Wpa/18282/2021 Ita/2/2021 Principal Commissioner Of Income Tax-1, Kolkata v. Asish Kumar Ghosh

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE WPA/18282/2021ITA/2/2021PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOLKATAVERSUSASISH KUMAR GHOSH BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAMAnd THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA Date : 1[st] April, 2022 Appearance :- Mr. Smarajit Roychowdhury, Adv.Mr. Soumen Bhattacharya, Adv. … For Appellant Mr. Abhratosh Majumder, Sr. Adv.Mr. Avra Majumder, Adv. Mr. K. Roy, Adv. Mr. B. Gupta, Adv. … For Respondent WPA/18282/2021 The Court : This writ petition has been filed by the assesseeAsish Kumar Ghosh challenging the order passed by the AssistantCommissioner of Income Tax, Head Quarter 1, Kolkata for thePrincipal Commissioner of Income Tax, Kolkata dated 9[th] September,2021. By the said order the request/representation made by theappellant to revive Form 3 declaration issued to the appellant under the provisions of the Direct Tax Vivad Se Vishwas Act 2020 (VSV Act)was rejected. The petitioner/assessee was assessed under theprovisions of the Income Tax Act, 1961 (the Act) for the assessmentyear 2014-15 by order dated 24[th] October, 2016 passed under Section143(3) read with Section 115 WE(3). Aggrieved by such order, theassessee preferred appeal before the Commissioner of Income Tax(Appeal-VI), Kolkata (CIT). By order dated 10[th] April, 2019 the appealwas dismissed. Challenging the same the assessee filed appeal beforethe Income Tax Appellate Tribunal (Tribunal). The appeal was allowedby order dated 2[nd] August, 2019. Aggrieved by such order the revenuehas filed appeal before this Court being ITAT 7 of 2021, which wasadmitted on 20[th] January, 2021 after condoning the delay of 400 daysin filing the appeal. Before the Tribunal, the assessee had filed MA224/Kolkata/2019 seeking certain clarification in the order passed bythe Tribunal dated 2[nd] August, 2019 deleting the addition ofunexplained cash credit under Section 68 of the Act. The saidapplication was allowed as prayed for. Aggrieved by the same, therevenue has filed ITAT 73 of 2021, which is yet to be admitted. As noted above, the assessee did not wish to contest the matterand precisely for such reason had filed a declaration under VSV Acton 30[th] October, 2020. The said declaration was processed and Form3 was issued to the assessee on 27[th] January, 2021. The events whichtook place after the filing of the declaration and before issuance ofForm 3 is the subject matter of controversy in the writ petition. The order impugned in the writ petition dated 9[th] September,2021 states that the revenue had filed appeal before this Court on 8[th]January, 2021 and the delay in filing the appeal was condoned andthe appeal was admitted on 20[th] January, 2021 and the declarationfiled by the assessee having been filed after the date of issue of theCircular dated 4[th] December, 2020 issued by the CBDT, thedeclaration filed under the VSV Act cannot be accepted and for suchreason the Form 3, dated 27[th] January, 2021, which was issued, wasstated to have been issued inadvertently and therefore cancelled. Inthe impugned order, the revenue refers to Question no.59 ascontained in the Circular No.21/2020, dated 4[th] December, 2020,issued by the CBDT which, according to the revenue, is in the natureof a clarification with regard to the applicability of the provisions ofthe VSV Act. Question no.59 and answer given thereunder are quotedbelow :- “Q. No.59. Whether the taxpayer in whose case the time limit forfiling of appeal has expired before 31[st] January, 2020 but anapplication for condonation of delay has been filed is eligible? Answer : If the time limit for filing appeal expired during periodfrom 1[st] April, 2019 to 31[st] January, 2020 (both dates included in theperiod) and the application for codonation is filed before the date ofissue of this circular, and appeal is admitted by the appellate authoritybefore the date of filing of the declaration, such appeal will be deemedto be pending as on 31[st] January, 2020.” “Q. No.59. Whether the taxpayer in whose case the time limit forfiling of appeal has expired before 31[st] January, 2020 but anapplication for condonation of delay has been filed is eligible? Answer : If the time limit for filing appeal expired during periodfrom 1[st] April, 2019 to 31[st] January, 2020 (both dates included in theperiod) and the application for codonation is filed before the date ofissue of this circular, and appeal is admitted by the appellate authoritybefore the date of filing of the declaration, such appeal will be deemedto be pending as on 31[st] January, 2020.” We have to test the correctness of the order passed by therevenue withdrawing the Form 3 declaration already issued in favour of the assessee. At the outset we need to point out that the revenuewhile passing the order dated 9[th] September, 2021 has not traced itspower to any statutory provision empowering them to withdraw aForm 3 declaration which has been admittedly issued in favour of theassessee on 20[th] January, 2021. Very often we come across caseswhere the assessee comes to the court stating that they have not beenpermitted to make alterations or amendments to the declarationwhich they have filed and very often such requests are declined onflimsy, frivolous and hypertechnical ground. When such cases comebefore the Court, the revenue would contend that they are guided andbound by the terms and conditions of the VSV Act and until andunless there is a specific provision provided for under the Act or theRules framed thereunder, the assessee has no right to make anyalteration. If the same stand is applied to the case of the