Wa/1450/2004 Of The Asst.commr.of Income Tax,Ernakulam v. J.c.augustine,Panampilly Nagar,Kochi

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.T.SANKARAN THURSDAY, THE 14TH JUNE 2007 / 24TH JYAISHTA 1929 WA.No. 1450 of 2004() AGAINST THE JUDGEMENT IN OP.12979/2003 Dated 20/07/2004 APPELLANTS: RESPONDENTS 1 & 2: ----------- 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-(1(2), RANGE I, ERNAKULAM. 2. THE RECOVERY OFFICER, ERNAKULAM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: PETITIONER & RESPONDENT NO.3: ------------- 1. J.C.AUGUSTINE, G.346, PANAMPILLY NAGAR, KOCHI 682 015. 2. THE SENIOR DIVISIONAL MANAGER, LIFE INSURANCE CORPORATION OF INDIA DIVISIONAL OFFICE, JEEVAN PRAKASH, M.G.ROAD, ERNAKULAM-1. BY ADV. SRI.MATHAI M.PAIKADAY (SR.) R1 BY ADV. SRI.MOHAN PULIKKAL R2 BY ADV. SRI.S.EASWARAN THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 14/06/2007,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L. DATTU, C.J. & K.T. SANKARAN, J. ................................................................................... W.A. No. 1450 OF 2004...................................................................................Dated this the 14[th] June , 2007 J U D G M E N T H.L. Dattu, C.J.: This appeal is filed by the Revenue, being aggrieved by thecommon judgment of the learned single Judge in O.P.Nos. 1798 of 2000and 12979 of 2003 and W.P.(C) 9866 OF 2004. Since the issues involvedin the said cases are common, the learned single Judge had clubbed allthe three cases and disposed of by a common judgment dated20.07.2004, 2. The facts, as noticed by the learned single Judge, are as under: The petitioner before the single Judge is an income tax assessee.For the assessement years 1990-91, 1991-92 and 1992-93, the assessingofficer had completed the assessment and had demanded income tax, fora sum of Rs. 78,45,838/- along with interest. He had also demanded anadditional amount of income tax of Rs. 9,62,240/- on the basis of theadditional income disclosed by the assessee. After completion of the assessment proceedings by the authoritiesunder the Income Tax Act ('Act' for short), the assessee had filed an 2 application before the Settlement Commission, under Section 245C of theAct. Before the Settlement Commission , the assessee had also made anapplication for allowing him to remit the additional income tax ofRs.9,62,240/- in instalments. The Settlement Commission, by its orderdated 19.07.1999 had passed an order under section 245D(1) of the Act.While doing so, the Settlement Commission had issued the followingorders and directions, the same is as under: “8. In accordance with the provisions of section245D(2A) of the Income Tax Act, the appellant shall pay,within 35 days of the receipt of this Order, the additionalamount of income tax payable on the income disclosed inthe settlement application and furnish proof of suchpayment to the Settlement Commission and its AssessingOfficer, within 15 days of making the aforesaid payment. Ifthe applicant does not pay the additional amount of incometax payable within the time specified in Section 245D(2A)of the Income Tax Act, the amount of income tax remainingunpaid, together with the interest payable thereon undersection 245D(2C) of the Income Tax Act, shall be recoveredby the Assessing Officer in accordance with the provisionsof section 245D(2D) of the Income Tax Act.” Thereafter, the assessee had paid the first instalment of Rs.1,17,155/- on 30.12.1999. The assessee had also remitted an amount of W.A. No. 1450 OF 2004 3 Rs.65,000/- . While the matter was pending before the SettlementCommission, since the assessee had defaulted in paying the instalments,the assessing officer had passed Ext.P8(a) ( in O.P.1798 of 2000) orderof attachment dated 30.12.1999. Aggrieved by the said order, theassessee was before this court in O.P. 1798 of 2000. Thereafter, the assessee had paid the first instalment of Rs.1,17,155/- on 30.12.1999. The assessee had also remitted an amount of W.A. No. 1450 OF 2004 3 Rs.65,000/- . While the matter was pending before the SettlementCommission, since the assessee had defaulted in paying the instalments,the assessing officer had passed Ext.P8(a) ( in O.P.1798 of 2000) orderof attachment dated 30.12.1999. Aggrieved by the said order, theassessee was before this court in O.P. 1798 of 2000. Subsequently, the assessing officer had also issued Ext.P8 ( in O.P.12979 of 2003) letter dated 18[th] March 2003 to the Branch Manager ofthe LIC of India, interalia requesting the Branch Manager to pay to himany amount due to the assessee. Aggrieved by the said action of theassessing officer, the assessee was before this court in O.P.12979 of2003 . Since there was default in payment of instalments granted, theSettlement Commission had cancelled the instalment facility granted tothe assessee by order dated 09.02.2004 (Ext. P6 in W.P.(C) 9866 of2004). Aggrieved by the said action of the Settlement Commission , theassessee was before this Court in W.P.(C) 9866 of 2004. 