Wp(C)/22711/2017 Of M.a.sajeev v. Principal Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 12TH DAY OF JULY 2017/21ST ASHADHA, 1939 PETITIONER(S): ----------------------- WP(C).No. 22711 of 2017 (L) ---------------------------- M.A. SAJEEV,LEGAL HEIR OF LATE M.A. UNNEERIKUTTY, KALPAKA BUILDING, TOWN HALL ROAD, CALICUT - 673 001. BY ADVS.SRI.MATHEWS K.UTHUPPACHAN, SRI.TERRY V.JAMES, SRI.SHARAN SHAHIER. RESPONDENT(S): ------------------------- 1. PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. 2. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. RANGE-1, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. 3. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001, KOZHIKODE. CIRCLE 1(1), AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001, KOZHIKODE. 4. COMMISSIONER OF INCOME TAX (APPEALS), AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT - 673 001. 5. CENTRAL BOARD OF DIRECT TAXES, NEW DELHI, REP. BY ITS CHAIRMAN. NEW DELHI, REP. BY ITS CHAIRMAN. 6. UNION OF INDIA, MINISTRY OF FINANCE, NEW DELHI, REP. BY SECRETARY, MINISTRY OF FINANCE, NEW DELHI. R1 TO R5 BY SRI.K.M.V.PANDALAI, SC. R6 BY ADV. SRI.N.NAGARESH, ASSIST. S.G. OF INDIA. rs. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12-07-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 22711 of 2017 (L) APPENDIX PETITIONER'S EXHIBITS:- EXHIBIT P1 A TRUE COPY OF THE ASSESSMENT ORDER DATED 21.12.2006 FOR THE ASSESSMENT YEAR 2004-05.THE ASSESSMENT YEAR 2004-05. EXHIBIT P2 A TRUE COPY OF THE ORDER DATED 29.07.2008 IMPOSING A PENALTY OF RS. 34,940/- UNDER SECTION 271 D.PENALTY OF RS. 34,940/- UNDER SECTION 271 D. EXHIBIT P3 A TRUE COPY OF THE ORDER DATED 29.07.2008 IMPOSING A PENALTY OF RS. 2,64,805 UNDER SECTION 271 E.PENALTY OF RS. 2,64,805 UNDER SECTION 271 E. EXHIBIT P4 A TRUE COPY OF THE DIRECT TAXES DISPUTE RESOLUTION SCHEME - 2016.SCHEME - 2016. EXHIBIT P5 A TRUE COPY OF THE DECLARATION DATED 29.09.12016 IN RESPECT OF SEC 271 D UNDER SECTION 203 OF THE FINANCE ACT IN RESPECT OF THE DIRECT TAX DISPUTE RESOLUTION SCHEME.RESPECT OF SEC 271 D UNDER SECTION 203 OF THE FINANCE ACT IN RESPECT OF THE DIRECT TAX DISPUTE RESOLUTION SCHEME. EXHIBIT P6 A TRUE COPY OF THE DECLARATION DATED 29.09.2016 IN RESPECT OF SEC.271E UNDER SECTION 203 OF THE FINANCE ACT IN RESPECT OF THE DIRECT TAX DIRECT TAX DISPUTE RESOLUTION SCHEME.RESPECT OF SEC.271E UNDER SECTION 203 OF THE FINANCE ACT IN RESPECT OF THE DIRECT TAX DIRECT TAX DISPUTE RESOLUTION SCHEME. EXHIBIT P7 A TRUE COPY OF THE FORM 3 CERTIFICATE ISSUED BY THE 1ST RESPONDENTS IN RESPECT OF AMOUNTS DETERMINED TO BE PAYABLE UNDER SECTION 271 D.1ST RESPONDENTS IN RESPECT OF AMOUNTS DETERMINED TO BE PAYABLE UNDER SECTION 271 D. EXHIBIT P8 A TRUE COPY OF THE FORM - 3 CERTIFICATE ISSUED BY THE 1ST RESPONDENT IN RESPECT OF AMOUNTS DETERMINED TO BE PAYABLE UNDER SECTION 271 E.1ST RESPONDENT IN RESPECT OF AMOUNTS DETERMINED TO BE PAYABLE UNDER SECTION 271 E. EXHIBIT P9 A TRUE COPY OF THE COMMUNICATION DATED 28.12.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P7 DECLARATION.BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P7 DECLARATION. EXHIBIT P10 A TRUE COPY OF THE COMMUNICATION DATED 28.12.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P8 DECLARATION.ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P8 DECLARATION. EXHIBIT P11 A TRUE COPY OF THE SAID CIRCULAR DATED 12.09.2016. EXHIBIT P12 A TRUE COPY OF THE SAID CIRCULAR NO.42 OF 2016 DATED 23.12.2016. DATED 23.12.2016. RESPONDENT'S EXHIBITS:-NIL. //TRUE COPY// rs. P.S. TO JUDGE K.VINOD CHANDRAN, J. EXHIBIT P9 A TRUE COPY OF THE COMMUNICATION DATED 28.12.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P7 DECLARATION.BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P7 DECLARATION. EXHIBIT P10 A TRUE COPY OF THE COMMUNICATION DATED 28.12.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P8 DECLARATION.ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE DECLARATION P8 DECLARATION. EXHIBIT P11 A TRUE COPY OF THE SAID CIRCULAR DATED 12.09.2016. EXHIBIT P12 A TRUE COPY OF THE SAID CIRCULAR NO.42 OF 2016 DATED 23.12.2016. DATED 23.12.2016. RESPONDENT'S EXHIBITS:-NIL. //TRUE COPY// rs. P.S. TO JUDGE K.VINOD CHANDRAN, J. --------------------------------------- W.P.(C) No. 22711 of 2017 (L)----------------------------------------Dated this the 12[th] day of July, 2017 JUDGMENT The petitioner's father was imposed with a penalty under Section271D and 271E of the Income Tax Act, 1961 [for short, the Act].The petitioner has approached the authority under the provisionsof 'The Direct Tax Dispute Resolution Scheme, 2016' as is seenExt.P4 for payment of 25% of the penalty. The declarations filedby the petitioner is produced as Exts.P5 and P6. Theproceedings of the income tax authority in deciding on 25% ofthe penalty is seen from Exts.P7 and P8. However, later theorders issued at Exts.P7 and P8 were withdrawn by Exts.P9 andP10 finding that the penalty imposed under Sections 271D and271E of the Act were not linked to the assessment proceedings.The petitioner challenges the said orders. 