Wa/1872/2021 Of The Deputy Commissioner Of Income Tax v. Salem Sree Ramavilas Chit Company

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMAND THE HONOURABLE MR.JUSTICE SATHI KUMAR SUKUMARA KURUP The Deputy Commissioner of Income Tax,Circle 1(1), Income Tax Office,No.3, Gandhi Road,Salem-7. ... Appellant Salem Sree Ramavilas ChitCompany Private Limited, rep.byits President Mr.N.K.Ramalingam ... Respondent PRAYER:- Appeal under Clause 15 of the Letters Patent against theorder dated 04.2.2020 made in W.P.No.1732 of 2020. Prayer in W.P.No.1732 of 2020:- Writ Petition filed under Article 226 of the Constitutionof India, to issue a writ of certiorari, calling for the recordsin ITBA/AST/S/143(3)/2019-20/1023185233(1), dated 27.12.2019 onthe file of the respondent relating to Assessment Year 2017-18and quash the same. Judgment was delivered by T.S.SIVAGNANAM,J We have elaborately heard Mr.A.P.Srinivas, learned SeniorStanding Counsel appearing for the appellant herein andMr.M.P.Senthilkumar, learned counsel accepting notice for therespondent herein. https://hcservices.ecourts.gov.in/hcservices/ 2. This appeal by the Department is directed against theorder dated 04.2.2020 in W.P.No.1732 of 2020 filed by therespondent herein. 3. The respondent herein filed the said writ petitionchallenging the assessment order dated 27.12.2019 under theprovisions of the Income Tax Act, 1961 (for short, the Act) forthe assessment year 2017-18. The said writ petition was heardand orders were reserved on the date of admission itself and theimpugned order has been pronounced on 04.2.2020. The ultimatedirection issued in paragraph 18 of the impugned order, at thefirst blush, appears to be an innocuous direction. 4. However, the learned Senior Standing Counsel appearingfor the appellant would contend that the observations andfindings rendered by the learned Single Judge have far reachingconsequences and that they have got cascading effect on othermatters, which are pending before various forums. It is furthercontended that the learned Single Judge made certainobservations commenting upon the efficacy and efficiency of theE-Proceeding facility introduced by the Income Tax Department.It is submitted that no opportunity was granted to the appellantto file a counter affidavit, as the said writ petition was heardand orders were reserved on the day when it came up foradmission. Furthermore, the learned Single Judge also touchedupon the merits of assessment and made certain observations,which is not done in a writ proceeding, especially when disputedquestions of fact are involved. Therefore, it is his furthersubmission that the impugned order passed in the said writpetition and the observations contained therein are liable to beinterfered with. 5. Per contra, Mr.M.P.Senthilkumar, learned counselappearing for the respondent herein submits that several recordswere placed before the learned Single Judge, many of which arenot being enclosed in the typed set of papers by the Revenue,that the respondent herein was rightly able to convince thelearned Single Judge that there has been violation of theprinciples of natural justice and that therefore, the learnedSingle Judge rightly remanded the matter to the Authorityconcerned to afford a fresh opportunity. 6. The learned counsel for the respondent herein has drawnour attention to the averments set out in paragraphs 3, 6 and 7of the affidavit filed in support of the said writ petition. Itis submitted that the respondent herein rightly gave a reply on17.2.2017 by way of online communication furnishing completedetails and the Income Tax Department (ITD) was convinced withthe same and did not raise any further query. It is alsosubmitted that the entire cash deposit was explained with 6. The learned counsel for the respondent herein has drawnour attention to the averments set out in paragraphs 3, 6 and 7of the affidavit filed in support of the said writ petition. Itis submitted that the respondent herein rightly gave a reply on17.2.2017 by way of online communication furnishing completedetails and the Income Tax Department (ITD) was convinced withthe same and did not raise any further query. It is alsosubmitted that the entire cash deposit was explained with reference to cash collections from the subscribers supportedwith reconciliation statements. According to him, the respondentherein has been filing its returns regularly by way ofelectronic returns into the web portal of the ITD and all thedetails have been furnished as to in which bank account, theamounts were deposited. 7. The learned counsel for the respondent herein alsosubmits that the respondent herein also responded to the noticedated 20.6.2019 issued under Section 142 of the Act and that theappellant herein namely the Assessing Officer, without goinginto the details submitted, completed the assessment by orderdated 27.12.2019, which was challenged in the said writ petitionand the learned Single Judge rightly allowed the said writpetition with the observations contained therein. 