Wp/11648/2019 Of S.ajit Kumar v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRASRESERVED ON : 25.07.2019DATE OF DECISION : 09.08.2019CORAM S.Ajit Kumar..Petitioner The Assistant Commissioner of Income-tax,Non-Corporate Circle-20(1),Room No.311, 3[rd] Floor,Wanaparthy Block,Aayakar Bhavan,121, Mahatma Gandhi Road,Chennai-600 034. ..Respondent This writ petition is filed under Article 226 of theConstitution of India praying to issue a Writ of certiorari orany other writ, direction or order in the nature of a writcalling for the records in F.No.ACDPK0418K / Penalty / 158BFA(2) / ACIT / NCC-20(1)/CHN dated 12.03.2019 for the BlockAssessment period from 01.04.1996 to 17.07.2002 on the file ofthe respondent and quash the same and pass such order or furtherorders as the High Court may deem fit and proper in thecircumstances of the case and thus render justice. For Petitioner : Mr.G.Ashokapathy for M/s.Pass Associates For Respondent : Mr.J.Narayanaswamy Standing Counsel ORDER Mr.G.Ashokapathy of M/s.Pass Associates (Law Firm) on behalfof writ petitioner and Mr.J.Narayanaswamy, learned StandingCounsel for the lone official respondent were before this Court,main writ petition was taken up and heard out with the consentof both learned counsel. 2Owing to the trajectory of the hearing or in otherwords, owing to what unfurled in the hearing, scope of theinstant writ petition stands considerably narrowed down. In the light of the submissions made by learned counsel on both sides,the entire writ petition now turns on a lone question, i.e.,limitation. To state with specificity, the sole question ininstant writ petition now is whether an order dated 12.03.2019bearing reference F.No.ACDPK0418K/Penalty / 158BFA(2) /ACIT/NCC-20(1) / CHN made by sole respondent (hereinafter'impugned order' for brevity) is barred by limitation.Notwithstanding several averments made, grounds / contentionsraised in the affidavit filed in support of the writ petitionand the counter affidavit filed by the lone official respondent,both learned counsel before this court agreed without anydisagreement or disputation that the entire writ petition nowturns on limitation issue and arguments were advanced on thisbasis. 3In the light of the narrow compass on which instantwrit petition now turns, short facts shorn of micro details willsuffice and the same is given infra under the caption 'FactualMatrix in a Nutshell'. 4Factual Matrix in a Nutshell :(a)Subject matter of instant writ petitionarises under the 'Income Tax Act, 1961' ('IT Act'for brevity). (b)Genesis of this writ petition was on17.07.2002 when a search by the Income TaxOfficials commenced in the office and residentialpremises of the writ petitioner. This search lastedtill 21.8.2002. (c)In the course of search, evidences werecollected and according to Income Tax Department,there was understatement of real income in theregular returns filed. To be noted, this is forblock period from 01.04.1996 to 17.07.2002(hereinafter 'said block period' for the sake ofclarity and convenience). (d)Assessment proceedings commenced and anassessment order dated 31.8.2004 came to be passedby the assessing officer. This assessment order wasmade under section 158BC read with Section 143(3)of IT Act. Vide aforesaid assessment order,undisclosed investment in two immovable propertiesand cash payment to a construction company out ofundisclosed income were quantified and it was heldthat writ petitioner is liable to pay a little overRs.60.57 lakhs as Tax together with interest oflittle over Rs.4.54 lakhs totalling Rs.65.11 lakhs.(e)Writ petitioner assailed the aforesaidassessment order by way of a statutory appeal underthe IT Act being ITA No.206/ 2004-05. Appellate (d)Assessment proceedings commenced and anassessment order dated 31.8.2004 came to be passedby the assessing officer. This assessment order wasmade under section 158BC read with Section 143(3)of IT Act. Vide aforesaid assessment order,undisclosed investment in two immovable propertiesand cash payment to a construction company out ofundisclosed income were quantified and it was heldthat writ petitioner is liable to pay a little overRs.60.57 lakhs as Tax together with interest oflittle over Rs.4.54 lakhs totalling Rs.65.11 lakhs.