3. As we have already noticed, since the assessee was common in all these cases and the issues were also common, the learned single Judgehad disposed of the cases by a common judgment, holding that in viewof Section 245F of the Act, once the matter is seized by the Settlement 4 Commission , the assessing officer cannot proceed to recover any amountordered to be paid, by the Settlement Commission . According to thelearned single Judge, it is the exclusive jurisdiction of the SettlementCommission, once an application is filed by the assessee under section245C of the Act . That only means, the jurisdiction of the assessingofficer is ousted once an application is pending before the SettlementCommission. To arrive at this conclusion, the learned single Judge hasrelied upon Sec. 245 F of the Act. Aggrieved by the findings andconclusions reached by the learned single Judge, the Revenue is before usin this Appeal. 4.Learned Senior Counsel appearing for the Revenue wouldstrenuously contended before us, that the findings and conclusionsreached by the learned single Judge requires re-consideration by thiscourt. 5. Percontra, learned counsel appearing for the assessee sought tojustify the impugned order passed by the learned single Judge. 6.. Chapter XIX A of the Act provides for settlement of cases.Section 245 A of the Act defines certain expressions. Section 245Bspeaks of constitution of the Settlement Commission by the CentralGovernment. Section 245BA provides for jurisdiction and powers of W.A. No. 1450 OF 2004 5 Settlement Commission. Section 245 C of the Act provides for filing ofan application by an assessee for settlement of cases before the SettlementCommission . Section 245 D of the Act provides for procedure on receiptof an application under section 245C of the Act. 5. Percontra, learned counsel appearing for the assessee sought tojustify the impugned order passed by the learned single Judge. 6.. Chapter XIX A of the Act provides for settlement of cases.Section 245 A of the Act defines certain expressions. Section 245Bspeaks of constitution of the Settlement Commission by the CentralGovernment. Section 245BA provides for jurisdiction and powers of W.A. No. 1450 OF 2004 5 Settlement Commission. Section 245 C of the Act provides for filing ofan application by an assessee for settlement of cases before the SettlementCommission . Section 245 D of the Act provides for procedure on receiptof an application under section 245C of the Act. 7. Sub-section (1) of Section 245D of the Act authorises theSettlement Commission, to take cognizance of an application filed byan assessee and also authorises the Settlement Commission to reject thesaid application under certain circumstances. Once an application isentertained, the Settlement Commission can proceed to pass an order,after affording an opportunity of hearing to the assessee or hisrepresentatives. Sub-section 2 of Section 245D of the Act mandates thatan order made under sub-section (1) shall be communicated to theapplicant and to the Commissioner. Sub-section(2A) of Section 245D ofthe ACt provides that subject to the provisions of sub-section (2B) ofSection 245D, the assessee shall pay, within thirty five days of thereceipt of a copy of the order under sub-section (1), the additionalamount of income tax payable on the income disclosed in theapplication and shall furnish proof of such payment to the SettlementCommission. Sub-section(2B) of the Act authorizes the Settlement W.A. No. 1450 OF 2004 6 Commission to extend the time for payment of the amount whichremains unpaid or allow payment thereof by instalments, on anapplication made by the assessee giving sufficient reasons for hisinability to pay the additional amount of income referred to in sub-section (2A). 8. For the purpose of this case, provisions of sub-section (2D) ofSection 245D of the Act requires to be noted. It is extracted and readsas under: “(2D) Where the additional amount of income-tax referredto in sub-section (2A) is not paid by the assessee within thetime specified under that sub-section or extended under sub-section (2B), as the case may be, the Settlement Commissionmay direct that the amount of income-tax remaining unpaid,together with any interest payable thereon under sub-section (2C), be recovered and any penalty for default inmaking payment of such additional amount may be imposedand recovered, in accordance with the provisions ofChapter XVII, by the Assessing Officer having jurisdictionover the assessee. 9. At this stage, it is also relevant to refer to Section 245F of the Act and its provisions, which is as under : “245F: Powers and procedure of Settlement Commission:- 7 (1) In addition to the powers conferred on the SettlementCommission under this Chapter, it shall have all the powerswhich are vested in an income-tax authority under this Act. (2) Where an application made under section 245Chas been allowed to be proceeded with under section 245D,the Settlement Commission shall, until an order is passedunder sub-section (4) of section 245D, have, subject to theprovisions of sub-section (3) of that section, exclusivejurisdiction to exercise the powers and perform the functionsof an income tax authority under this Act in relation to thecase. (3) Notwithstanding anything contained in sub-section (2)and in the absence of any express direction to the contraryby the Settlement Commission, nothing contained in thissection shall affect the operation of any other provision ofthis Act requiring the applicant to pay tax on the basis ofself assessment in relation to the matters before theSettlement Commission. (2) Where an application made under section 245Chas been allowed to be proceeded with under section 245D,the Settlement Commission shall, until an order is passedunder sub-section (4) of