S.gurushankar v. A.sornam,Assistant Commissioner Of Income Tax,Central Circle-I, Madurai – I,Kulamangalam Main Road,Madurai – 625 002

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURTDATED : 04.10.2021CORAM: THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN CONT P(MD)No.1116 of 2020 in WMP(MD)No.82 of 2019inWP(MD)No.109 of 2019 S.Gurushankar Vs. ... Petitioner A.Sornam,Assistant Commissioner of Income Tax,Central Circle-I, Madurai – I,Kulamangalam Main Road,Madurai – 625 002. ... Respondent Prayer: Contempt Petition filed under Section 11 of the Contempt ofCourts Act, 1971, to punish the respondent/contemnor for thecontempt committed of the order passed by this Court dated04.01.2019 in WMP(MD)No.82 of 2019 in WP(MD)No.109 of 2019. Prayer in WMP(MD). 82/ 2019 : To pass ad interim stay of the operation of the impugned orderdated 29/11/2018 PAN: /CC-1/MDU/2018-19 of the secondrespondent in respect of the revised assessment for the assessmentyear 2015-16 in the case of the petitioner. Prayer in WP(MD). 109/ 2019 : Writ Petition is filed under Article 226 of the Constitution ofIndia, praying this Court To issue a writ of CertiorarifiedMandamus, calling for the records of the second respondent (DeputyCommissioner of Income Tax, Central Circle-1, Madurai) in therevised order of assessment in PAN: /CC-1/MDU/2018-19giving effect to the orders of the Commissioner of Income Tax(Appeals-19, Chennai) under section 143 (3) of the IT Act dated29/11/2018 in respect of for the assessment 2015-16 in the case ofthe petitioner,quash the same. For Respondent : Mrs.S.Srimathy, standing counsel https://hcservices.ecourts.gov.in/hcservices/ ORDER The petitioner herein filed WP(MD)No.109 of 2019 challengingthe order dated 29.11.2018 PAN : /CC-1/MDU/2018-19 passedby the Deputy Commissioner of Income Tax, Central Circle-1, Madurai(I/C), Madurai in respect of the assessment year 2015-16. ThisCourt vide order dated 04.01.2019 in WMP(MD)No.82 of 2019 hadgranted interim stay of the operation of the said order. There isno dispute that the interim stay is still in operation. In themeanwhile, the Assistant Commissioner of Income Tax, Central Circle-1, Madurai issued notice of demand under Section 156 of the IncomeTax Act, 1961 on 23.03.2020 calling upon the petitioner to pay a sumof Rs.1,33,57,360/-. According to the petitioner, issuance of thesaid notice of demand constitutes a willful breach of the interimorder granted by this Court. 2.Statutory notice was issued and the contemnor appeared beforethis Court and filed an affidavit justifying the issuance of thesaid notice of demand. 3.The learned Senior Counsel appearing for the petitionersubmitted that the said notice of demand was issued even beforefiling of an application for vacating the interim order of staygranted by this Court. He pointed out that the petitioner wasoriginally slapped with an assessment order dated 31.12.2016 inrespect of the assessment year 2015-16. Aggrieved by the same, thepetitioner filed an appeal before the Commissioner of Income Tax(Appeals), Chennai. The appellate authority passed an order dated14.09.2018 partly allowing the petitioner's appeal. The DeputyCommissioner of Income Tax thereafter passed the order dated29.11.2018 purporting to give effect to the order of the appellateauthority. 3.The learned Senior Counsel appearing for the petitionersubmitted that the said notice of demand was issued even beforefiling of an application for vacating the interim order of staygranted by this Court. He pointed out that the petitioner wasoriginally slapped with an assessment order dated 31.12.2016 inrespect of the assessment year 2015-16. Aggrieved by the same, thepetitioner filed an appeal before the Commissioner of Income Tax(Appeals), Chennai. The appellate authority passed an order dated14.09.2018 partly allowing the petitioner's appeal. The DeputyCommissioner of Income Tax thereafter passed the order dated29.11.2018 purporting to give effect to the order of the appellateauthority. 4.The stand of the petitioner in the writ petition is that thesaid order dated 29.11.2018 had been passed without noticing thatthe appellate authority had granted 100% deduction under Section 80-1B (11-C) and without taking note of the fact that the petitionerhad been granted tax holiday for five years. The learned SeniorCounsel pointed out that only on 05.08.2019, the contemnor filedthe appeal before the Income Tax Appellate Tribunal with anapplication to condone the delay of 235 days in filing the appeal.It is the contention of the learned Senior Counsel that thecontemnor had suppressed material facts while filing the appealbefore the Tribunal. The contemnor had not disclosed the fact ofthe pendency of the writ petition. The outcome of such an appealwould have a direct bearing on the outcome of the writ petitionfiled before this Court. According to him, after purporting togive effect to the order of the appellate authority, when thepetitioner had challenged the resultant order, the question offiling an appeal challenging the appellate authority's order willhttps://hcservices.ecourts.gov.in/hcservices/ not arise at all. According