(e)Writ petitioner assailed the aforesaidassessment order by way of a statutory appeal underthe IT Act being ITA No.206/ 2004-05. Appellate authority is the Commissioner of Income Tax(Appeals)-I, Chennai and the appellate authority inand by order dated 15.2.2005 confirmed the order ofassessing officer with regard to tax liability, butwith regard to interest alone, the appellateauthority directed assessing officer to chargeinterest for only five months and not for sixmonths. (f)Writ petitioner assessee as well as'Income Tax Department' (hereinafter 'Revenue' forbrevity) carried the matter in appeal by way ofstatutory appeals under section 253 of IT Act tothe 'Income Tax Appellate Tribunal' (Bench inChennai) which shall hereinafter be referred to as'ITAT' for the sake of brevity. (g)ITAT vide common order dated 28.4.2006allowed the appeal filed by the writ petitionerassessee and dismissed the appeal filed by theRevenue. Thereafter, revenue filed a statutoryappeal under section 260A of IT Act being TCANo.2620 of 2006 and a Hon'ble Division Bench ofthis Court by order dated 22.11.2006 dismissed thetax case appeal and did not interfere with theorder of ITAT. Revenue carried the matter toHon'ble Supreme Court of India vide Civil AppealNo.10164 of 2010 and Hon'ble Supreme Court in andby order dated 2.5.2018 allowed the Civil Appeal.This in effect means that the order made by theoriginal authority, i.e., assessment made by theassessing officer on 31.8.2004 stood resuscitatedqua tax liability and interest. To be noted, in theorder made by the original authority on 31.8.2004,it was made clear that penalty proceedings underSection 158BFA(2) of IT Act will be initiatedseparately qua undisclosed income for the saidblock period. While this was mentioned in theassessment order itself, a separate 'Show CauseNotice' ('SCN' for brevity) was also issued on thesame day, i.e., 31.8.2004 calling upon assessee toappear in person on date and time specified thereinto show cause as to why penalty under section158BFA(2) of IT Act should not be imposed.(h)This SCN also did not progress owing toassessment order going through four levels ofappellate adjudication, i.e., before appellateauthority, ITAT, Hon'ble Division Bench of thisCourt and Hon'ble Supreme Court of India, thedetails and trajectory of which have been set outsupra. (i)Therefore, after the order of Hon'ble Supreme Court of India on 2.5.2018, when theoriginal assessment order made by the originalauthority on 31.8.2004 stood resuscitated,respondent issued a notice dated 12.9.2018 callingupon the writ petitioner Assessee to appear on aspecified date and time (17.9.2018, 3.30 p.m.) toshow cause as to why penalty should not be imposedunder Section 158BFA(2) of IT Act. (j)A perusal of this communication dated12.9.2018 makes it clear that it is a continuationof SCN qua penalty which was already issued on31.8.2004. To be noted, 31.8.2004 SCN has beencited in the reference and the writ petitionerAssessee has been called upon to appear on theaforementioned date and time. Supreme Court of India on 2.5.2018, when theoriginal assessment order made by the originalauthority on 31.8.2004 stood resuscitated,respondent issued a notice dated 12.9.2018 callingupon the writ petitioner Assessee to appear on aspecified date and time (17.9.2018, 3.30 p.m.) toshow cause as to why penalty should not be imposedunder Section 158BFA(2) of IT Act. (j)A perusal of this communication dated12.9.2018 makes it clear that it is a continuationof SCN qua penalty which was already issued on31.8.2004. To be noted, 31.8.2004 SCN has beencited in the reference and the writ petitionerAssessee has been called upon to appear on theaforementioned date and time. (k)Writ petitioner assessee sent a replydated 1.3.2019 and the same culminated in impugnedorder made by respondent. To be noted, videimpugned order, respondent has levied minimumpenalty, i.e., 100% of tax qua undisclosed income.Therefore, the penalty was little over Rs.60.57lakhs. It was Rs.60,57,286.00 to be precise.Assailing the impugned order, this writ petitionhas been filed and as mentioned above, instant writpetition now turns on the lone pivotal ground thatimpugned order is barred by limitation. 