of the IncomeTax Act?2. Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in law in extending stay ofcollection of demands beyond six months,without looking into the jurisdictional HighCourt and Supreme Court rulings, simply passedthe impugned order which is perverse in nature?3. Whether on the facts and in thecircumstances of the case, the AppellateTribunal was correct in directing the Revenuefrom taking any coercive action withoutappreciating that the assessee has not made outthe case before the first appellate authorityand also not paid any tax dues beyond 20% ofconfirmed demand, when the issues in questionsare covered by the judgments of Hon'ble SupremeCourt of India?” 3.The assessee is an individual engaged in the business oftrading in gold jewellery and bullion. A search and seizureoperation was conducted in the business premises of the assesseeand group companies on 02.09.2014 as well as the residentialpremises of the assessee, who was the Managing Director of oneof the group companies. For the assessment year underconsideration (AY 2015-16), the assessee filed return of incomeadmitting a total income of Rs.1,42,42,750/- in response to anotice issued under Section 153A of the Act. Upon completion ofsuch assessment, the taxable income was computed toRs.113,96,27,822/- against the income which was returned, namelyRs.1,42,42,750/-withaconsequentnetdemandofRs.46,30,29,450/-. 3.The assessee is an individual engaged in the business oftrading in gold jewellery and bullion. A search and seizureoperation was conducted in the business premises of the assesseeand group companies on 02.09.2014 as well as the residentialpremises of the assessee, who was the Managing Director of oneof the group companies. For the assessment year underconsideration (AY 2015-16), the assessee filed return of incomeadmitting a total income of Rs.1,42,42,750/- in response to anotice issued under Section 153A of the Act. Upon completion ofsuch assessment, the taxable income was computed toRs.113,96,27,822/- against the income which was returned, namelyRs.1,42,42,750/-withaconsequentnetdemandofRs.46,30,29,450/-. 5. A sum of Rs.20 crores was added as undisclosed income ofthe assessee since the assessee had surrendered the same duringthe course of search under Section 132(4) of the Act. Further,during the search operation, it came to light that there was noevidence that was produced by the assessee with regard to theamount claimed for wastages on melting and purification of oldgold purchased. Furthermore, payments were also made in cash ofless than Rs.20,000/- by splitting the bills. A sum of Rs.76.19crores was added as deemed dividend under Section 2(22)(e) ofthe Act, being the cumulative credit balance in the books of thegroup companies, in the hands of the assessee, for the reasonthat the assessee had indirectly borrowed funds from the companythrough the books of other group companies, which according tothe department were only “paper” concerns. 6. The Assessing Officer further held that 98% of the sharesheld by the assessee in the private limited company should betreated as deemed dividend. The claim for exemption of Long TermCapital Gains (LTCG) under Section 10(38) of the Act to the tuneof Rs.16.24 crores was disallowed for the reason that the gainscomputed were unrealistic (Penny Stock) with the marketconditions and the returns earned by the assessee were 2613% ofthe investments. 7. Aggrieved by the additions, the assessee preferred appealbefore the Commissioner of Income Tax (Appeals) – 18, Chennai(hereinafter referred as CIT(A)). When the appeal was pendingbefore the CIT(A), the assessee approached this Court by filingW.PNo.13319 of 2019 praying for an issuance of Writ ofCertiorarified Mandamus to quash the order passed by the CIT(A)dated 25.03.2019 and for a consequential direction upon theAssessing Officer to restrain him from enforcing the demandraised on the petitioner, vide demand notice dated 30.12.2016,pending disposal of the appeal before the CIT(A). The writpetition was disposed of by order dated 11.06.2019, by settingaside the order passed by the Commissioner of Income Tax,Central-1, dated 25.03.2019 and directing the CIT(A) to disposeof the main appeal within a time frame. Thereafter, the appealhas been heard and dismissed by order dated 14.11.2019.Aggrieved by the same, the assessee preferred an appeal beforethe Tribunal. 8. In terms of the directions issued in the writ petition inthe stay petitions filed therein, a sum of Rs.3 crores was paid https://hcservices.ecourts.gov.in/hcservices/ by the assessee. Before the Tribunal, the assessee filed staypetitions praying for stay of the demand of Rs.37,05,16,734/- onthe ground that the assessee has already paid 20% of the demand,namely, Rs.9,25,12,716/-. The Tribunal passed an order in thestay petition on 20.12.2019, whereby the Tribunal thought fit tofix the hearing of the main appeal itself at an early date andtill then directed the Revenue not to initiate coercive actionagainst the assessee for recovery of the outstanding demand. TheTribunal has referred to the arguments of the learned counselfor the assessee, who placed challans for the payment of taxesto the tune of Rs.9.26 crores post assessment framed by theAssessing Officer. https://hcservices.ecourts.gov.in/hcservices/ by the assessee. Before the Tribunal, the assessee filed staypetitions praying for stay of the demand of Rs.37,05,16,734/- onthe ground that the assessee has already paid 20% of the demand,namely, Rs.9,25,12,716/-. The Tribunal passed an order in thestay petition on 20.12.2019, whereby the Tribunal thought fit tofix the hearing of the main appeal itself at an early date andtill then directed the Revenue not to initiate coercive actionagainst the assessee for recovery of the outstanding demand. TheTribunal has referred to the arguments of the learned counselfor the assessee, who placed challans for the payment of taxesto the tune of Rs.9.26 crores post assessment framed by theAssessing Officer. 