Wp(C)/13738/2012 Of Shri Thomas Muthoor v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 18TH DAY OF JUNE 2012/28ND JYAISHTA 1934 WP(C).No. 13738 of 2012 (N) --------------------------------------- PETITIONER(S): ---------------------- SHRI THOMAS MUTHOOT MUTHOOT HOUSE, KOZHENCHERRY, PATHANAMTHITTA DISTRICT PIN 689 641. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SMT.NISHA JOHN SRI.V.P.NARAYANAN SMT.BOBY M.SEKHAR RESPONDENT(S): ------------------------ 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1, ENNIKKATTIL ESTATE NEAR KSRTC BUS STATION, THIRUVALLA 689 645. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) 1 AYAKKAR BHAVAN, KAWDIAR, THIRUVANANTHAPURAM 695 003. AYAKKAR BHAVAN, KAWDIAR, THIRUVANANTHAPURAM 695 003. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18-06-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WPC.NO:13738/2012 APPENDIX PETITIONER(S) EXHIBITS EXHIBIT P1.TRUE COPY OF ASSESSMENT ORDER AND DEMAND NOTICE DATED 27.12.2011 FOR THE ASSESSMENT YEAR 2005-06 PASSED BY THE FIRST RESPONDENT.DATED 27.12.2011 FOR THE ASSESSMENT YEAR 2005-06 PASSED BY THE FIRST RESPONDENT. EXHIBIT P1(a).TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2006-07 PASSED BY THE FIRST RESPONDENT.PASSED BY THE FIRST RESPONDENT. EXHIBIT P1(b).TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2007-08 PASSED BY THE FIRST RESPONDENT.PASSED BY THE FIRST RESPONDENT. EXHIBIT P2.TRUE COPY OF APPEAL MEMORANDUM DATED 10.1.2012 FOR THE ASSESSMENT YEAR 2005-06 SUBMITTED BY THE PETITIONERBEFORE THE SECOND RESPONDENT.THE ASSESSMENT YEAR 2005-06 SUBMITTED BY THE PETITIONERBEFORE THE SECOND RESPONDENT. EXHIBIT P2(a).TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2006-07 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT.SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P2(b).TRUE COPY OF -DO- FOR THE ASSESSMENT YEAR 2007-08 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT.SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P3.TRUE COPY OF STAY PETITION DATED 28.3.2012 FOR THE ASSESSMENT YEAR 2005-06 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT.ASSESSMENT YEAR 2005-06 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P3(a).TRUE COPY OF -DO-FOR THE ASSESSMENT YEAR 2006-07 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT.SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P3(b). TRUE COPY OF -DO-FOR THE ASSESSMENT YEAR 2007-08 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT.SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT. EXHIBIT P4.TRUE COPY OF NOTICE DATED 2.03.2012 ISSUED BY THE FIRST RESPONDENT.RESPONDENT. EXHIBIT P5.TRUE COPY OF REPLY DATED 12.3.2012 GIVEN BY THE PETITIONER TO THE FIRST RESPONDENT.PETITIONER TO THE FIRST RESPONDENT. EXHIBIT P6.TRUE COPY OF JUDGMENT DATED 4.4.2012 IN WPC NO.8681 OF THIS HON'BLE COURT.THIS HON'BLE COURT. mjl WPC.NO:13738/2012 RESPONDENTS' EXHIBITS: NIL /TRUE COPY/ P A TO JUDGE P.R. RAMACHANDRA MENON, J. --------------------------------------- W.P.(C). No.13738 of 2012 ---------------------------------------- Dated this the 18[th] day of June, 2012 JUDGMENT The assessment finalized by the first respondent under EXHIBIT P4.TRUE COPY OF NOTICE DATED 2.03.2012 ISSUED BY THE FIRST RESPONDENT.RESPONDENT. EXHIBIT P5.TRUE COPY OF REPLY DATED 12.3.2012 GIVEN BY THE PETITIONER TO THE FIRST RESPONDENT.PETITIONER TO THE FIRST RESPONDENT. EXHIBIT P6.TRUE COPY OF JUDGMENT DATED 4.4.2012 IN WPC NO.8681 OF THIS HON'BLE COURT.THIS HON'BLE COURT. mjl WPC.NO:13738/2012 RESPONDENTS' EXHIBITS: NIL /TRUE COPY/ P A TO JUDGE P.R. RAMACHANDRA MENON, J. --------------------------------------- W.P.(C). No.13738 of 2012 ---------------------------------------- Dated this the 18[th] day of June, 2012 JUDGMENT The assessment finalized by the first respondent under Section 143(3) of the Income Tax Act in the different assessmentyears 2005-06 to 2007-08 as borne by Ext.P1 series assessmentorders are already under challenge in Ext.P2 series appealspreferred before the second respondent. The petitioner has alsopreferred Ext.P3 series I.As. for stay and since no positive orderswere passed in the I.As for stay and since the petitioner wassimultaneously confronted with the coercive proceedings, thepetitioner approached this Court by filing W.P.(C).No.8681/2012,which culminated in Ext.P6 judgment, whereby this Courtdirected the appellate authority to consider and pass orders onI.As for stay. 2. Pursuant to the above direction, the second respondentconsidered Ext.P3 series petitions for stay and passed Ext.P7series orders granting interim stay, subject to satisfaction of 50%of the liability by way of instalments, of course after giving credit W.P.C. No. 13738 of 2012 to the amount already stated as satisfied. The petitioner hassatisfied the first instalment, coming to a total of nearly Rs. 35lakhs and is now before this Court, challenging the conditionimposed by the appellate authority to avail the benefit of interimstay, contending that the same is onerous and rather impossibleto be performed. The respondents have filed a statementthrough their Standing Counsel seeking to sustain the conditionimposed upon the petitioner. Reference is also made to theCircular issued by the Central Board of Direct Taxes, bearingNo.1914 dated 2.12.1993, stipulating the “guidelines for grantinginterim stay” and it is stated that the matter has been consideredand dealt with accordingly. 