Wp(C)/2570/2011 Of Sreeja.k v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM WEDNESDAY, THE 25TH DAY OF JULY 2012/3RD SRAVANA 1934 WP(C).No. 2570 of 2011 (U) -------------------------- PETITIONER:---------- SREEJA.K., W/O.VALSAN MATATHIL, PROPRIETRES, MALABAR COLLEGE, YOGASALA ROAD KANNUR, MATATHIL HOUSE, MUNDAYAD KANNUR-670006. BY ADVS.SRI.GEORGE POONTHOTTAM SRI.K.M.FIROZ RESPONDENTS: ------------ 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-I, 7TH FLOOR AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001. 2. THE ASSISTANT DIRECTOR OF INCOME TAX, (INV), AAYAKAR BHAVAN, KOZHIKODE-673001. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, (TAXES) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.4.2012, ALONG WITH WP(C) N0.2573/2011 & WP(C) N0.2617/2011, THECOURT ON 25-07-2012 DELIVERED THE FOLLOWING: VK WP(C).No. 2570 of 2011 (U) -------------------------- APPENDIX--------- PETITIONER'S EXHIBITS--------------------- EXT.P1. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2003-04 DATED31.12.2010 EXT.P2. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2004-05 DATED31.12.2010 EXT.P3. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2005-06 DATED31.12.2010 EXT.P4. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2006-07 DATED31.12.2010 EXT.P5. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2007-08 DATED31.12.2010 EXT.P6. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2008-09 DATED31.12.2010 EXT.P7. COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2009-10 DATED31.12.2010 EXT.P8. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2003-04. EXT.P9. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2004-05. EXT.P10. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2005-06. EXT.P11. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2006-07. EXT.P12. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2007-08. EXT.P13. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2008-09. VK EXT.P14. COPY OF THE DEMAND NOTICE DATED 31.12.2010 FOR THE YEAR 2009-10 EXT.P15. COPY OF THE NOTICE DATED 26.7.2010. EXT.P16. COPY OF THE COMMUNICATION DATED 24.12.2010. EXT.P17. COPY OF THE COMMUNICATION NO.AAPPK5717K DATED 22.12.2010. EXT.P18. COPY OF THE REQUEST DATED 15.9.08 EXT.P19. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OFTHE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2004-05. EXT.P20. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OFTHE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2006-07. EXT.P21. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OFTHE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2007-08. EXT.P22. COPY OF THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OFTHE INC0ME TAX ACT DATED 31.12.2010 FOR THE YEAR 2008-09. EXT.P23. COPY OF THE NOTICE ISSUED BY THE 1ST RESPONDENT DATED27.1.2011. EXT.P24. COPY OF THE COMMUNICATION DATED 31.1.2011. RESPONDENT'S EXHIBITS: NIL ---------------------- / TRUE COPY / VK P.A. TO JUDGE C.K.ABDUL REHIM,J. ------------------------------- WP(C).NOs. 2570,2573 & 2617 of 2011 ---------------------------------Dated this the 25th day of July, 2012 JUDGMENT In all these three writ petitions, challenge is against order of assessments finalised by the 1[st] respondent against a Trust aswell as against the trustees, under section 153 A read withsection 144 of the Income Tax Act 1961. Since the groundsraised are identical and all the assessments pertain to incomederived from the Trust in question, these cases are consideredtogether and disposed of through a common judgment. Referenceto Exhibits is made as in the order in WP(C).2573/2011. 2. A brief history of facts is as follows. A search under ---------------------- / TRUE COPY / VK P.A. TO JUDGE C.K.ABDUL REHIM,J. ------------------------------- WP(C).NOs. 2570,2573 & 2617 of 2011 ---------------------------------Dated this the 25th day of July, 2012 JUDGMENT In all these three writ petitions, challenge is against order of assessments finalised by the 1[st] respondent against a Trust aswell as against the trustees, under section 153 A read withsection 144 of the Income Tax Act 1961. Since the groundsraised are identical and all the assessments pertain to incomederived from the Trust in question, these cases are consideredtogether and disposed of through a common judgment. Referenceto Exhibits is made as in the order in WP(C).2573/2011. 2. A brief history of facts is as follows. A search under section 132 was conducted at the premises of the educationalinstitution run by the Trust and at the residences of the Trustees.Various incriminating documents disclosing undeclared assets andincome belonging to the petitioners, were seized and taken intocustody. A sworn statement was recorded from the petitioner inWP(C).2573/2011 under section 132 (4) of the Act . The casewas entrusted to the 1[st]respondent for completion of WP(C).2570 /2011 & conn. Cases assessments under section 153 A. On 15.7.2009 notices undersection 153 A were issued which were served on the petitioner on21.7.2009. The assessees filed returns pursuant to the noticeon 27.8.2009. Thereafter various notices were issued undersection 143 (2) and 142(1) for personal hearing as well as forproduction of documents and for filing statement of assets andliabilities with respect to financial years 2001 -02 to 2008-09.Eventhough appearance was made through authorisedrepresentative the petitioners failed to furnish any details, inspiteof adjournments sought for. On 8.10.2010 a notice proposingimposition of penalty, under section 271 (1) (b), was issued.Then the petitioners produced 'net wealth statement' on15.11.2010. Eventhough the cases were posted for personalhearing on 30.11.2010 the