8. We have carefully perused the materials placed on record. 9. At the outset, we need to point out that when aneffective alternate remedy is available under the statute, theWrit Courts are slow in entertaining a writ petition underArticle 226 of The Constitution of India thereby interdictingthe procedure provided under the relevant Statute. In severaldecisions of the Hon'ble Supreme Court, it has been pointed outthat the Writ Courts seldom entertain petitions when alternateremedies are available especially in taxing statutes. Bearingthis cardinal principle in mind, if we examine the case asprojected by the learned counsel for the respondent herein, wefind that it is a case where the respondent herein ought not tohave been permitted to bypass the appeal remedy available tothem under the provisions of the Act. 10. In the affidavit filed in support of the said writpetition, the respondent herein challenged the order dated27.12.2019 firstly on the ground of violation of the principlesof natural justice and secondly on the ground that theassessment and the demand are vitiated on account of total nonapplication of mind. Thirdly, it is submitted that the additionmade under Section 69A of the Act on the demonetized cashdeposit by the respondent herein in the bank is erroneous, asthe respondent herein is in the business of conducting chits inthe regular course of business as per the Chit Funds Act, thatthe balance of Specified Bank Notes (SBN) available as on08.11.2016 was only deposited and that the entire cash depositwas explained with reference to the cash collected from thesubscribers prior to 08.11.2016 supported with reconciliationstatements. Similar is the challenge to the addition underSection 69A of the Act stating that when there are high pitchedassessments without proper application of mind, the AssessingOfficer cannot mechanically complete the assessment. 11. If these were the grounds raised namely (i) there hasbeen violation of the principles of natural justice, (ii) therehas been total non application of mind and (iii) the additionmade under Section 69A of the Act was uncalled for, obviously itis a matter where the factual matrix needs to be adjudicatedthreadbare. Such an exercise cannot be done by a Writ Court andshould not be permitted to be done. 11. If these were the grounds raised namely (i) there hasbeen violation of the principles of natural justice, (ii) therehas been total non application of mind and (iii) the additionmade under Section 69A of the Act was uncalled for, obviously itis a matter where the factual matrix needs to be adjudicatedthreadbare. Such an exercise cannot be done by a Writ Court andshould not be permitted to be done. 12. We have carefully perused the impugned order toascertain as to whether the learned Single Judge touched uponthe merits of the case of the respondent herein – assessee. Thediscussion in the impugned order starts from paragraph 13 and inparagraph 14, the learned Single Judge observed that theGovernment of India demonetized Rs.500/- and Rs.1000/- notes on08.11.2016. Thereafter, the learned Single Judge took note ofthe cash collected by the respondent herein to the tune ofRs.57,85,655/- between 01.11.2016 and 08.11.2016 and made anobservation that this collection did not appear to be unusual ascompared to the collections made during November 2015. 13. It was further observed by the learned Single Judge inthe impugned order that out of the total collection ofRs.57,85,655/- and a closing cash of Rs.38,72,374/- as on31.10.2016, the respondent herein deposited the amount ofRs.26,77,716/-, which was also not in variance with the cashdeposits made by the respondent herein during the precedingfinancial year. The learned Single Judge also observed thatcollection of monthly subscription/dues by the respondent hereinduring the aforesaid period appeared to be reasonable ascompared to be the same period during 2015. 14. If such is the finding rendered by the learned SingleJudge, the direction remanding the matter to the appellantherein for a fresh consideration is an empty formality. When theCourt is satisfied that there has been violation of theprinciples of natural justice, the Court shall be careful not tomake any observation touching upon the merits of the matter sothat it will prejudice the mind of the authority concerned, whois to take a decision. It is a settled legal principle that noperson, be it a court or a higher official, can direct anAssessing Officer to complete the assessment in a particularmanner, because the Assessing Officer has to independentlydecide an issue and should not be guided by any terms andconditions issued by the superior authority. The AssessingOfficer should be only guided by judicial precedents and shouldbe guided by judicial discipline. Hence, the exercise directedto be done in paragraph 18 of the impugned order is held to benot sustainable. 