Wp(C)/10312/2009 Of Dr.attukal Radhakrishnan v. Asst.commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 19TH MAY 2010 / 29TH VAISAKHA 1932 WP(C).No. 10312 of 2009(H) -------------------------- PETITIONER --------------- DR.ATTUKAL RADHAKRISHNAN, REMA JYOTHISHALAYAM, MANAKKAD P.O., THIRUVANANTHAPURAM-695 009. BY ADV. SRI.B.S.KRISHNAN, SENIOR ADVOCATE SRI.K.ANAND (A.201) RESPONDENTS: --------------- 1. ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, DEVI KRIPA BUILDING, PALLIMUKKU, PETTAH P.O., TRIVANDRUM-695 024. 2. COMMISSIONER OF INCOME TAX (CENTRAL), 5TH FLOOR, KANDAMKULATHY TOWERS, M.G.ROAD, KOCHI-682 011. 3. THE POST MASTER, MANACAUD, TRIVANDRUM-695 009. 4. CHIEF MANAGER, STATE BANK OF TRAVANCORE, MANACAUD, TRIVANDRUM-695 009. R1 AND R2 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX R3 BY ADV. SRI.S.KRISHNAMOORTHY, CGC R4 BY ADV. SHRI R.S. KALKURA,SC. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19/05/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 10312 of 2009(H) PETITIONER'S EXHIBITS: APPENDIX EXT.P1 :TRUE COPY OF ASSESSMENT ORDER DATED 30.10.2002.30.10.2002.EXT.P2:TRUE COPY OF SETTLEMENT APPLICATION UNDER SECTION 245 C(1) SUBMITTE4D BY THE PETITIONER BEFORE THE 1ST RESPONDENT. SECTION 245 C(1) SUBMITTE4D BY THE PETITIONER BEFORE THE 1ST RESPONDENT. EXT.P3:TRUE COPY OF ORDER DTED 12.12.2003 UNDER SECTION 245D(1)SECTION 245D(1)EXT.P4:TRUE COPY OF FINAL ORDER UNDER SECTION 245D(4) OF THE INCOME TAX ACT DATED 05.03.2008OF THE INCOME TAX ACT DATED 05.03.2008EXT.P5:TRUE COPY OF PROCEEDINGS OF 1ST RESPONDENT DATED 16.04.2008. DATED 16.04.2008. EXT.P6:TRUE COPY OF PETITION UNDER SECTION 264 OF THE INCOME TAX ACT BEFORE THE 2ND RESPONDENT INCOME TAX ACT BEFORE THE 2ND RESPONDENT EXT.P7:TRUE COPY OF ORDER DATED 19.02.2009 OF THE 2ND RESPONDENT UNDER SECTION 264. 2ND RESPONDENT UNDER SECTION 264. EXT.P8:TRUE COPY OF THE LETTER DATED 03.03.2009 OF THE 1ST RESPONDENT. 1ST RESPONDENT. /TRUE COPY/ P.S. TO JUDGE. P.R. RAMACHANDRA MENON, J. .............................................................................. W.P.(C ) No.10312 OF 2009 ......................................................................... Dated this the 19[th] May , 2010 J U D G M E N T Scope and sustainability of Ext. P5 order passed by the first respondent and P7 order passed by the second respondentsustaining imposition and demand of 'interest' under Section 158BFA (1) of the Income Tax Act ( 'IT' Act in short) is underchallenge in this Writ Petition, stating that the said proceedingsare beyond the scope of Ext. P4 order passed by the SettlementCommission under Section 245D(4) of the IT Act which does notprovide for any 'interest' and further that the order passed bythe Settlement Commission is conclusive and binding by virtueof Section 245- I of the Act. 2. So as to analyse the application of the legal provisions to the given set of facts and circumstances, it is essential to refer tosome basic facts and controversies involved. W.P.(C ) No.10312 OF 2009 2 respondent and P7 order passed by the second respondentsustaining imposition and demand of 'interest' under Section 158BFA (1) of the Income Tax Act ( 'IT' Act in short) is underchallenge in this Writ Petition, stating that the said proceedingsare beyond the scope of Ext. P4 order passed by the SettlementCommission under Section 245D(4) of the IT Act which does notprovide for any 'interest' and further that the order passed bythe Settlement Commission is conclusive and binding by virtueof Section 245- I of the Act. 2. So as to analyse the application of the legal provisions to the given set of facts and circumstances, it is essential to refer tosome basic facts and controversies involved. W.P.(C ) No.10312 OF 2009 2 3.The petitioner/assessee is an 'Astrologer' by profession,who derives income from different sources including from givingprofessional advice to people on various matters in the field ofastrology; by virtue of the business in running a'Kalyanamandapam' owned by him and also from various TVprogrammes. The departmental authorities conducted a searchunder Section 132 of the IT Act in the residential and businesspremises of the assessee on 20.10.2000. Notice was issued tothe assessee under Section 158BC on 08.12.2000. Since therewas no response, notice under Section 142(1) dated 06.06.2002was issued calling for return of income and cash flow. Since thepetitioner/assessee did not turn up, reminder was issued on13.08.2002 proposing to complete the assessment ex parte,which also was not responded, when another letter was issuedcalling for the return of income, enclosing copies of valuationreport of the Valuation Cell of the Department in respect of thevarious assets. 