petitioners failed to appear.Therefore pre assessment notices proposing finalisation of bestjudgment assessment was issued on 24.12.2010. Since thepetitioners have not responded to the pre-assessment noticealso, the assessments were finalised on 31.12.2010, as perExts.P1 to P7 orders. WP(C).2570 /2011 & conn. Cases 3. The impugned orders of assessment are assailed mainlyon the ground that the assessments were finalised withoutcompliance of principles of natural justice to the extent ofproviding reasonable opportunity to the petitioners. Specificcontention raised is that, the respondents have failed infurnishing copies of seized documents inspite of request madein this regard. Ext.P18 is copy of a letter submitted to the 2[nd]respondent on 15.9.2008. It is mentioned in Ext.P18 that thepetitioner is in need of photocopies of the seized records in orderto prepare cash flow statement and other statements to besubmitted. A request was also made for furnishing photocopy ofthe statement recorded. Case of the petitioners is that, sincethe respondents have failed in furnishing photocopies of seizedrecords, in compliance with the mandatory provisions containedin section 132 (9), the petitioners were prevented fromeffectively contesting the assessments. According to thepetitioners, since copies of the seized records were not availablethey were not in a position to file returns or net wealth statementin a true and effective manner. They were also prevented from WP(C).2570 /2011 & conn. Cases WP(C).2570 /2011 & conn. Cases substantiating correctness of the returns filed since no correctcash flow statement could be prepared due to lack of availabilityof records, is the contention. Ext.P26 and P27 letters will indicatethat after finalisation of the assessments the petitioners werepermitted to take photocopies of the seized records. According tothe petitioners, this is a clear indication to the effect that beforefinalisation of the assessments the petitioners were denied ofopportunity for perusal of the seized records and in effectivelycontesting he assessments. It is contended that the impugnedassessments are violative of principles of natural justice andunsustainable in the eye of law. Therefore inspite of availabilityof alternative statutory remedy, the petitioners are justified ininvoking jurisdiction of this court, is the contention. 4. In a statement filed on behalf of respondents thesequence of events after conduct of search is narrated in detail.According to the respondents ample opportunity was afforded tothe assessees, but they failed in co-operating with theassessments by not responding to various notices issued. It isspecifically pointed out that, inspite of receipt of the pre- WP(C).2570 /2011 & conn. Cases assessment notices there was no response from the side of thepetitioners. According to the respondents the request for copiesof the seized records was submitted only after completion of theassessments on 17.1.2011. No request for furnishing suchcopies were submitted to the 1[st] respondent, after proceedingsfor finalisation of the assessment was initiated, is the contention.Eventhough receipt of Ext.P18 by the 2[nd] respondent is admitted,it is contended that the request was not made before theassessing authority after the matter was entrusted with the 1[st]respondent. It is further contended that the petitioners havenever raised any objection at the time when the returns werefiled or at the time when net wealth statements were furnished.Therefore, according to the respondents, the contention nowraised regarding denial of opportunity is totally baseless. It iscontended that there is no sustainable grounds to bye pass thestatutory remedy of appeal. 5. Further contention raised by the petitioners isregarding denial of effective opportunity after issuance of preassessment notice. It is contended that no opportunity to file WP(C).2570 /2011 & conn. Cases objections nor any opportunity of personal hearing was afforded before finalising the assessment. According to learned counsel,the assessments were finalised at a haste on 31.12.2010, afterservice of notice on the petitioners only on 27.12.2010. It isalso contended that pre assessment notices issued were lackingin enumeration of any facts or figures or even the methodproposed to be adopted for finalisation of the assessment. 6. Respondents have met with the above contention pointing out the specific provisions contained in section 144(1).The 2[nd] proviso to section 144(1) specifies that in cases where anotice under section 142(1) has issued prior to making of anassessment, it shall not be necessary to give any opportunity ofpersonal hearing to the assessee as mandated under section 144(1) (C). Therefore it is contended that, on the basis of failure onthe part of the assessees in responding to notices issued undersection 142(1) there was no requirement for calling for anyobjections or for affording any opportunity of personal hearing. 7. Before adjudicating upon the contentions factual issues ,it is to be decided as to whether the writ petition is maintainable WP(C).2570 /2011 & conn. Cases 6. Respondents have met with the above contention pointing out the specific provisions contained in section 144(1).The 2[nd] proviso to section 144(1) specifies that in cases where anotice under section 142(1) has issued prior to making of anassessment, it shall not be necessary to give any opportunity ofpersonal hearing to the assessee as mandated under section 144(1) (C). Therefore it is contended that, on the basis of failure onthe part of the assessees in responding to notices issued undersection 142(1) there was no requirement for calling for anyobjections or for affording any opportunity of personal hearing. 