15. Furthermore, we find that in paragraph 16, the learnedSingle Judge proceeded to record a finding that the respondentherein, prima facie, demonstrated that the assessmentproceedings resulted in distorted conclusion on fact that theamount collected by the respondent herein during the period washuge and remained unexplained by the respondent herein andtherefore, the same was liable to be treated as unaccountedmoney in the hands of the respondent herein under Section 69A ofthe Act. It was also recorded by the learned Single Judge thatthe assessment order making the respondent herein liable to taxat the maximum marginal rate of tax by invoking Section 115BBEof the Act placing reliance on the decision of the Hon'bleSupreme Court in the case of Smt.Shrilekha Banerjee Vs. CIT[reported in AIR 1964 SC 697] appeared to be misplaced. If suchis the observation or finding, obviously we cannot expect theAssessing Officer to take an independent decision in the matter. 16. The next aspect, which we have noted is with regard tothe observation made by the learned Single Judge regarding theE-Governance implemented by the Government of India and moreparticularly the E-Proceeding facilities under the provisions ofthe Act. In paragraph 15, the learned Single Judge gave a wordof appreciation to the steps taken by the ITD and observed thatit is a laudable step. However, in the next sentence, thelearned Single Judge proceeded to record a finding that suchassessments, without human interference, could lead to erroneousassessments if the officers were not able to understand thetransactions and statement of accounts of an assessee without apersonal hearing. Therefore, the learned Single Judge foundfault with the appellant herein for not calling for a writtenexplanation before proceeding to conclude that the amountcollected by the respondent herein was unusual. 17. Firstly, the said writ petition, which was filed by therespondent herein, did not challenge the E-Proceeding facilityintroduced by the ITD nor any Notification issued by theGovernment of India in that regard. The prayer sought for in thesaid writ petition was for a Writ of Certiorari to quash theassessment order dated 27.12.2019. Hence, the said writ petitionnot being in the nature of a public interest litigation nor awrit petition where a declaratory relief was sought for againstE-Proceeding facility, the observation contained in paragraph 15needs to be eschewed. 18. Further, we find that in paragraph 17 also, there is anobservation made by the learned Single Judge with regard to E-Proceeding facility implemented by the ITD. For the reasonstated above, the finding rendered in paragraph 17 of theimpugned order also needs to be eschewed. Thus, taking note ofwhat we have held in the preceding paragraphs, we are of the clear view that no useful purpose will be served by remandingthe matter to the Assessing Officer for a fresh consideration. 19. The learned Senior Standing Counsel appearing for theappellant herein has drawn our attention to the Note onE-Proceeding, which was communicated to the respondent herein. 20. The relevant portions of the Note on E-Proceeding readas hereunder : “1. As a part of e-governance initiative, tofacilitate conduct of assessment proceedingselectronically, Income Tax Department hasdeveloped the 'E-Proceeding' facility. It is asimple way of communication between the Departmentand the assessee in a hassle free manner, throughelectronic means, without the necessity to visitIncome Tax Office for conduct of assessmentproceedings. This new facility is also environmentfriendly as assessment proceedings have now becomepaperless. 2. In assessment proceedings through the 'E-Proceeding' functionality, there is a seamlessflow of letters, notices, questionnaires, orders,etc., from Assessing Officer to assessee' E-filingaccount. On receipt of Departmental communication,assessee is able to submit his response along withattachments, if any, by uploading the same on theE-filing portal. The response submitted by theassessee is also viewed by the Assessing Officerelectronically. Thus, besides saving precious timeof the taxpayer, 'E-Proceeding' also provides a24X7 anytime/ anywhere convenient facility tosubmit response to the Departmental queries incourse of assessment proceedings. .... 4. In case under 'E-Proceeding', hearing maybe conducted manually in following situation(s): I. Where books of accounts have to beexamined; or II. Where provision of Section 131 of theIncome Tax Act, 1961 has been invoked; or III. Where examination of witness is to bemade by assessee or Assessing Officer; or IV. Where a show cause notice contemplatingany adverse view is issued and assessee requestsfor personal hearing to explain the matter. .... 