4. After a lapse of nearly 21 months, the petitioner /assessee filed return of income for the block period of 10 years W.P.(C ) No.10312 OF 2009 on 19.09.2002. After considering the facts and circumstances,with reference to the available materials on record and alsoafter hearing the petitioner/authorised representative of thepetitioner, Ext.P1 assessment order was passed by the firstrespondent, computing the total income of the petitioner /assessee as rounded to Rs.1,24,70,280/-, in respect of which thetotal tax payable including surcharge and interest under Section158 BFA (I) was shown as Rs.1,13,80,367/- which wasdemanded to be satisfied as nothing was paid by the petitioner ,the belated return itself being a 'Nil Return'. 5. On better wisdom, the petitioner /assessee sought tohave the matter settled by approching the 'SettlementCommission' and accordingly, Ext. P2 application was filed underSection 245C(1) of the IT Act. After considering the application,Ext.P3 preliminary order was passed, considering it as a fit caseto be taken for settlement. Thereafter, the matter was dealtwith in detail and final order was passed as borne by Ext. P4,whereby the 'Undisclosed Income ' (UDI in short) of Rs.50,37,180/- already offered from the part of the W.P.(C ) No.10312 OF 2009 petitioner/assessee and an additional UDI of Rs. 13,02,955/-offered in the course of the proceedings under different heads(thus conceding the total UDI of Rs. 63,40,135/-) was acceptedby the Settlement Commission as true disclosure andaccordingly, the total income for the concerned block period wasfixed as Rs.63,40,135/-. The liability in respect of the saidincome was ordered to be recovered by the assessing officer asper Chapter XVII of IT Act, making it clear that if the tax wasnot paid within 35 days from the date of receipt of the order, itwas to attract interest under Section 245D(6A) of the IT Act aswell. The petitioner was spared from prosecution under theIT Act and under IPC and also from imposition of any penaltyunder the IT Act . petitioner/assessee and an additional UDI of Rs. 13,02,955/-offered in the course of the proceedings under different heads(thus conceding the total UDI of Rs. 63,40,135/-) was acceptedby the Settlement Commission as true disclosure andaccordingly, the total income for the concerned block period wasfixed as Rs.63,40,135/-. The liability in respect of the saidincome was ordered to be recovered by the assessing officer asper Chapter XVII of IT Act, making it clear that if the tax wasnot paid within 35 days from the date of receipt of the order, itwas to attract interest under Section 245D(6A) of the IT Act aswell. The petitioner was spared from prosecution under theIT Act and under IPC and also from imposition of any penaltyunder the IT Act . 6. Pursuant to Ext. P4, the first respondent issued Ext. P5order giving effect to Ext.P4, reckoning the income returned as'NIL' and the additional income offered before the SettlementCommission as Rs.63,40,135/-. The total tax payable on theconceded income at the rate of 60%, surcharge payable at therate of 17% and interest under Section 158 BFA (1) on W.P.(C ) No.10312 OF 2009 5 Rs.4450700/- were separately worked out showing the total asRs.5785985/- and after giving credit to the payment ofRs.3681159/-, the balance sum of Rs.21,04,826/- wasdemanded. 7. It is seen from the materials on record that thepetitioner filed an application for rectification before the firstrespondent u/s 154 of the Act,stating that he was not liable tosatisfy interest under Section 158 BFA(1); which however wasrejected by the said respondent and this order was subjected tochallenge by filing a Revision Petition under Section 264 of theIT Act before the second respondent. After considering thefacts and circumstances, the legal provisions and the bindingjudicial precedents, the second respondent passed Ext.P7 orderdismissing Ext. P6 Revision Petition, aggrieved of which, thepetitioner has now approached this Court, challenging Exts. P5and P7. 