Request Could Not Be Allowed v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM WEDNESDAY, THE 30TH MARCH 2011 / 9TH CHAITHRA 1933 WP(C).No. 5701 of 2011(K) -------------------------------- PETITIONER(S): ------------------- M/S. SOUTH KERALA CASHEW EXPORTERS, KILIKOLLUR, KOLLAM, REPRESENTED BY ITS PROPRIETOR, A.A. SALAM. BY ADVS. SRI.ANIL D. NAIR SRI.J.R.PREM NAVAZ SMT.NIVEDITA A.KAMATH RESPONDENT(S): -------------------- 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLLAM. 2. THE COMMISSIONER OF INCOME TAX (APPEALS)-III, ERNAKULAM. BY ADV. JOSE JOSEPH, SC. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 30/03/2011, ALONG WITH WPC NO. 5761 OF 2011 WPC NO. 5740 OF 2011 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: svs. C.K.ABDUL REHIM, J ----------------------------------------------- W.P(C) Nos.5701/2011, 5740/2011 &5761/2011 ----------------------------------------------- Dated this the 30[th] day of March, 2011. J U D G M E N T The petitioners in W.P(C) Nos.5701/2011 and5761/2011 are the two proprietory concerns. The commonproprietor of those concerns, is a trustee of the trust, who isthe petitioner in W.P(C) No.5740/2011. The trust inquestion is running a Hospital and a Medical College and itsincome is exempted under the provisions of Section 10(23-c)(vi) of the Income Tax Act from the assessment year 2008-09 onwards. Consequent to a search and seizure conductedunder Section 132, on 6.1.2009, assessments werecompleted against the petitioner trust under Section 153Ar/w Section 143(3) of the Income Tax Act, for the years2004-05, 2007-08, 2008-09 and 2009-2010. With respect tothe firms in W.P(C) No.5701/2011 and 5761/2011 protectiveassessments were completed as a consequence, withrespect to the years 2003-04 to 2009-2010. W.P(C) Nos.5701/2011, 5740/2011 &5761/20112 2. Statutory appeals were filed against the assessments in all the three cases, before the 2[nd]respondent. Through Ext.P12 in W.P(C) No.5740/2001 andthrough Ext.P17 in the other two cases, the 2[nd] respondentappellate authority had dismissed the stay petitions filedalong with the appeal. The request for having priorityhearing of the appeals were also declined. The petitionersare challenging the interim order issued by the 2[nd]respondent in all the three cases. 3.The impugned assessments were challengedbefore the appellate authority on various grounds. Whileconsidering the interim applications, the petitioners havepointed out that the assessments are highly erroneous and the assessments were finalised without properconsideration of the explanations offered. In all these cases,the petitioners have pointed out that the assessment is highpitched and the tax amount raised is very huge. It was alsocontended that the petitioners are incapable of paying even W.P(C) Nos.5701/2011, 5740/2011 &5761/20113 3.The impugned assessments were challengedbefore the appellate authority on various grounds. Whileconsidering the interim applications, the petitioners havepointed out that the assessments are highly erroneous and the assessments were finalised without properconsideration of the explanations offered. In all these cases,the petitioners have pointed out that the assessment is highpitched and the tax amount raised is very huge. It was alsocontended that the petitioners are incapable of paying even W.P(C) Nos.5701/2011, 5740/2011 &5761/20113 a small portion of the demand. In the case of the trust itwas specifically pointed out that due to financial stringencythe trust is even not in a position to carry out its objectivesof imparting medical education to about 100 students and isalso not in a position to pay salary to the Doctors and Para-Medical staff who were engaged in running the Hospital.But the interim applications were dismissed by the 2[nd]respondent finding that the petitioners have not filed itsupdated statements of financial affairs to prove theirincapacity in paying the amounts. The 2[nd] respondentfurther observed that, “other averments made regardingassessments being grossly erroneous cannot be verified atthis stage”. On the basis of such finding the appellateauthority found that stay of recovery of amounts could notbe granted. Regarding the request for early disposal of theappeals, it was observed that, in view of the CBDT's actionplan, which is only to dispose of high demand appeals filedupto 31.3.2010 on priority basis before March 2011, the request could not be allowed. 