4. In case under 'E-Proceeding', hearing maybe conducted manually in following situation(s): I. Where books of accounts have to beexamined; or II. Where provision of Section 131 of theIncome Tax Act, 1961 has been invoked; or III. Where examination of witness is to bemade by assessee or Assessing Officer; or IV. Where a show cause notice contemplatingany adverse view is issued and assessee requestsfor personal hearing to explain the matter. 5. This taxpayer friendly measure hassubstantially reduced the compliance burden forassessees. The assessees who do not yet have anE-filing account, are requested to get themselvesregistered by following the simple instructionscontained in (www. incometaxindiaefiling.gov.in)for having an E-filing account.” 21. The E-Proceeding does not foreclose the conduct of aphysical hearing, but has circumscribed four conditions, onwhich, such hearing shall be conducted manually. In terms ofClause 5 of the Note, the assessees, who did not have e-filingaccount, were requested to get themselves registered.Admittedly, the respondent herein registered themselves andreturns were filed through e-portal and the response to thenotice under Section 142 of the Act was sent through thee-portal. Therefore, it will be too late for the respondentherein now to state that all is not well with the E-Proceedingfacility. 22. There is nothing placed before us to show that therespondent herein – assessee made a specific request in terms ofparagraph 4 of the above Note stating that they require aphysical hearing for a particular reason. In such circumstances,the sweeping observations and remarks are not called forespecially when the system has been implemented and all theassessees through out the country have switched over from manualprocedure to e-procedure. 23. The Court can take judicial notice of the fact that allrecruitments conducted by various specialized recruitmentagencies as well as this Court have been accepting applicationsfrom candidates only as e-copies through e-portal and it hasbeen many years since physical applications have been done awaywith. The e-filing of such applications for recruitment tovarious posts in this Court as well as the District Judiciaryhave made the process very transparent and user friendly. Whensuch is the present state of affairs and when all persons haveequipped themselves to handle such procedure, we feel that theobservations made in paragraphs 15 and 17 of the impugned orderare not required. 24. Thus, for all the above reasons, the writ appeal isallowed and the impugned order passed in the said writ petitionis set aside. All observations and findings regarding theeffectiveness of the E-Governance implemented by the ITD are set https://hcservices.ecourts.gov.in/hcservices/ aside. Likewise, the observations and findings rendered in theimpugned order touching upon the merits of the assessment arealso set aside. Consequently, W.P.No.1732 of 2020 is dismissed.No costs. The connected CMP is closed. 25. The respondent herein – assessee is granted liberty tofile an appeal before the First Appellate Authority as againstthe assessment order dated 27.12.2019 and if such appeal isfiled within four weeks from the date of receipt of a copy ofthis judgment, then the First Appellate Authority shall, whilecomputing the limitation, exclude the period from 23.1.2020 tillthe date of filing of the appeal, which we have peremptorilyfixed as four weeks from the date of receipt of a copy of thisjudgment. It is made clear that if the respondent herein failsto avail this opportunity within the period stipulated, then thebenefit of this order will not enure to the respondent herein. Sd/- Assistant Registrar(CS VI) //True Copy// Sub Assistant Registrar RSTo 25. The respondent herein – assessee is granted liberty tofile an appeal before the First Appellate Authority as againstthe assessment order dated 27.12.2019 and if such appeal isfiled within four weeks from the date of receipt of a copy ofthis judgment, then the First Appellate Authority shall, whilecomputing the limitation, exclude the period from 23.1.2020 tillthe date of filing of the appeal, which we have peremptorilyfixed as four weeks from the date of receipt of a copy of thisjudgment. It is made clear that if the respondent herein failsto avail this opportunity within the period stipulated, then thebenefit of this order will not enure to the respondent herein. Sd/- Assistant Registrar(CS VI) //True Copy// Sub Assistant Registrar RSTo The Deputy Commissioner of Income Tax,Circle 1(1), Income Tax Office,No.3, Gandhi Road,Salem-7.+1cc to Mr.G.Baskar, Advocate, S.R.No.38261+1cc to Mr.A.P.Srinivas, Advocate, S.R.No.38113 W.A.NO.1872 OF 2021 &C.M.P.NO.11916 OF 2021 MG(CO)PBS/27/08/2021