Wa/1335/2016 Of Kerala State Beverages (M&M) Corporation Limited v. Joint Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU MONDAY, THE 29TH DAY OF AUGUST 2016/7TH BHADRA, 1938 WA.No. 1335 of 2016 () IN WP(C).18723/2016 -------------------------------------------- AGAINST THE JUDGMENT IN WP(C) 18723/2016 of HIGH COURT OF KERALADATED 27-06-2016 APPELLANT/PETITIONER: --------------------- KERALA STATE BEVERAGES (M&M) CORPORATION LIMITED SASTHAMANGALAM, TRIVANDRUM, 695010, REP. BY MANAGING DIRECTOR. BY ADVS.SRI.ANIL D. NAIR SRI.R.SREEJITH KUM.SOUMYA PRAKASH KUM.MEKHALA M.BENNY RESPONDENTS:------------ 1. JOINT COMMISSIONER OF INCOME TAX SPECIAL RANGE, TRIVANDRUM - 693 001. SPECIAL RANGE, TRIVANDRUM - 693 001. 2. PRINCIPAL COMMISSIONER OF INCOME TAX, TRINANDRUM-695001. TRINANDRUM-695001. 3. THE COMMISSIONER OF INCOME TAX, (APPEALS) TRIVANDRUM-695001. TRIVANDRUM-695001. R BY SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 29-08-2016, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: Antony Dominic & Dama Seshadri Naidu, JJ. -------------------------------------------------- Writ Appeal No.1335 of 2016 ------------------------------------------------- Dated this the 29[th] day of August, 2016 JUDGMENT Antony Dominic, J. In this appeal, after we had dictated judgment dated 22.8.2016, counsel for the respondents sought for anopportunity to make further submissions. Thereupon this casewas posted for spoken to and was heard today. Accordingly,this judgment is rendered. 2. Heard the learned counsel for the appellant and thelearned standing counsel appearing for the respondents. 3. This writ appeal is filed against the judgment of thelearned single judge in WPC No.18723 of 2016. The writpetition having been dismissed, this appeal is filed. 4. Briefly stated the facts of the case are that theappellant, a Government of Kerala undertaking, is an assesseeunder the Income Tax Act. Ext.P1 is an order of assessmentpassed against the assessee for the assessment year 2012-2013 where the total income was determined by adding W.A. No.1335 of 2016 2 surcharge on sales tax under the Kerala General Sales Tax Actand turn over tax levied under the Kerala Surcharge on TaxesAct, 1957. 5. In so far as the assessments for the assessment years2007-2008 to 2011-2012 are concerned, the assessee's totalincome in those years was determined by making similaradditions. In those cases following the orders of the IncomeTax Appellate Tribunal and the Commissioner of Income Tax(Appeals), additions were deleted and substantial amounts hadbecome refundable. Immediately after Ext.P1 order ofassessment was passed, the appellant was issued Ext.P2 dated3.2.2015 informing that a total amount of Rs.223,57,34,050/-have been determined to be refunded on giving effect to theorders of the CIT(A) pertaining to the assessment years 2007-2008 to 2011-2012 and that it was proposed to adjust therefund amount against the demand of tax due under Ext.P1 forthe assessment year 2012-2013. Ext.P2 itself makes it clearthat the said intimation was given to the appellant underSection 245 of the Income Tax Act. 6. Subsequently the appellant received Ext.P10A to P10Edated 6.2.2015, issued under Section 240 of the Income TaxAct determining the amount due for refund for each of the W.A. No.1335 of 2016 3 assessment years, viz. 2007-2008 to 2011-2012. It was at thatstage, the assessee filed the writ petition contending that onlyafter determining the refund amount due under Section 240,adjustment as per Ext.P2 under Section 245 is permissible.The learned Single Judge, making reference to the provisionsof Section 245 dismissed the writ petition. It is this judgmentwhich is challenged before us. 6. Subsequently the appellant received Ext.P10A to P10Edated 6.2.2015, issued under Section 240 of the Income TaxAct determining the amount due for refund for each of the W.A. No.1335 of 2016 3 assessment years, viz. 2007-2008 to 2011-2012. It was at thatstage, the assessee filed the writ petition contending that onlyafter determining the refund amount due under Section 240,adjustment as per Ext.P2 under Section 245 is permissible.The learned Single Judge, making reference to the provisionsof Section 245 dismissed the writ petition. It is this judgmentwhich is challenged before us. 7. The learned counsel for the appellant contended thathaving regard to the judgment of this Court in ITA No.68 of2015 and connected cases, whereby final orders passed by theTribunal confirming the deletion of surcharge and turn overtax paid by the assessee were upheld, the addition made inExt.P1 assessment order is patently illegal and, therefore, noadjustment could have been made by the department towardsa non-existing liability. He also contended that having regardto the scheme of the provisions of Sections 240 and 245,except after determining the amount under Section 240 as isdone by Exts.P10A to P10E, adjustment under Section 245 asper Ext.P2 could have been made. Therefore, according to thelearned counsel, the learned single judge erred in dismissingthe writ petition. 