8. Heard the learned Standing Counsel for the first andsecond respondents as well. 9. Shri V. Ramachandran, the learned Sr. Counsel who W.P.(C ) No.10312 OF 2009 addressed arguements on behalf of the petitioner submittedthat Exts.P5 and P7 orders passed by the first and secondrespondents are per-se wrong and illegal, being beyond thescope of the order to be passed under Section 245D(4),contending that Ext.P4 order passed by the SettlementCommission provided for realisation of 'tax alone' and on failureto remit the said amount within the specified time, his liability topay interest under Section 245D(6A) was to be attracted, whileno reference was made to any interest payable under Section158 BFA (I). Since the order passed by the SettlementCommission is final/conclusive/binding, the first and secondrespondents could not have added something more into it,whether the said addition was statutory or otherwise, submitsthe learned Sr. Counsel, adding that the further instructiongiven in Ext. P4 order passed by the Settlement Commission as'post script' was only to realise the tax, interest and penalty, ifany, “payable as per the order”. Since the order did not specifyany 'interest', there was absolutely no rationale for havingcharged 'interest' under Section 158BFA (1) and that the W.P.(C ) No.10312 OF 2009 W.P.(C ) No.10312 OF 2009 matter has become final and conclusive by virtue of themandate under Section 245 I of the Income Tax Act, since thesaid order has not been sought to be challenged from the partof the Revenue for omission/deletion/waiver in respect of'interest' for late filing of the return as provided under Section158 BFA (1). The learned Sr. Counsel also submitted that the'post script' does not form part of Ext.P4 order passed by theSettlement Commission and as such, the second respondentwent wrong in placing reliance on the same while passingExt.P7 order. 10. Mr.Jose Joseph, the learned Standing Counsel for therespondents 1 and 2 submitted with reference to theadmitted/undisputed materials on record that the liability to payinterest under Section 158 BFA (1) is mandatory and that thereis no power, competence or jurisdiction for the SettlementCommission to waive the same under any circumstance. It wasalso submitted that the Settlement Commission has obviouslynot passed any order in Ext.P4 waiving interest under Section158 BFA (1) and has only decided the 'Undisclosed Income', giving consequential direction to the departmental authorities towork out the tax and other amounts payable, in accordance withlaw and this being the position, the challenge raised against theimpugned orders is not correct or sustainable. 11. It is brought to the notice of this Court that the orderpassed by the first respondent dismissing the application forrectification under Section 154 of the IT Act is not underchallenge and that the same still stands. Similarly, it is alsopointed out that Ext.P4 order passed by the SettlementCommission with the 'post script' shown therein is also not underchallenge, while the dispute/challenge is only with respect to theconsequential orders, i.e., Exts. P5 and P7; for which reason also,the Writ Petition is stated as not maintainable. Reliance is alsoplaced on the decision rendered by the Constitution Bench, asreported in (2001) 252 ITR 1 (SC) ( CIT vs Anjun M.H.Ghasawala), which was followed by (2003) 259 ITR 449 (SC)(CIT vs. Hindustan Bulk Carriers ) and (2003) 264 ITR 564(SC) (CIT vs. Sant Ram Mangal Ram Jewellers), holdingthat there is no power for the Settlement Commission to waive W.P.(C ) No.10312 OF 2009 statutory interest . 12. True, Section 245D (6) stipulates that the order ofSettlement Commission shall specify the tax, interest, penaltyetc., and once an order is passed by the Settlement Commission,as provided under Section 245 (4), it is final and binding as tothe matters stated therein, as provided under Section 245-I ofthe Act , which is extracted below : “245-I:Every order of settlement passed undersub-section (4) of section 245D shall beconclusive as to the matters stated therein andno matter covered by such order shall, save asotherwise provided in this Chapter, be reopenedin any proceeding under this Act or under anyother law for the time being in force. “ Even a plain reading of the above provision