4.Learned counsel for the petitioners raised variouscontentions to point out that the attitude taken by theappellate authority is highly misconceived and it is totallyagainst the guidelines issued by the CBDT with respect todisposal of stay petitions. The petitioner relies on variousdecisions reported in N.Ragan Nair V. Income TaxOfficer & another [1987(165) ITR 650], ValvolineCummins Ltd. V. Deputy Commissioner of Income Tax& others [2008 (307) ITR 103], Commissioner ofIncome Tax, Kerala V. Cochin Company (Pvt) Ltd.[1976(104) ITR 655] in support of their contentions. Thepetitioners further point out that with respect to protectiveassessments it is settled position in law that there cannot beany recovery of tax and interest. However, it is contendedthat the denial of stay, pending disposal of the appeal, willcause severe prejudice and the same will defeat theproceedings in the appeal itself. It is also contended that huge demand based on the high pitched assessments could not be met with, considering the financial situation. It isurged that the reasoning mentioned by the appellateauthority is totally baseless and that the rejection is made ina mechanical manner without any proper application ofmind and without any due advertance to the grounds raisedin the appeal. Under such circumstances the petitionerseeks interference of this Court. 5.Heard standing counsel appearing for therespondents. It is contended that huge amounts is underdemand by virtue of the assessments. It is furthercontended that disposal of the appeal may take considerabletime since voluminous records and documents need beperused meticulously. 6.On consideration of the facts and circumstances attendant in these cases, as well as on consideration of therival submissions, I am of the view that dismissal of the staypetitions is totally unjustified and unreasonable. On appreciation of the grounds enumerated for dismissal, it is 5.Heard standing counsel appearing for therespondents. It is contended that huge amounts is underdemand by virtue of the assessments. It is furthercontended that disposal of the appeal may take considerabletime since voluminous records and documents need beperused meticulously. 6.On consideration of the facts and circumstances attendant in these cases, as well as on consideration of therival submissions, I am of the view that dismissal of the staypetitions is totally unjustified and unreasonable. On appreciation of the grounds enumerated for dismissal, it is evident that the appellate authority has not made a properapplication of mind and failed in evaluating merits of thegrounds raised in appeal. It is not evident as to whether theappellate authority required the appellants to produce anyproof regarding the financial status. Going by the settledprecedents which prescribe the parameters to be followedby the statutory appellate authorities while dealing withinterim applications, the orders which are impugned inthese writ petitions could not be termed as sustainableunder law. It is also evident that a proper application of theguidelines issued by the CBDT in its real perspective wasnot done. Under such circumstances I am inclined to setaside the interim order impugned in this writ petitions. 7.However, on considering the factual aspects, I amof the view that remitting of the matter to the appellateauthority for passing fresh interim order will only help inmultiplying proceedings. On the other hand, I am of the 7 view that ends of justice will be achieved, if the appellate authority is directed to dispose the appeals itself on an earlybasis, and till then to make interim arrangements subject toconditions to be imposed. 8.Therefore, these writ petitions are disposed ofdirecting the 2[nd] respondent appellate authority to considerand dispose of the statutory appeals (Exts.P6 to P9 in W.P(C) No.5740/2011, Exts.P8 to P14 in other two cases), asearly as possible, at any rate within a period of six monthsfrom the date of receipt of a copy of this judgment. Therefore, these writ petitions are disposed of 9.Till such time the appeals are disposed of asdirected above, recovery steps for enforcement of thedemand initiated pursuant to the assessments concerned,shall be kept in abeyance, subject to condition of thepetitioners remitting a sum of Rs.3 crores in 3 (three) equalmonthly instalments, falling due on or before 30.4.2011 andon or before the last day of the two succeeding monthsthereafter. W.P(C) Nos.5701/2011, 5740/2011 &5761/2011 8 10. It is made clear that on the event of default in payment of any one of the instalments, the respondents will be free to proceed with further steps of recovery. ab C.K.ABDUL REHIMJUDGE