to the learned Senior Counsel, thevery act of filing the appeal is contumacious. He also would submitthat this Court had granted an unconditional interim stay of allfurther proceedings. Therefore, the contemnor ought not to haveissued the impugned notice of demand. He would further contend thatwhen the petitioner applied for rectification in respect of theorders passed by the subsequent assessment orders by invokingSection 115JC, the contemnor summarily rejected the same by statingthat the said statutory provision is very much applicable to thepetitioner. The learned Senior Counsel would point out that theapplicability of the said provision is pending before this Court andwhen by a reasoned order this Court had granted interim stay, acontra view could not have been expressed by the contemnor. Thelearned Senior Counsel also placed reliance on the decisionsreported in 2005 SCC Online Guj 423, (2014) 1 SCC 674, (2014) andSCC Online All 16144. 5.Per contra, the learned standing counsel appearing for thedepartment submitted that no contempt has been committed and shecalled for the dismissal of the contempt petition. 6.I carefully considered the rival contentions and went throughthe materials on record. The contemnor herein can be said to havecommitted contempt only if it is shown that the order passed by thisCourt has been willfully violated and not otherwise. If thepetition for vacating the interim order had been filed beforeissuing the notice of demand, this Court would not have evenentertained the contempt petition. It is a settled practice ofthis Court that when a vacate stay petition is pending, the contemptpetition is not taken up for disposal. But in the case on hand,the vacate stay petition was filed only after the contempt petitionwas filed. That is why, I took up the contempt petition for finaldisposal. 6.I carefully considered the rival contentions and went throughthe materials on record. The contemnor herein can be said to havecommitted contempt only if it is shown that the order passed by thisCourt has been willfully violated and not otherwise. If thepetition for vacating the interim order had been filed beforeissuing the notice of demand, this Court would not have evenentertained the contempt petition. It is a settled practice ofthis Court that when a vacate stay petition is pending, the contemptpetition is not taken up for disposal. But in the case on hand,the vacate stay petition was filed only after the contempt petitionwas filed. That is why, I took up the contempt petition for finaldisposal. 7.The petitioner is an income tax assessee. The case on handpertains to the assessment year 2015-16.He was issued with anassessment order. He filed an appeal.The appeal was partly allowed.The order of the appellate authority was sought to be given effectto by passing the order dated 29.11.2018. That was put to challengeand I granted interim stay of the same. Thereafter, the assessingauthority had filed an appeal against the order of the appellateauthority before the Income Tax Appellate Tribunal.It is true thatif the said appeal filed by the assessing authority is allowed, thewrit petition itself may become infructuous.It is also alleged thatin the condone delay petition filed before the Tribunal, subsequentdevelopments have not been set out. In my view, that will in no wayamount to contempt of the interim order passed by this Court. It isfor the petitioner to canvas his contentions before the Tribunal andI fail to understand as to how filing of a statutory appeal beforethe Tribunal will constitute violation of the order passed by thishttps://hcservices.ecourts.gov.in/hcservices/ Court. The statutory right available to the assessing authoritycannot be stifled by holding out the threat of contempt. When thepetition filed by the petitioner is taken up for final disposal, itwill be decided based on the legal and factual position thenobtaining. Hence, I do not find any merit in the first contentionurged by the learned Senior counsel appearing for the petitioner. 8.Likewise, the dismissal of the rectification petition filedby the assessee by holding that a particular provision is applicablewould not also constitute contempt. This is for two reasons. Theinterim order passed by this Court is in respect of the assessmentyears 2013-14, 2014-15 and 2015-16. The rectification petitions arein respect of the assessment years 2016-17 and 2017-18. Therectification petitions do not relate to the subject matter of thewrit petition pending before this Court. Of course, there is aoverlapping in the sense that the issue raised in the writ petitionand the issue raised in the rectification petitions are one and thesame. But the writ petition is yet to be disposed of. The stand ofthe authority is that a particular statutory provision isapplicable. There is contest between the petitioner and theassessing authority as regards the applicability of a particularprovision. When the issue is yet to be decided, the authority canvery well take a stand in the meanwhile. Grant of interim order ofstay will not amount to handing out a final decision on theparticular issue. This Court had taken only a prima facie view andpassed an interim order of stay. That will not tie the hands ofthe authority in reiterating their stand in the rectificationproceedings. 