9. We find from the order that there is no discussion as tohow the Tribunal was satisfied in directing the Revenue not toinitiate coercive action against the assessee for recovery ofoutstanding demand. The power to be exercised by the Tribunalshould be in accordance with Section 254(2A) read with theproviso thereunder. We find the order to be devoid of reasonsthough the order is a four page order, substantial part of theorder is only the submissions made by the assessee, which aretouching upon the merits of the matter and while holding thatthe order is devoid of reasons, we find that the Tribunal wasjustified in observing that they are not commenting upon themerits of the matter involved in the main appeal. Further, wenote that the Tribunal finally disposed of the stay petition byorder dated 20.12.2019, after noting that the appeal is fixedfor hearing before the Regular Bench on 13.01.2020. 10. Under normal circumstances, if the appeal is to be heardby a different Bench than the Bench which is hearing the staypetition and the case is set out for hearing on a particulardate, Courts normally do not dispose of the interlocutoryapplications, but would direct the application to be called onthe date when the appeal is heard. However, the Tribunal choseto follow a different procedure in the instant case. It appearsthat the appeal was not listed before the Regular Bench of theTribunal on 13.01.2020. Thus, the assessee had an unfairadvantage in the sense that there was a protection granted tothe assessee by default, because the appeal has not been takenup on 13.01.2020. The Tribunal thereafter issued a Corrigendumorder and from the copy furnished in the typed set of papers atpage 105, we find that there is no date mentioned in the saidorder, but the Tribunal chose to exercise its power and rectifythe earlier order dated 20.12.2019 by suo motu correcting theorder. Since the copy of the order furnished to us does notcontain the date, we are not clear as to whether the Corrigendumorder/suo motu order was passed by the Tribunal before13.01.2020 or after 13.01.2020. In fact, we have seen severalorders where the Tribunal refused to exercise its power when anapplication is filed for rectification of mistake. That apart, it is not very clear that whether the Revenue was heard beforesuch a rectification was done. Nevertheless, the appealcontinued to remain pending and not taken up for disposal. it is not very clear that whether the Revenue was heard beforesuch a rectification was done. Nevertheless, the appealcontinued to remain pending and not taken up for disposal. 11. We deprecate the practice adopted by the Tribunal inexercising its suo motu power for issuing a Corrigendum to anorder which has already been signed and the petition having beendisposed of. The Tribunal becomes a functus officio and they canexercise their power of rectification under Sub-Section (2) ofSection 254, if the mistake is brought to its notice by theassessee or the Assessing Officer and the procedure to befollowed while exercising the power is provided in the first andsecond proviso under Sub-Section (2) of Section 254. Therefore,we are at a loss to understand as to how the Tribunal exercisedits power in issuing a suo motu Corrigendum, that too by anundated order without hearing the Revenue or the AssessingOfficer. As mentioned above, the appeal was not taken up forhearing on 13.01.2020 and obviously, the protection granted bythe Tribunal in its interim order dated 20.12.2019 enured infavour of the assessee and the Revenue is right in its argumentthat the order of stay was in force beyond the period providedin the proviso to Section 254(2A) of the Act. 12. It is not clear as to why the assessee moved a secondstay application before the Tribunal in SP.No.50/Chny/2019. Thesaid stay application was dismissed by order dated 14.02.2020,fixing the appeal for hearing on 25.02.2020. It was made clearthat the assessee should not seek adjournment on the date ofhearing and in case the Revenue seeks adjournment, the entireamount will be stayed automatically. On the date fixed forhearing, the matter was not heard by the Tribunal. From theorder sheet dated 25.02.2020, it is seen that when the appealwas taken up, the assessee's counsel sought for a Passover andthe matter was subsequently taken up at 12.15 PM and the learnedcounsel for the assessee submitted that he would take 2 hours tocomplete his arguments. The Tribunal has recorded that, sincethe matter could not be completed due to paucity of time, thecase is adjourned to 17.03.2020 with consent of both theparties. The learned counsel for the assessee pleaded that theinterim protection for recovery proceedings for the demand maybe granted to the assessee. Accordingly, the Tribunal directedthe Departmental representative to suitably inform the AssessingOfficer, having jurisdiction over the assessee's case, not toinitiate coercive measure for the recovery of the demand tillthe date of hearing on 17.03.2020 and the matter was adjournedto 17.03.2020. 