5Having set out the factual matrix in a nutshell, thiscourt now embarks upon the exercise of discussion of rivalsubmissions under the caption 'Discussion and Dispositivereasoning' infra. Before the same is done, it is deemedpertinent to make it clear that learned counsel on both sidessubmitted without any disputation that arguments advanced arenot covered by any case law and therefore, no case law was citedor pressed into service by both sides. 6Discussion and Dispositive reasoning : (a)Primary contention of learned counsel forwrit petitioner is that the impugned order is barredby limitation in the light of section 158BFA(3)(c) ofIT Act. Furthering his submission in this direction,learned counsel submitted that time limitprescribed / applicable to this case, for initiatingpenalty proceedings is six months from the date ofreceipt of ITAT order. As exact date of receipt isnot available, it is to be reckoned from the date ofITAT order which is dated 28.4.2006 is his say.Though obvious, for the sake of clarity, it ismentioned that the earliest date of receipt of ITAT order can only be the date of order itself. From thedate of ITAT order, limitation expires on 27.10.2006.(b)However, as would be evident from thetrajectory which the assessment order took in theinstant case, assessment proceedings did not stopwith the order of ITAT. The order of ITAT was carriedin appeal to this court by the Revenue under Section260A of IT Act unsuccessfully and thereafter Revenuehad carried it to Hon'ble Supreme Court successfully.(c)One important and significant aspect of thematter is both sides submitted without anydisputation that all appeals, i.e., first appeal bywrit petitioner Assessee, two appeals by writpetitioner assessee and Revenue to ITAT, Tax CaseAppeal to this court by Revenue and S.L.P in Hon'bleSupreme Court were all filed within the prescribedtime limits. (d)Adverting to the aforesaid provisions oflaw, learned counsel for writ petitioner contendedthat the statute (to be precise, section 158BFA(3)(c)) very clearly mentions about the order of firstappellate authority, namely Commissioner of Appeals-Iin this case and ITAT, but does not talk about TCA inthis court or further proceedings in Hon'ble SupremeCourt. (e)In an attempt to buttress this submission,learned counsel for writ petitioner placed relianceon section 275 of IT Act, as also The Taxation Laws(Amendment) Bill, 2005 being Bill No.74 of 2005. (d)Adverting to the aforesaid provisions oflaw, learned counsel for writ petitioner contendedthat the statute (to be precise, section 158BFA(3)(c)) very clearly mentions about the order of firstappellate authority, namely Commissioner of Appeals-Iin this case and ITAT, but does not talk about TCA inthis court or further proceedings in Hon'ble SupremeCourt. (e)In an attempt to buttress this submission,learned counsel for writ petitioner placed relianceon section 275 of IT Act, as also The Taxation Laws(Amendment) Bill, 2005 being Bill No.74 of 2005. (f)With regard to Section 275 of IT Act, itwas submitted that penalty under section 271(1)(c) ofIT Act has a time limit, which is different from thatof penalty under section 158BFA(2) of IT Act.Adverting to Bill No.74 of 2005, it was submittedthat the possibility of widening the period oflimitation for penalty under section 158BFA(2) of ITAct was also examined, but the same was not done. (g)Responding to the aforesaid submission,learned Revenue counsel submitted that the order ofITAT in the instant case has not been given legalquietus. In other words, the assessment order had notattained finality with the order of ITAT on28.4.2006. It was submitted that in any case, ITAThad allowed the appeal of writ petitioner assesseeand dismissed the Revenue appeal. Therefore, thequestion of any penalty proceedings pursuant to ITATorder does not arise, as penalty proceedings cansurvive only when the assessment order is sustained.Furthering