2. The learned Standing Counsel appearing for the departmentrelies on Ext.P11 clarification issued by the Central Board ofDirect Taxes. relies on Ext.P11 clarification issued by the Central Board ofDirect Taxes. 3. The issue is no longer resintegra, as the same has been decidedby this Court in W.P.(C) No.6417 of 2017 dated 26.05.2017. Thecontention taken before the learned single Judge was similar andrelied on words used in the scheme which took in the payment ofby this Court in W.P.(C) No.6417 of 2017 dated 26.05.2017. Thecontention taken before the learned single Judge was similar andrelied on words used in the scheme which took in the payment of W.P.(C) No. 22711 of 2017 (L) tax, interest and penalty as levied under the Act. Thedepartment and the CBDT was of the opinion, that only if penaltyis imposed as a direct consequence of the assessmentproceedings and linked to the interest leviable, would it becovered under the Scheme. 4. This Court on a consideration of the issue found so: 7. On a consideration of the facts and circumstances ofthe case and the submissions made across the bar, Ifind from a perusal of Ext.P4 Amnesty Scheme that, theScheme contemplates the making of a declaration oftax arrears, which phrase is defined as meaning anamount of tax, interest orpenalty determined, interalia, under the Income Tax Act, and in respect of whichan appeal is pending before the appellate authority ason 29.02.2016. The Scheme also envisages that, in thecase of a pending appeal related only to penalty,theamount payable by an eligible declarant would be 25%of the minimum penalty leviable, along with the tax andinterest payable on the total income finally determined.It is not in dispute that, in the instant case, thedeclarations submitted by the petitioners were inrespect of penalties that were imposed on them by theauthorities concerned. It is also not in dispute that inthe declaration, the petitioners had offered to pay 25%of the mandatory penalties that were imposed onthem. The contention of the Department isessentially that, inasmuch as there is a reference to apayment of tax and interest payable on the total incomefinally determined, along with 25% of the minimumpenalty leviable, the Scheme must be intended to cover only such penalties as have been imposed on anassessee along with the assessment order. Theclarification of the CBDT in the context of a penaltyorder under Section 271(C) or 271 (C) (A) of theIncome Tax Act also suggests that, such penalties, asare not linked to assessment proceedings, would not becovered under the Scheme. On an overallconsideration of the Scheme, however, I do not see anyscope for such a restrictive interpretation of the ambitof the Amnesty Scheme, in the manner suggested bythe learned counsel for the respondents. Firstly, thedefinition of tax arrears does not exclude a situationwhere the dispute of an assessee is only in respect of apenalty that has been determined against him underthe Income Tax Act. Secondly, while the procedureenvisaged includes the filing of a declaration solely inrespect of penalty, the Scheme suggests that when adeclaration is only with regard to penalty, theobligation of the declarant is to pay 25% of theminimum penalty levied, and also to pay the tax andinterest payable on the total income finally determinedfor the assessment year in question. The object of theScheme appears to be to ensure that, while a personseeking an Amnesty Scheme only in respect of thepenalty that is imposed on him, avails the benefit of theScheme to that extent, it should also be ensured thatthe said declarant discharges the tax and interestliability under the Income Tax Act for the assessmentyear in question. In other words, a person, who defaultson the tax and interest liability under the Income TaxAct for the assessment year, cannot claim the benefit ofamnesty in respect of the penalty alone. It is alsosignificant to note that the exclusions from the Scheme,that are enumerated in Section 208 of the Finance Act, 2016, also do not expressly provide for the exclusion ofa declaration, such as those filed in the instant writpetition, where the amnesty is sought only in respect ofa penalty that is imposed under the Income tax Act.Thus, I find that, the reasons stated in Exts.P8, P9 andP10 intimations served on the petitioners cannot belegally sustained to deny the petitioners the benefit ofExt.P4 Amnesty Scheme. 5. Going by the authoritative pronouncement, this Court is of theopinion that, there is no scope for restricting the interpretationgiven to the scheme and that the penalty as levied underSections 271D and 271E of the Act also could be settled underthe Scheme. Hence, Exts.P9 and P10 are set aside. In such circumstance, the first respondent shall process theapplication on the basis of interpretation as laid down by thisCourt in the afore cited judgment and pass fresh orders inaccordance with the directions therein. Sd/- K.VINOD CHANDRAN JUDGE