7. Before adjudicating upon the contentions factual issues ,it is to be decided as to whether the writ petition is maintainable WP(C).2570 /2011 & conn. Cases in view of the statutory remedy provided. It is conceded by thepetitioners that the impugned orders of assessment areappealable under section 246A. Appeal will lie to theCommissioner of Income tax (Appeals) from an assessmentunder section 153A as provided under section 246 A (ba) . It isevident that the Commissioner (Appeals) has got every power toalter , modify or cancel the assessment. Obviously the powersare co-extensive with that of the assessing authority. Thereforeit cannot be contended that the remedy of appeal provided is notefficacious in any manner. Question whether the impugnedassessments are vitiated for denial of opportunity is a matterwhich can be looked into by the appellate authority. Thepetitioners can also contend before the appellate authority thatthe assessments were completed in an arbitrary manner withexorbitant figures, even by placing reliance on copies of theseized records, which are admittedly furnished to the petitionersafter completion of the assessments. Considering the settledlegal precedents it is to be examined whether there exists anyspecial or extra ordinary circumstances which warrants WP(C).2570 /2011 & conn. Cases interference of this court, despite availability of an effective statutory remedy. I am not in a position to accept contentionsregarding existence of any such ground to exercise thediscretionary power vested on this court. 8. Standing Counsel appearing for the respondents placed reliance on a recent decision of the Hon'ble apex court in Income Tax Officer vs. M.Pirai Choodi 334(11) ITR 262 (SC). Inthe said case the Hon'ble Supreme Court observed that the HighCourts should not have set aside the entire assessment order onthe basis of the contention that opportunity of cross examinationwas denied to the assessee. It is observed that, on theparticular aspect the assessee could have gone in appeal to theCommissioner of Income Tax (appeals). On failure to complythe statutory remedy, the High Courts should not have quashedthe assessment, is the observation. In the said case the Hon'bleSupreme Court had given liberty to the assessee to move beforethe appellate authority. 9. Learned Standing Counsel had also placed reliance on a Division Bench decision of this court in CommercialTax Officer, WP(C).2570 /2011 & conn. Cases 9 Irinjalakkuda and others vs. C.U.Mathai (2012 (51)VST253 (Ker). In the said case when the assessee had failed torespond to notice of hearing, this court observed that, there wasno justification to interfere with the assessment order on theground of violation of natural justice. The court observed thatthe only remedy available to the assessee is to file appeal and tocontest the matter before the appellate authority. From the sideof the respondents reliance was also placed in another decision ofthis court inTolin Rubbers (P)Lltd. vs. AssistantCommissioner of Income Tax (Vol.264 (2003) ITR 439).It is held therein that a writ will not normally lie in a case wherethe assessee can file appeal against the assessment in view ofthe fact that the appellate authority has got all powers of theassessing officer. 10. In view of he settled legal precedents, I am of the view that the petitioners ought to have filed statutory appeal againstthe impugned assessments, instead of approaching this court byinvoking Article 226. In view of the above findings I am notexpressing any view on the merits of contentions raised regarding denial of opportunity or regarding non furnishing of the copies of the seized documents. Since the matter was pendingbefore this court in these writ petitions since the year 2011onwards, I am of the view that interest of justice will be servedif the petitioners are given liberty to file appeals before theappellate authority. 11. Therefore the writ petitions are disposed of directingthe petitioners to file appeal before the Commissioner of IncomeTax (appeals) under section 246 (A), within a period of twoweeks from the date of receipt of a copy of this judgment. Ifstatutory appeals are filed within the time stipulated as above,the Commissioner of Income Tax (Appeals) having jurisdiction inthe matter should entertain those appeals as if they are filedwithin the statutory limitation period, and shall proceed todispose of the same on merits. 12. The petitioners will be at liberty to seek appropriateinterim relief regarding recovery of amounts covered under theimpugned assessments either before the appellate authority orbefore the assessing officer, as the case may be. In order to WP(C).2570 /2011 & conn. Cases facilitate the petitioners to seek appropriate interim relief, all further steps for recovery of the amounts under the impugnedassessments shall be kept in abeyance for a period of 6 weeksfrom the date of receipt of a copy of this judgment. 13. If the statutory appeals are filed as directed above, the appellate authority shall take all earnest efforts to dispose of theappeals at the earliest, at any rate within a period of four monthsfrom he date of receipt of such appeals. 14. It is necessary to observe that this court throughvarious interim orders had stayed all further proceedings withrespect to the proposal issued for imposition of penalty undersection 271 (1) (c) and such orders were continued till date. Iam of the view that in the interest of justice it is necessary todirect the respondents to keep in abeyance finalisation of anysuch proceedings till the disposal of the appeals, if filed within thetime stipulated above. pmn/ C.K.ABDUL REHIM, JUDGE