his submission in this direction, learnedRevenue counsel submitted that this court also in aforementioned TCA had dismissed the same andtherefore, there was no assessment order for penaltyproceedings to proceed. Ultimately, the assessmentorder was resuscitated only on 2.5.2018 when Hon'bleSupreme Court allowed the civil appeal and therefore,the reckoning date for computing limitation should be2.5.2018 being the date of order of Hon'ble SupremeCourt and not 28.4.2006 being the date of the orderof ITAT. (h)This Court has carefully considered thesubmissions on both sides. While it is clear thatrelevant provision relied on by learned counsel forwrit petitioner talks only about first appeal to thefirst appellate authority, the order of ITAT andstops with the same, there is another provision whichdeals with a scenario which does not fall in such afactual setting. That provision is Section 158BFA(3)(e) of IT Act. A careful analysis of this provisionmakes it clear that this provision itself providesfor two periods of limitation qua penalty undersection 158BFA(2). One period is the end ofassessment year in which assessment proceedings cameto be passed. In this case, assessment order came tobe passed on 31.8.2004 and therefore, that financialyear ended on 31.3.2005. In the considered view ofthis court, this limb of time frame does not apply toinstant case on hand as two successive appeals,namely statutory appeal to Commissioner (Appeals) andstatutory appeal to ITAT under Section 253 of IT Actdid not get completed in less than a year. (i)The next limb talks about a period, fromthe date on which penalty proceedings are initiated.In the instant case, if it is construed that penaltyproceedings were initiated on 31.8.2004, as alreadyalluded to supra, the same could not be continuedowing to writ petitioner assessee's appeal beforefirst appellate authority. To be noted, firstappellate authority confirmed the tax levy, butreduced the interest component, resulting in bothassessee and Revenue carrying the matter in appeal toITAT. Obviously, Revenue had to wait for the outcomeof appeals before ITAT. As already mentioned supra,the outcome of appeals before ITAT was in favour ofwrit petitioner assessee. Absent assessment order,the question of penalty proceedings does not ariseand therefore, penalty proceedings initiated on31.8.2004 continued to lie dormant. This court alsodismissed the TCA and assessment order got resuscitated / revived only when Hon'ble SupremeCourt allowed the Civil Appeal on 2.5.2018 andtherefore, further notice dated 12.9.2018 continuingpenalty proceedings which was involuntarily lyingdormant was issued. This 12.9.2018 notice is wellwithin six months from the date of the order ofHon'ble Supreme Court and therefore, it cannot begainsaid that impugned order is barred by limitation. (j)On a demurrer, even if the proposition isto be tested by assuming that 12.9.2018 communicationis not a continuation of penalty proceedingsinitiated on 31.8.2004, section 158BFA(3)(e) savesthe situation for the Revenue. The Revenue has sixmonths time to initiate penalty proceedings.Therefore, if one were to test limitation, it is tobe construed that penalty proceedings commenced on31.8.2004, but was lying dormant till 2.5.2018 whenHon'ble Supreme Court sustained / resuscitated theassessment order. (k)With regard to the provision relied on bythe writ petitioner, i.e., section 275 of IT Act, itis to be noted that said provision in its presentform was brought into the statute books on 01.04.1971when section 260A of IT Act which provides for astatutory appeal to this court was not there in theIT Act. To be noted, section 260A of IT Act wasbrought into statute books only on 01.10.1998. To benoted, what is of utmost significance is, section158BFA(3)(c) also was inserted / brought into statutebooks only on 1.1.1997. Therefore, as on the date onwhich limitation was statutorily prescribed, the lastforum was ITAT. (l)For the purpose of enhanced clarity andspecificity, this Court deems it appropriate tomention that limitation qua penalty proceedings underIT Act is prescribed under two provisions