revenuebefore us, the only answer which can be given is that once adeclaration is issued in Form no.3, there appears to be no statutoryprovision which permits the Department to withdraw or cancel theForm 3. It may be a different aspect if there are reasons for either notfully accepting the Form 3 declaration while issuing Form 4declaration or for any other reasons, which is not the case before us. Therefore, we are of the prima facie view that the Form 3declaration once having been issued can be processed and taken to itslogical end either may be fully in favour of the assessee or otherwisebut there appears to be no provision to withdraw Form 3 declaration which was admittedly issued in favour of the assessee on 27[th]January, 2021. The second issue would be whether the revenue can nowcontend that Circular dated 4[th] December, 2020 covers cases onlywhen the appeals are filed with an application for condonation ofdelay between 1[st] April, 2019 and 31[st] January, 2020 and the appealin the assessee’s case was filed before this Court on 8[th] January, 2021and therefore in terms of the Circular, an application under the VSVAct is not maintainable. One important issue which the revenue has lost sight of is thatthe appeal which is filed before this Court on 8[th] January, 2021 wastime barred and there was a delay of 400 days in filing the appeal.Even prior to filing the appeal the assessee had filed the declarationunder the VSV Act on 30[th] December, 2020. This appears to have beendone by abundant caution mentioning the cut off date as 31[st]January, 2020 in column B of the Declaration. The assessee was puton notice and the affidavit and the application for condonation ofdelay along with the memorandum of grounds were served on theassessee and soon after receipt of the same on 12[th] January, 2021 arevised declaration under the VSV was filed mentioning the relevantdetails. On 21[st] January, 2021 delay in filing the appeal was condonedand the appeal was also admitted. The question would be as to whatis the effect of the condonation of the delay in filing the appeal. Thelast date for filing the appeal was 13[th] December, 2019 but the appeal was filed only on 8[th] January, 2021. Consequently, there was a delayof 400 days. By virtue of the order passed by this Court on 20[th]January, 2021 condoning the delay, it is deemed that the appeal filedby the revenue for all purposes was within time, that is, as if theappeal had been presented not later than 13[th] December, 2019. Thiswould be the correct interpretation of the legal provisions and theeffect of an order of a court condoning the delay. This is as a result ofdeeming fiction which is created by condoning the delay committed bythe revenue and treating the appeal as if it had been presented withintime. Our view is also supported by the decision of the Division Benchof the High Court of Kerala in the case of S.V. Suhasini Devi & Anr.vs. Padmanabhan Madhavan, reported in AIR 1989 Kerala 314,wherein the Court had observed that the delay having been condonedby the Court, the appeal should therefore be deemed to have beenfiled within the time allowed by law. Thus, by applying the deemingfiction to the facts of the case, we have to necessarily hold that theappeal filed by the revenue before this Court for all purposes shouldbe treated to have been an appeal filed not later than 13[th] December,2019. In such circumstances, the petitioner/assessee was well withinhis right to have chosen to avail the benefit of the VSV Act and thedeclaration filed by the assessee has to be treated to be a validdeclaration and has to be processed in accordance with the provisionsof the VSV Act. The other aspect would be whether the revenue can take advantage of its wrong. In other words, the revenue now seeks tocontend that the assessee cannot avail the benefit of the Scheme onthe ground that the appeal was filed by them much after 31[st] January,2020, that is, on 8[th] January, 2021 alone and therefore, in terms ofthe clarification issued by the CBDT the declaration cannot beentertained. The Hon’ble Supreme Court in Superintendent of Taxes, Dhubri& Ors. vs. M/s. Onkarmal Nathmal Trust, reported in (1976)1 SCC766held that the State cannot take advantage of its own wrong andlack of diligence. This principle would apply with full force to the caseon hand. Thus, in the light of the above discussion, we are of the clearview that the order passed by the revenue dated 9[th] September, 2021is not sustainable and not in accordance with law. In the result, the writ petition is allowed. The order dated 9[th]September, 2021 as well as the earlier reply as given by the revenue tothe assessee namely, letter dated 15[th] July, 2021, are held to be badin law and accordingly quashed. The learned Standing Counsel appearing for the revenue wouldcontend that the Scheme has come to an end and at this juncture thequestion of processing the declaration of the assessee does not arise. We do not agree to the said contention for more than onereason. Firstly, the provisions of VSV Act and the Scheme availedthereunder had a cut off date which cut off date was extended and the last of such extension was till 31[st] October, 2021. Therefore, it may betrue that as on date the Scheme is no longer in vogue but it isincorrect to state that the Department will not act on declarationswhich have been filed by the assessee or in cases where the assesseehad approached the court and courts grant certain reliefs directingthe Department to process the declaration form. Therefore, the officersof the Department which have been entrusted with the assignment ofconsidering the declaration filed under the Scheme do not becomefunctus officio and would continue to exercise their power. That