section 245D, have, subject to theprovisions of sub-section (3) of that section, exclusivejurisdiction to exercise the powers and perform the functionsof an income tax authority under this Act in relation to thecase. (3) Notwithstanding anything contained in sub-section (2)and in the absence of any express direction to the contraryby the Settlement Commission, nothing contained in thissection shall affect the operation of any other provision ofthis Act requiring the applicant to pay tax on the basis ofself assessment in relation to the matters before theSettlement Commission. (4) For the removal of doubt, it is hereby declaredthat, in the absence of any express direction by theSettlement Commission to the contrary, nothing in thisChapter shall affect the operation of the provisions of thisAct in so far as they relate to any matters other than thosebefore the Settlement Commission. ((5) and (6) (Omitted by the Finance Act, 1987 with effectfrom 01.06.1987.) (7) The Settlement Commission, shall, subject to the 8 provisions of this Chapter, have power to regulate its ownprocedure and the procedure of Benches thereof in allmatters arising out of the exercise of its powers or of thedischarge if its functions, including the places at which theBenches shall hold their sittings. “ 10. Placing reliance primarily on this provision, the single Judgeis of the opinion that during the pendency of the application before theSettlement Commission , the assessing officer should not have issued Ext.P8 (a) dated 30.12.1999 (in O.P. 1798 of 2000), Ext .P8 dated 18.03.2003(in O.P. 12979 of 2003) and Ext. P6 dated 09.02.2004 ( in O.P. 9866 of2004). 11. Section 245J of the Act provides for recovery of sums dueunder order of settlement. This Section only says that once an order ispassed by the Settlement Commission under sub-section (4) of Section245D of the Act, subject to the conditions imposed therein, the amountsmay be recovered and any penalty for default in making payment ofsuch sums may be imposed and recovered in accordance with theprovisions of Chapter XVII, by the assessing officer having jurisdictionover the person who made the application for settlement under section245C. 12. The admitted facts are: 9 After having quantified the tax liability by the assessing officerfor the assessment period 1990-91, 1991-92 and 1992-93, the assessee hadfiled an application before the Settlement Commission as provided undersection 245C of the Act , the petitioner/assessee had moved an applicationbefore the Settlement Commission for allowing him to remit theadditional income of Rs. 9,62,240/- in instalments. The Settlement Commission, after considering the request somade, had passed an order dated 19.07.1999. In the said order, theSettlement Commission has granted certain time to the petitioner/assesseeto pay the amounts ordered to be paid under section 245D (2A) of theAct. In the very same order, it was also observed that if for any reason ,the assessee defaults in paying the amounts, the proceedings undersection 245D(2D) of the Act can be invoked by the Assessing Officerhaving jurisdiction over the assessee, who made the application forsettlement before the Settlement Commission. 13. In the instant case, as we have already observed, the assesseeis questioning the two orders passed by the assessing officer, viz., theorder of attachment dated 30.12.1999 and the letter to the BranchManager of the LIC dated 18.03.2003 and also the order passed by the 10 Settlement Commission, cancelling the instalment facilities. 13. In the instant case, as we have already observed, the assesseeis questioning the two orders passed by the assessing officer, viz., theorder of attachment dated 30.12.1999 and the letter to the BranchManager of the LIC dated 18.03.2003 and also the order passed by the 10 Settlement Commission, cancelling the instalment facilities. 14. Keeping in view the provisions of Section 245F of the Act, butignoring the provisions of Section 245(2D) of the Act, the single Judge isof the opinion that once the matter is seized by the SettlementCommission, the Assessing Officer has no jurisdiction to issue theaforesaid notice and order. This, in our opinion, may not be justified forthe reason that Section 245D(2D) of the Act does authorize theAssessing Officer to proceed against an assessee, if he has committedany default of the instalments payable as ordered by the SettlementCommission under Section 245D(2A) of the Act. At this stage, wefurther intend to add that the power under Section 245F of the Act is ageneral power given to the Settlement Commission whereas the powerunder Section 245D (2D) of the Act are special powers . In the instantcase, such power has been exercised by the Assessing Officer. 15. In view of the above, the orders passed by the single Judgecannot be sustained by us. The matter requires to be remanded to thesingle Judge to decide as to whether the Assessing Officer was justifiedin issuing the orders of attachment dated 30.12.1999 and the garnishingnotice dated 18.03.2003 to the Branch Manager of the LIC and whetherthe Settlement Commission should have cancelled the instalment W.A. No. 1450 OF 2004 11 facility granted to the assessee under sub-section (2A) of Section 245D ofthe Act. 16. With these observations and directions, Writ Appeal is disposed of. Ordered accordingly. H.L. DATTU, CHIEF JUSTICE. K.T. SANKARAN, JUDGE. lk