3. Sri. T.M. Sreedharan, the learned Sr. counsel appearingfor the petitioner submits that the contents of the statement donot reconcile with the aspects as dealt with by the appellateauthority in Ext.P7 series interim orders. There is absolutely nodiscussion with regard to the merits involved, but for simplyobserving that there is 'no financial stringency'. It has beensimply ordered to satisfy 50% of the demand in '5' equatedmonthly instalments. The learned Standing Counsel appearing W.P.C. No. 13738 of 2012 for the department submits that the merit of the case can be considered and decided only after considering the entire materialson record, in the course of finalization of the appeals. Because ofthe heavy backlog, it is not possible for the appellate authority tohave it finalized immediately as sought for by the petitioner andthe petitioner has to wait in the queue. 4. After hearing both the sides, this Court finds that the main dispute is in respect of the disallowance made underSection 40(a)(ia) in the assessment completed under Section 143(3). In spite of the case projected by the petitioner in theappeals when the question of granting interim stay wasconsidered by the appellate authority, nothing on merits has beenconsidered as evident from Ext.P7 series orders. The observationas given in paragraph '6' of the said order is in the followingterms: “As regards merits of the issues raised in the grounds of appeal, nothing can be said at thisjuncture without hearing the grounds of appeal andexamining the issues thoroughly.” 4. After hearing both the sides, this Court finds that the main dispute is in respect of the disallowance made underSection 40(a)(ia) in the assessment completed under Section 143(3). In spite of the case projected by the petitioner in theappeals when the question of granting interim stay wasconsidered by the appellate authority, nothing on merits has beenconsidered as evident from Ext.P7 series orders. The observationas given in paragraph '6' of the said order is in the followingterms: “As regards merits of the issues raised in the grounds of appeal, nothing can be said at thisjuncture without hearing the grounds of appeal andexamining the issues thoroughly.” Admittedly, the merits have not been considered and what is considered is only the 'financial stringency', which has been dealt W.P.C. No. 13738 of 2012 with in paragraph '7' of the order, holding that appellant has notbeen able to make out any case of financial stringency. Thisrequirement does not appear to be as a “guideline” or relevantnorm to be followed, as given in the 1993 Circular, crux of whichhas been extracted by the respondents in paragraph '3' of theirstatement. The applicability of the said Circular has beenconsidered again even in the year 2009 and the position has beenclarified vide Ext.P8, Board's letter dated 1.12.2009. As a matterof fact, under the head 'Guidelines for Staying Demand', variouscircumstances and requirements have been stipulated, also inrespect of a petition filed under Section 220(6) of the Income TaxAct and necessity for the Assessing Officer to consider all thesefacts and to pass a speaking order. 5. No doubt, the appellate authority is to discharge the function as a 'quasi judicial authority', who has to consider anddecide whether or not any condition is to be imposed and if so, towhat extent and why? In the absence of any such discussion,when such authority declares that 50% has to be satisfied, itcannot but be held as without proper application of mind. 6. After hearing both the sides and after going through the W.P.C. No. 13738 of 2012 materials on record and also taking note of the nature of thecontentions raised by the petitioner, more so in view of thesettled position of law on the point in approaching the issue withproper application of mind, this Court finds that the conditionimposed by the appellate authority upon the petitioner requiresmodification. Taking note of the fact that, the petitioner hasalready satisfied the first instalment, which comes to nearlyRs.35 lakhs, this Court directs the petitioner to satisfy the nextinstalment as well, as ordered by the appellate authority videExt.P7 order, with in two weeks, on which event the petitionerwill continue to have the benefit of interim stay, throughout thependency of the appeal. Writ petition is disposed of. P.R. RAMACHANDRA MENON, JUDGE.