would clearly reveal that the finality to the order passed under Section 245D (4) isconferred only in respect of the 'matters stated therein'holdingthat no matter covered by such order shall be reopened, unlessotherwise specified. “245-I:Every order of settlement passed undersub-section (4) of section 245D shall beconclusive as to the matters stated therein andno matter covered by such order shall, save asotherwise provided in this Chapter, be reopenedin any proceeding under this Act or under anyother law for the time being in force. “ Even a plain reading of the above provision would clearly reveal that the finality to the order passed under Section 245D (4) isconferred only in respect of the 'matters stated therein'holdingthat no matter covered by such order shall be reopened, unlessotherwise specified. 13. On reading Ext. P4 order in the light of above statutoryprescription, it is very much evident that there is absolutely noreference to the dispute, if any, with regard to the liability to payinterest under Section 158 BFA (1) or as to the proposal oracceptance /finding rendered by the Commission on this aspect.To ascertain the position, whether the liability to pay interestunder Section 158 BFA(1) was disputed in any manner beforethe Settlement Commission, it is very much relevant to gothrough Ext.P2 application preferred by the petitioner in thisregard under Section 245C(I). Particulars of the issues to besettled, as sought for under 'Column No.10' of the saidapplication, is answered by the petitioner stating that thesame is answered vide 'Annexure-B' attached. In Annexure B(which also forms part of the materials on record before thisCourt ) reference is made (in para 13) to the 'Undisclosed Income'determined by the assessing authority for the block assessmentyear at Rs. 1,24,70,280/-; the tax demanded on the said income;the surcharge at the rate of 17% and interest under Section 158BFA (I) for belated filing of the block return. No grievance israised in respect of the liability to pay interest under Section 158 11 BFA (1). It is further discernible from para 16of Annexure-B ofEx.P2 application for Settlement, that the demand ofRs.1,13,80,367/-included surcharge payable at the rate of 17%also inclusive and that the dispute was confined to thesustainability of imposition of surcharge, contending that theenabling provision in this regard under Section 158 BFA (I) wasintroduced only w.e.f. 01.06.2002 and hence applicable only forsearches conducted after 01.06.2002, thus seeking to have thesurcharge deleted. In other words, the liability to satisfy'interest' under Section 158 BFA (1) for filing the belated returnwas never disputed from the part of the petitioner. This being theposition, the said liability to satisfy 'interest' by virtue of specificstatutory prescription under Section 158BFA (1) cannot becontended as a matter 'covered by Ext.P4 order' passed by theSettlement Commission, so as to attract the 'Ban' under Section245-I in respect of the liability to pay 'interest' under the saidhead. The idea and understanding of the petitioner to thecontrary is quite wrong and misconceived . 14. The learned Sr. Counsel further submitted that the 14. The learned Sr. Counsel further submitted that the word 'shall' in Section 158BFA (1) is liable to be read and''understood asmay. The said contention does not appear to bepalatable at all to this Court, obviously for the reason that thedifferent context/circumstances and different consequencescontemplated under Section 158 BFA are separately dealt withunder sub sections 1 and 2. With regard to the liability to pay'interest' under sub seciton (1) of Section 158 BFA, the lawmakers were cautious and vigilant to have used the word'shall';whereas, coming to the question of 'penalty' to be imposedunder sub section (2) of Section 158 BFA , the word used is only''may.This by itself shows that the legislative wisdom of the lawmakers has very much considered, analysed and weighed thedifferent circumstances under the very same provision ,whilemaking it 'obligatory' on the part of the assessee to satisfy'interest' under sub section (1) deploying the word 'shall', butmaking it 'discretionary' with regard to imposition of 'penalty'''under sub sectiion (2) by using the wordmay. This establishesthat there was conscious attempt on the part of the Parliament inthe selection of words 'shall'/'may'in the appropriate context andas such, this Court is not in a position to read the word'shall'as ''may, as contended by the learned Sr. Counsel. Accordingly, thesaid contention is rejected. 