13. In our considered view, the Tribunal, while issuingdirections to the Departmental representative, not to exerciseits jurisdiction against the assessee, should be traceable tothe statutory provisions. We find that no such power has beenconferred on the Tribunal under Section 254 of the Act. Therefore, issuing such directions and restraining the AssessingOfficer to exercise his statutory function is beyond thejurisdiction of the Tribunal and therefore, the order anddirection issued to the Department through the Departmentalrepresentative is non-est in the eye of law. The learnedDepartmental representative has no jurisdiction to give anyconcession or consent on behalf of the Department without thewritten approval of the competent authority. Therefore, thestand taken by the learned Departmental representative is oflittle avail as he has no jurisdiction to agree to thedirections issued by the learned Tribunal, which itself iswithout jurisdiction. Challenging the said order, the Revenue isbefore us by way of this appeal. Therefore, issuing such directions and restraining the AssessingOfficer to exercise his statutory function is beyond thejurisdiction of the Tribunal and therefore, the order anddirection issued to the Department through the Departmentalrepresentative is non-est in the eye of law. The learnedDepartmental representative has no jurisdiction to give anyconcession or consent on behalf of the Department without thewritten approval of the competent authority. Therefore, thestand taken by the learned Departmental representative is oflittle avail as he has no jurisdiction to agree to thedirections issued by the learned Tribunal, which itself iswithout jurisdiction. Challenging the said order, the Revenue isbefore us by way of this appeal. 14. Subsequently, the assessee filed the third stay petitionin S.P.No.184/Chny/2020, since a recovery notice was issued tothe assessee on 20.10.2020. The Tribunal, by order dated29.10.2020, disposed of the third stay petition, where it hasnoted that after the interim order was passed on 25.02.2020 andextended on 17.03.2020, the Tribunal did not function. TheTribunal has also noted that the assessee did not file anydocument establishing financial difficulties. However, it tooknote of the submission of the learned counsel for the assesseethat due to pandemic, the assessee was unable to run hisbusiness and is facing difficulties to pay the outstandingdemand. Considering the pandemic situation, the Tribunal fixedthe date of hearing for the appeal on 07.12.2020 with adirection to the assessee as well the Department to cooperatefor concluding the final hearing of the appeal. The Tribunaldirected the Department not to take any coercive steps torecover the outstanding demand till the next date of hearingi.e. 07.12.2020. We are informed by the learned Senior StandingCounsel for the Revenue that the appeal was heard on 07.12.2020and orders have been reserved on 07.12.2020 itself and ordersare awaited. 15. We have elaborately set out the manner in which theTribunal proceeded with the matter. It is no doubt ture thatthe assessee cannot be blamed for the non-functioning of theTribunal, which is also beyond the control of the Tribunal dueto pandemic situation. But however, we are on a larger issuewith regard to the power of the Tribunal to be exercised whilegranting interim orders. We find that the exercise of power bythe Tribunal is not to be in accordance with Section 254(2A) ofthe Act. Further, we have also commented upon the directionissued by the Tribunal to the Department through itsDepartmental representative not to initiate coercive action. 16. In our opinion, the Tribunal has no such power to issuedirections, but has got power to grant an interim order underSection 254, subject to the conditions stipulated therein.Therefore, we are compelled to answer the substantial questions https://hcservices.ecourts.gov.in/hcservices/ of law in favour of the Revenue and against the assessee.However, we do not wish to interfere with the impugned orderwhich had been passed by the Tribunal, though we are decidingthe substantial questions of law in favour of the Revenue onaccount of the fact that the Tribunal has already heard theappeal on 07.12.2020 and reserved orders and the issue regardingwhether the assessee should be put on further condition etc.,has become academic because the main appeal is to be disposed ofshortly and we are informed by the learned Senior StandingCounsel for the Revenue that the Tribunal will dispose of thematter at the earliest, probably in the next two or three weeks. 17. For the above reasons, while declining to exercisejurisdiction and interfere with the impugned order, we answerthe substantial questions of law in favour of the revenue. Theappeal stands disposed of accordingly. No costs. 17. For the above reasons, while declining to exercisejurisdiction and interfere with the impugned order, we answerthe substantial questions of law in favour of the revenue. Theappeal stands disposed of accordingly. No costs. Sd/- Assistant Registrar(CS III)//True Copy// Sub Assistant RegistrarhvkTo1. The Income Tax Appellate Tribunal, Madras 'C' Bench,2. The Commissioner of Income Tax, Chennai.3. The Assistant Commisioner of Income Tax, Central Circle-1 (4) (I-C), Chennai +1cc to Mr.T. SENTHIKUMAR, Advocate, S.R.No.423 CP(CO)SM/17/02/2021 TCA.No.492 of 2020