8. The learned counsel for the revenue contended that W.A. No.1335 of 2016 4 even in spite of the orders of the Tribunal and the judgment ofthis Court concerning the assessment years 2007-2008 to2011-2012, and irrespective of the correctness of theadditions made in Ext.P1, until the assessment order is variedin appeal, the department was entitled to invoke its powerunder Section 245 and to adjust the amounts due for refundfor the assessment years 2007-2008 to 2011-2012. He alsoreferred to us Section 292B and Section 292BB and contendedthat a technical breach would not invalidate the notices issuedby the department. 9. We have considered the submissions made. Accordingto us, irrespective of the controversy concerning Sections 240and 245, the appellant is entitled to succeed. Admittedly, forthe assessment years 2007-2008 to 2011-2012, the turn overof surcharge and turn over tax paid by the assessee wereadded to their total income and tax was levied on that basis.The correctness of that issue was decided by the Tribunal inthe assessee's favour for one of the assessment years. Thatorder was followed by the Commissioner of Income Tax(Appeals) before whom the appeals concerning the remainingyears were pending at that time. The revenue carried thosematters also before the Tribunal and the Tribunal followed its W.A. No.1335 of 2016 5 earlier order and upheld the order passed by the FirstAppellate Authority. All these orders were challenged by therevenue before this Court. This Court confirmed the orderpassed by the Tribunal in the judgment in ITA No.68 of 2015and connected cases. As on date, there is no appeal againstthose judgments. 10. This, therefore, means that the total income of theassessee could not have been determined by adding thesurcharge and turn over tax paid by the assessee. If that beso, not only that the assessee was entitled to have the amountsfound to be refundable in Exts.P2 and P10 series refunded toit, but also the addition of the surcharge and turn over tax tothe total income in Ext.P1 assessment order for the year 2012-2013 is also illegal. Therefore, despite the fact that an appealfiled against Ext.P1 is pending consideration of theCommissioner of Income Tax (Appeals), as of now, thedepartment is not entitled to adjust the amount refundable tothe assessee consequent to the orders passed by theCommissioner of Income Tax Appellate Tribunal and thisCourt. For these reasons, we are inclined to set aside thejudgment under appeal and also Ext.P2 and direct the first For these reasons, we are inclined to set aside thejudgment under appeal and also Ext.P2 and direct the first W.A. No.1335 of 2016 6 respondent to refund the amount mentioned in Ext.P2 to theassessee forthwith. The writ appeal is allowed as above. Sd/- Antony Dominic, Judge sd/- Dama Seshadri Naidu, Judge css/ true copy P.S.TO JUDGE Antony Dominic & Dama Seshadri Naidu, JJ.-------------------------------------------------- Writ Appeal No.1335 of 2016 ------------------------------------------------- Dated this the 22[nd] day of August, 2016 JUDGMENT Antony Dominic, J. The appellant filed writ petition No.18723 of 2016seeking to quash Ext.P7 and to direct the respondents torefund the amounts adjusted vide Ext.P2. The writpetition having been dismissed, this appeal is filed. 2. We heard the learned counsel for the appellantand the learned standing counsel appearing for therespondents. 3. As a result of Ext.P1 order of assessment for theassessment year 2012-2013, substantial amounts weredue from the appellant. At the same time on giving effectto the appellate orders pertaining to the assessmentyears 2007-2008 to 2011-2012, amounts were due to be W.A. No.1335 of 2016 8 refunded to the appellant. According to the appellant,instead of refunding the amounts, those amounts wereadjusted towards the amounts due under Ext.P1, issuingExt.P2 dated 3.2.2015, in exercise of the department'sright under Section 245 of the Income Tax Act, it isstated it was only subsequently that on 6.2.2015, thedepartment issued Ext.P10 series under Section 240 ofthe Income Tax Act giving effect to the appellate ordersfor the assessment years 2007-2008 to 2011-2012. This,according to the counsel, is against the provisions ofSection 240 and 245 of the Income Tax Act. 4. However, when this argument was raised, thelearned standing counsel for the department submittedthat as a result of the judgment of this Court in ITANos.112 of 2015 and connected cases whereby theappeals filed by the department against the orders of theTribunal pertaining to the assessment years 2007-2008 to2011-2012 were dismissed, the adjustment made as perExts.P2 and P10 series cannot be sustained and that theamounts have to be refunded to the appellant. 5. Since the department is thus conceding the rightof the appellant to get the amounts adjusted by Ext.P2 W.A. No.1335 of 2016 9 and Ext.P10 series refunded to it, it is not necessary forus to answer the legal question raised by the learnedcounsel for the appellant. Therefore, recording the submission made by thelearned standing counsel appearing for the respondents,that the amounts adjusted under Section 245 as perExts.P2 and P10 series would be refunded to theappellant, this appeal is disposed of leaving open thecontentions raised. Antony Dominic, Judge Dama Seshadri Naidu, Judge