apart,the scheme had been periodically extended and one has to look to theobject for such extension and one of the objects was to augment therevenue and if that was the object of the scheme then liberalinterpretation requires to be given, however, not to the extent ofreviving the scheme but to consider the declaration filed under thescheme will before the closure of the scheme and to direct them to beprocessed in accordance with law. In the light of the above, we direct the concerned respondent torestore the Form 3 declaration dated 27[th] January, 2021 which waswithdrawn/deleted from the server of the Department and process theForm 3 declaration in accordance with law. This direction be complied with by the appropriate respondentwithin a period of eight weeks from the date of receipt of the servercopy of this order. The Registrar, IT, is directed to take note of the factum ofdisposal of WPA 18282 of 2021 in Appellate Side cause list along withthe ledger maintained by the department. ITA/2/2021 This appeal filed by the revenue under Section 260A of theIncome Tax Act, 1961 is directed against the order dated 2[nd] August,2019 passed by the Income Tax Appellate Tribunal “B” Bench, Kolkatain ITA No. 1164/Kol/2019 for the assessment year 2014-15. Therevenue has suggested following substantial questions of law forconsideration. a)Whether the assessee is entitled to tax exemption u/s. 10(38)when the records and material indicates that the alleged incomeshown as Long Term Capital Gain is result of manipulatedpractice of an organized tax evasion ? b)Whether the order of the Income Tax Appellate Tribunal waserroneous in law in deleting the addition of Rs. 24,28,532/- (Rs.23,72,470/- + Rs. 56,062/-) ignoring the large scam of taxevasion by way of bogus capital gain generated in penny stock ?c)Whether the Income Tax Appellate Tribunal was justified ingranting relief to the assessee on account of addition made u/s.68 by the Assessing Officer of Rs. 24,28,532/- (Rs. 23,72,470/-+ Rs.56,062/-) by dismissing the appeal of the revenue onmonetary criteria only ? d)Whether the Income Tax Appellate Tribunal was justified ingranting relief to the assessee on account of addition made u/s.68 of the Income Tax Act, 1961 ignoring the fact that theassessee could not substantiate the genuineness of thetransactions or prove that it had not indulged in dubious sharetransactions in a penny stock, meant to account for itsundisclosed income in the garb of Long Term Capital Gain ?granting relief to the assessee on account of addition made u/s.68 of the Income Tax Act, 1961 ignoring the fact that theassessee could not substantiate the genuineness of thetransactions or prove that it had not indulged in dubious sharetransactions in a penny stock, meant to account for itsundisclosed income in the garb of Long Term Capital Gain ? e)Whether the Income Tax Appellate Tribunal order waserroneous in law in accepting the transactions in purchase/sideof shares as genuine, merely on the basis of documentssupplied by the assessee, without piercing the veil of themanipulative and fraudulent transactions entered by assesseein collusion with a cabal of share brokers and entry operatorsfor the purpose of tax evasion ?erroneous in law in accepting the transactions in purchase/sideof shares as genuine, merely on the basis of documentssupplied by the assessee, without piercing the veil of themanipulative and fraudulent transactions entered by assesseein collusion with a cabal of share brokers and entry operatorsfor the purpose of tax evasion ? We have heard Mr. Smarajit Roychowdhury, learned StandingCounsel, assisted by Mr. Soumen Bhattacharya, learned Advocateappearing for the revenue and Mr. Abhratosh Majumder, learnedSenior Counsel, assisted by Mr. Avra Majumder. In this appeal we may not be required to answer the substantial questions of law in the light of the fact that the respondent/assesseehad filed declaration under the provisions of the Vivad Se Viswas Act(VSV Act) and though the declaration was processed and Form 3 wasissued on 27[th] January, 2021, subsequently it was withdrawn fromthe server of the Department. This compelled the assessee to submit We have heard Mr. Smarajit Roychowdhury, learned StandingCounsel, assisted by Mr. Soumen Bhattacharya, learned Advocateappearing for the revenue and Mr. Abhratosh Majumder, learnedSenior Counsel, assisted by Mr. Avra Majumder. In this appeal we may not be required to answer the substantial questions of law in the light of the fact that the respondent/assesseehad filed declaration under the provisions of the Vivad Se Viswas Act(VSV Act) and though the declaration was processed and Form 3 wasissued on 27[th] January, 2021, subsequently it was withdrawn fromthe server of the Department. This compelled the assessee to submit representation to the Department and the representation was rejectedby order dated 9[th] September, 2021. The said order was put tochallenge in WPA/18282 of 2021, which was allowed by us by orderdated 1[st] April, 2022 with a direction to the concerned authority torestore the Form 3 which was originally issued and process the samein accordance with law. In the light of the said direction, this appeal filed by the revenuestands closed and the substantial questions of law are left open. In the event, the assessee is not successful in obtaining a reliefunder the provisions of the VSV Act and for any valid reason thedeclaration is rejected, we grant liberty to the appellant/revenue torestore the appeal to the file of this case and file an application andsuch application shall be entertained by the Registry without insistingupon an application under Section 5 of the Limitation Act. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)