Wp(C)/25055/2021 Of Sea Pearl v. Income Tax Officer

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS FRIDAY, THE 12 DAY OF NOVEMBER 2021 / 21ST KARTHIKA, 1943 WP(C) NO. 25055 OF 2021 PETITIONER/S: SEA PEARL PANNITHADAM ROAD, KECHERY P.O., THRISSUR-680501, REPRESENTED BY ITS MANAGING PARTNER ALI FIROZ.BY ADV PREETHA S.NAIR RESPONDENT/S: 1INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, DELHI-110001.2COMMISSIONER OF INCOME TAX (APPEALS), NATIONAL FACELESS APPELLATE CENTRE, DELHI-110001. BY ADV.JOSE JOSEPH, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON12.11.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -2- JUDGMENT Petitioner challenges an order of assessment dated15.06.2021. 2. Petitioner is a partnership firm consisting of 21 partners.Petitioner filed its return for the year declaring a total income ofRs.Nil. The assessment was taken up for scrutiny. During thescrutiny, introduction of large amount of capital into the firm tothe extent of Rs.4.33 crores was noticed. Assessee was asked toexplain the source of investment made by its partners. Thoughthe information sought for by the Assessing Officer wasprovided, the officer was dissatisfied with the explanation, andtherefore he completed the assessment by holding the capitalintroduced, as unexplained cash credit under Section 68 of theIncome Tax Act and added it to the total income of the assessee. 3. Petitioner contends that the capital introduced into thefirm by the partners have been treated as unexplained cash WP(C) NO. 25055 OF 2021 -3- credit of the firm and without any justifiable explanation addedas income of the assessee. According to learned Counsel for thepetitioner, the Assessing Officer has gone on a completely wrongtangent and has rendered a perverse assessment order ignoringall canons of law that governs assessments under the Act. Adv.Preetha S. Nair, learned Counsel for the petitioner furthersubmits that, even though an appeal has been preferred beforethe Commissioner of Income Tax (Appeal- National FacelessAssessment Centre), petitioner fears that stay will be grantedonly on condition of deposit of substantial portion of the amountassessed which would cause prejudice to the assessee. It is alsoargued that the assessment orders of this nature are issued bythe Assessing Officers to compel assessees to deposit amountswhile they pursue appellate remedy. 4. A perusal of assessment order, shows that the AssessingOfficer has treated the capital infused into the partnership as anunexplained cash credit under Section 68 of the Act, sincesatisfactory explanation was not offered by the assessee. WP(C) NO. 25055 OF 2021 -4- Whether sufficient explanation was offered or not is a matterwhich requires appreciation of facts and hence, I am of the viewthat the circumstances of the case does not warrant interferencein exercise of the jurisdiction under Article 226 of theConstitution of India. 5. It is submitted that an appeal has already been preferred before the appellate authority. There is no reason to assumethat the appellate authority will not consider the merits of thecontentions advanced by the petitioner. 6. However, having regard to the nature of contentionsadvanced by the learned Counsel for the petitioner as well as thefindings in the order of assessment and the compelling situationnow prevailing, I am of the view that the petitioner is entitled fora grant of stay of all coercive proceedings pursuant to Ext.P1assessment order, during the pendency of the appeal.Necessarily the appeal has to be disposed of in a time boundmanner. 7. Accordingly, I direct the 2[nd] respondent to consider and WP(C) NO. 25055 OF 2021 -5- 5. It is submitted that an appeal has already been preferred before the appellate authority. There is no reason to assumethat the appellate authority will not consider the merits of thecontentions advanced by the petitioner. 6. However, having regard to the nature of contentionsadvanced by the learned Counsel for the petitioner as well as thefindings in the order of assessment and the compelling situationnow prevailing, I am of the view that the petitioner is entitled fora grant of stay of all coercive proceedings pursuant to Ext.P1assessment order, during the pendency of the appeal.Necessarily the appeal has to be disposed of in a time boundmanner. 7. Accordingly, I direct the 2[nd] respondent to consider and WP(C) NO. 25055 OF 2021 -5- pass appropriate orders on the appeal preferred by thepetitioner, as expeditiously as possible, at any rate, within aperiod of six months from the date of receipt of a copy of thisjudgment. All coercive proceedings pursuant to the order ofassessment dated 15.06.2021 shall be kept in abeyance till thedisposal of the appeal. The writ petition is disposed of accordingly. Sd/- BECHU KURIAN THOMAS JUDGE uu 12.11.2021 -6- APPENDIX OF WP(C) 25055/2021 PETITIONER EXHIBITSExhibit P1 (A) TO TRUE COPIES OF THE ASSESSMENT ORDER ALONG P1(C)WITH COMPUTATION STATEMENT AND NOTICE OF DEMAND DATED 15.6.2021.Exhibit P2TRUE COPIES OF THE APPEAL DATED 11.8.2021.Exhibit P3TRUE COPY OF THE STAY PETITION DATED 20.10.21.Exhibit P4TRUE COPY OF THE FIRST RESPONDENTS ORDER DATED 18.10.2021.