with regardto two different types of penalties. With regard topenalty under section 271(1)(c), limitation isstatutorily prescribed in section 275, with regard topenalty under section 158BFA(2) as in the instantcase, limitation is statutorily prescribed undersection 158BFA(3)(c). With regard to both theseprovisions, namely Sections 275 and 158BFA(3)(c)which prescribe different periods of limitation fortwo different types of penalties, both theseprovisions were brought into statute books in theirpresent form before section 260A of IT Act was brought into statute books. To be noted, section 260Aof IT Act provides for a statutory appeal to HighCourt and this was brought into statute books only on01.10.1998. To put it differently, when two differentperiods of limitation for two different kinds ofpenalties were statutorily prescribed under IT Act,ITAT was the last forum qua statutory appeals. (m)There is one more way of looking at thisaspect of the matter. Section 260A appeal to thiscourt is on substantial question/s of law only andtherefore ITAT is in any case the last forum onfacts. brought into statute books. To be noted, section 260Aof IT Act provides for a statutory appeal to HighCourt and this was brought into statute books only on01.10.1998. To put it differently, when two differentperiods of limitation for two different kinds ofpenalties were statutorily prescribed under IT Act,ITAT was the last forum qua statutory appeals. (m)There is one more way of looking at thisaspect of the matter. Section 260A appeal to thiscourt is on substantial question/s of law only andtherefore ITAT is in any case the last forum onfacts. (n)One more way of looking at the matter,albeit on a demurrer premise is, even if 12.9.2018notice is not construed as continuation of 31.8.2004SCN, impugned order will not be hit by limitation assection 158BFA(3)(e) does not talk about penaltyproceedings 'already initiated' in past tense, but ittalks about penalty proceedings in praesenti. To benoted, the term used is 'is' and not 'was'. (o)Be that as it may, though an attempt madeby learned counsel for writ petitioner by placingreliance on Bill No.74 of 2005 comes across as anattractive argument, it is not an argument which canbe accepted for reading into a provision of law. Thequestion of debate and deliberation qua the Bill andlooking into the same may arise only when there isambiguity, but in the instant case, as this courtcomes to the conclusion that the provision isunambiguous and not even ambivalent, this argumentdoes not carry the case of writ petitioner anyfurther. (p)The last point which requires to beconsidered is the doctrine of merger. Leading case inthis regard is Kunhayammed case being Kunhayammed andothers Vs. State of Kerala and another reported in(2000) 6 SCC 359. The order of this court made in TCANo.2620 of 2006 certainly merges with the order ofHon'ble Supreme Court as the order of Hon'ble SupremeCourt dated 2.5.2018 has been passed post leave,i.e., in the latter half part of Article 136 of theConstitution of India. Impugned order says that theorder of Hon'ble Supreme Court merges with that ofthe ITAT. This may not be happily worded, but as thisorder of ITAT which merges with the order of Hon'bleSupreme Court, merely because it is not happilyworded, the proposition does not become preposterous,warranting interference. Suffice to say that thedoctrine of merger in any event operates. 7Conclusion :The discussion and dispositive reasoning leads us to aninevitable conclusion that the impugned order is not barred bylimitation and the same is not liable to be set aside as timebarred.8Decision :Writ petition is dismissed. Considering the nature ofthe matter, parties are left to bear their respective costs.Consequently, connected miscellaneous petition is closed.Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar ToThe Assistant Commissioner of Income-tax,Non-Corporate Circle-20(1),Room No.311, 3[rd] Floor,Wanaparthy Block,Aayakar Bhavan,121, Mahatma Gandhi Road,Chennai-600 034. +1 cc to M/s.J.Narayanaswamy,Advocate Sr.No. 69415 AKM/16.09.19/9P-3C / order inW.P.No.11648 of 2019