9.The respondent/contemnor filed a detailed affidavitjustifying the issuance of notice of demand. The learned standingcounsel took me through the order passed by the appellate authority.Even while granting 100% deduction under Section 80-1B (11C) of theAct, the appellate authority had given a finding that the petitionerhad accepted an undisclosed income to the tune of Rs.12,62,28,580/-at the time of search. The net income of the assessee wasRs.12,63,63,600/- and he had also offered to pay tax for the same.The penalty to the tune of 10% on the said undisclosed income worksout to Rs.1,26,36,360/- under clause (a) of sub-section (1) ofSection 271AAB. The contemnor in her affidavit had given thejustification as follows : “4.I respectfully submit that the petitioner hadfiled an appeal before Commissioner of Income Tax(Appeals) against the original assessment order. The CIT(Appeals) has partly allowed the appeal and granted 100%deductions under section 80-1B(11C). However in theappellate order the CIT (Appeals) had given a findingthat the petitioner has accepted Rs.12,62,28,580/-(Rs.12,42,12,500/- admitted at the time of search) inhttps://hcservices.ecourts.gov.in/hcservices/ paragraph 4.5 at page 35 of the typed set. In paragraph4.6.3 at page 40 the CIT (Appeals) has concluded that theassessee has shown the net income of Rs.12,63,63,600/- astaxable income in the return filed and offered to pay taxfor the same. For the amount of Rs.12,63,63,600/- thepenalty u/s 271AAB(1) of Income Tax Act is leviable. Thepenalty being 10% of undisclosed income works out toRs.1,26,36,360/- (10% of Rs. 12,63,63,600/-) under clause(a) of sub section (1) of section 271AAB. 5.I respectfully submit that the CIT (Appeals) hadpartly allowed the appeal as far as the addition of IPcollection.IntheoriginalassessmentRs.26,52,747/- was added which is based on difference incollection as on 20.08.2014. The CIT (Appeals) hasgranted a relief of Rs.2,49,410/- and confirmed theaddition of Rs.24,03,337/-, thereby partly allowed theclaim of the assessee. For the amount Rs.24,03,337/- theSection states that penalty could be levied from 30% to90% and the revenue has imposed 30%. The amount ofRs.7,21,000/- is 30% of Rs.24,03,337/-) under clause (c)of sub section (1) of section 271AAB. 6.I respectfully submit that if the amountRs.1,26,36,360/- and Rs.7,21,000/- are added the amountis Rs.1,33,57,360/- and for this amount only the demandnotice under Section 156 dated 23.03.2020 was issued. Infact this notice was issued along with the order passedimposing penalty and in the order these details arestated. However the assessee has not enclosed the copy ofthe order in the typed set but has enclosed only thedemand notice. Now the same is enclosed in the typed setof papers. 7.I respectfully submit that at the cost ofrepetition the CIT (Appeals) has allowed in entirety thededuction (i.e. 100% deduction) claimed under section 80-1B(11C) and to give effect the revised assessment orderwas passed. But as far as the unaccounted receipts areconcernedtheassesseehimselfhasadmittedRs.12,63,63,600/- in his “return of income” itself andhas offered to pay tax, for this only the penalty of 10%of Rs.12,63,63,600/- is imposed to the tune ofRs.1,26,36,360/-. As far as the difference of IPcollection is concerned, Rs.26,52,747/- was confirmed inoriginal assessment order, the CIT (Appeals) has granteda relief of Rs.2,49,410/- and confirmed the balanceamount of Rs.24,03,337/-. The penalty of 30% ofRs.24,03,337/- was imposed to the tune of Rs.7,21,000/-.Adding both the penalty Rs.1,33,57,360/- was imposed videthe order-cum-demand notice dated 23.03.2020 was issued.”https://hcservices.ecourts.gov.in/hcservices/ 10.I am therefore satisfied that the issuance of notice ofdemand on 23.03.2020 has nothing to do with the interim ordergranted by this Court. There is no violation of the order passed bythis Court, let alone willful violation. The contemnor isdischarged. I however make it clear that it is open to thepetitioner herein to independently challenge the said notice ofdemand dated 23.03.2020 in the manner known to law. The orderclosing the contempt petition will not be put against thepetitioner. 11.With this observation and liberty to the petitioner, thiscontempt petition stands closed. Sd/- Assistant Registrar (Records) // True Copy // skm / /2021Sub Assistant Registrar(CS) NOTE: In view of the present lock down owing to COVID-19pandemic, a web copy of the order may be utilized forofficial purposes, but, ensuring that the copy of the orderthat is presented is the correct copy, shall be theresponsibility of the advocate/litigant concerned. To The Assistant Commissioner of Income Tax,Central Circle-I, Madurai – I,Kulamangalam Main Road,Madurai – 625 002. +3 CC to M/s.S.RAMESH, Advocate ( SR-31145[F] dated 05/10/2021 ) CONT P(MD)No.1116 of 2020 in WMP(MD)No.82 of 2019 in WP(MD)No.109 of 2019 04.10.2021 MGJ(21.10.2021) 6P 5C https://hcservices.ecourts.gov.in/hcservices/