15. With regard to the challenge raised during the course ofarguments, against the reliance placed by the second respondentin Ext P7 order , on the 'post script' of Ext. P4 order passed bythe Settlement Commission , it is argued that the 'post script'does not form part of Ext. P4 order. It is very much relevant tonote that there was no such case for the petitioner at any timebefore and no such contention was raised in Ext.P6 applicationfiled before the second respondent under Section 264 of the ITAct as well. Similarly, no such contention or challenge is raisedin this Writ Petition as well. On the other hand, the post scriptgiven in Ext. P4 order is rather sought to be relied on, asevident from the top most paragraph, page 3 of the WritPetition (not numbered).The only contention was that theliability to pay interest, tax, penalty etc mentioned in the 'postscript' was only to be “as per order”; ie,since Ext. P4 order didnot specify 'interest' under Section 158 BFA, it was not liableto be enforced. To say the least, the contention now raised W.P.(C ) No.10312 OF 2009 against the 'post script' made during the course of thearguments, without any pleading, is without any legal footing. 16. The above contention is also not sustainable foranother reason as well. The case that has been moulded inExt.P6 petition filed before the second respondent and also inthis Writ Petition is that, the direction/permission to realise'interest' as given in the 'post script' is subject to the terms asspecified in the order and since Ext. P4 order specified paymentof tax alone within the specified time (lest it should attractinterest under Section 245 D(6A)), no such liability to satisfy'interest' under Section 158 BFA is there. As referred to hereinbefore (with reference to paragraph '16' of Annexure B attachedto Ext. P2 application for settlement filed before the SettlementCommission) the issue raised for settlement before theSettlement Commission did not pertain to the liability to pay'interest' under Section 158BFA (1) and it was confined ratherto the 'quantum of income' and also sustainability of'surcharge'. Ext.P4 order has not stated anything regarding'surcharge' and pursuant to Ext.P4 order, the first respondent W.P.(C ) No.10312 OF 2009 W.P.(C ) No.10312 OF 2009 has issued Ext. P5 order fixing tax, surcharge and interest underSection 158 BFA (1), which stands confirmed as per Ext. P7order passed by the second respondent as well. The petitionerhas not rebutted the liability to satisfy 'surcharge' anywhere inthe Writ Petition and no such argument has been addressed bythelearned Sr. Counsel before this Court, inspite of the fact thatExt.P4 order, according to the petitioner, only speaks about theliability to pay tax and nothing more. The petitioner hasconceded in the Writ Petition that thetotal 'tax plus surcharge'(on the settlement income reckoned as Rs.6340,135/-) isRs.44,50,775/-, out of which, the petitioner has paid a sum of Rs.36,81,159/- and that the petitioner has made arrangements forpayment of the balance under this head. 17. Applying the very same logic and reasoning, the onlyquestion decided by the Settlement Commission was the incomereckonable and nothing else. This is further evident from thevarious issues considered and discussed by the SettlementCommission in Ext.P4 order itself. The first issue is regardingvaluation of 'Manacaud Residence' (para 3). The second issueis W.P.(C ) No.10312 OF 2009 16 regarding valuation of 'Kalyanamandapam' building (para 4). Thethird issue is in relation to the claim of liabilities (para 5)andthe fourth issueis in respect of car and furniture (para 6).Nothing further was discussed or dealt with in respect of theliability to pay 'interest' under Section 158 BFA(1). More sowhen, even according to the petitioner, it was never an issuesought to be considered and settled, as sought for videAnnexure-B to Ext.P2 application. In the above circumstances, there is absolutely no merit orbonafides in the Writ Petition Accordingly interference isdeclined and the Writ Petition is dismissed. P.R. RAMACHANDRA MENON, JUDGE.