Wp(C)/35228/2018 Of M/S. Canon Granites Pvt Ltd v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU TUESDAY,THE 30TH DAY OF OCTOBER 2018 / 8TH KARTHIKA, 1940 WP(C).No. 35228 of 2018 PETITIONER: M/S. CANON GRANITES PVT LTD.MUNICIPAL BUILDING, ROUND SOUTH, THRISSUR - 680 001, REPRESENTED BY ITS MANAGING DIRECTOR MR.JOSE K.FRANCIS BY ADVS.SRI.RAMESH CHERIAN JOHNSRI.JOSEPH MARKOSE (SR.) RESPONDENTS: 1THE DEPUTY COMMISSIONER OF INCOME TAXCIRCLE 1 (1), AAYAKKAR BHAVAN, SHAKTHAN THAMPURAN NAGAR, THRISSUR - 680 001 2THE COMMISSIONER OF INCOME TAX (APPEALS)O/OF THE COMMISSIONER OF INCOME TAX (APPEALS), AAYAKKAR BHAVAN, SHAKTHAN THAMPURAN NAGAR, THRISSUR-680001 ADV. SRI. JOSE JOSEPH, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON30.10.2018 ALONG WITH W.P.(C)Nos.35229/2018 AND 35301/2018, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT The petitioner, a company trading in Granite, is an assessee under the Income Tax Act. For the assessment years 2011-2012, 2013-2014 and2014-2015, it has faced, according to the petitioner, high pitchedassessment proceedings. When the petitioner took the matters in appeal,the appellate authority passed a conditional order: the petitioner to pay15% of the demand as a pre-condition to having further proceedingsstayed. Aggrieved, the petitioner Company has filed this writ petition. 2. Sri Joseph Markose, the learned Senior Counsel for the petitioner,has submitted that though the Company has been an assessee since 2002,it has faced no scrutiny. In 2011, the Company's Director complained tothe Central Bureau of Investigation, ACB, Cochin (CBI), about the demandsby certain officials of the Income Tax Department for illegal gratification.Acting on the complaint, the CBI has laid a trap, the Senior Counselfurther submits, and registered the Exts.P1 and P2 crimes against a fewofficials. Then onwards the Department has been after the Company. 3. In all the next succeeding years, the petitioner has continuously been subjected to scrutiny and high pitched assessments. 4. The learned Senior Counsel, first, fairly admits that the pre-condition—that is, paying 15% of the disputed tax—per se cannot betermed illegal. But, then, according to him, the pre-condition must beviewed in the backdrop of the Company's complaint and theDepartmental determination to persecute the Company. He stresses thatpeople like the Company's Directors must be encouraged to contain thescourge of graft in public life. 5. The appellate authority ought to have, asserts the learned Senior Counsel, given the benefit of doubt to the Company and heard the appealwithout a pre-condition; it would have, then, only enhanced theDepartment's reputation for impartiality. And that could have restoredthe Company's confidence in the system. Instead, the respondents havevictimised the Company. Therefore, the learned Senior Counsel urgesthis Court to dispense with the Ext.P8 condition and impose a blanket stay on further proceedings until the appellate authority decides the statutoryappeal. 5. The appellate authority ought to have, asserts the learned Senior Counsel, given the benefit of doubt to the Company and heard the appealwithout a pre-condition; it would have, then, only enhanced theDepartment's reputation for impartiality. And that could have restoredthe Company's confidence in the system. Instead, the respondents havevictimised the Company. Therefore, the learned Senior Counsel urgesthis Court to dispense with the Ext.P8 condition and impose a blanket stay on further proceedings until the appellate authority decides the statutoryappeal. 6. On the other hand, the learned Standing Counsel for the IncomeTax Department has submitted that the petitioner's complaint against theDepartment officials and the resultant crimes registered by the CBI havenothing to do with the scrutiny and assessment proceedings. He referredto the Company’s allegations: the Company was never touched until 2011when its Director complained about the graft. To refute that allegation,the Standing Counsel submits that the assessing authority does not selectthe assessees for scrutiny; it is a system-generated random choice.Perhaps the petitioner, according to him, had been lucky until then.7. The learned Standing Counsel has drawn my attention to theExt.P8 conditional orders in W.P.(C)No.35228/2018, Ext.P14 in W.P.(C)No.35229/12018, and Ext.P13 in W.P.(C)No.35301/2018. He then stressesthat the orders are well-reasoned and require no interference. In thisregard, he also submits that the Department's circulars mandate that theappellate authority has jurisdiction to impose a pre-condition up to 20% of the demanded tax. Viewed from that perspective, 15%, as imposed by the appellate authority, is far less and cannot be termed onerous. 8. Heard Sri Joseph Markose, the learned Senior Counsel for thepetitioner, as also Sri Jose Joseph the learned Standing Counsel for therespondent Department. 9. Indeed, this Court as well as the Supreme Court has time and again reiterated the well-settled legal principle: discretion by acompetent judicial or quasi-judicial authority calls for no interferenceunless it suffers from perversity or gross illegality. Here, viewed inisolation, the Exts.P8, P14, and P13 conditional orders in these writpetitions are unexceptional: the condition of 15% pre-deposit isreasonable. 10. But the issue here needs to be viewed in the backdrop of theproceedings that preceded. Strange or fortuitous as it may seem, until2011 the Company had never been subjected to scrutiny. Then, from thatyear onwards it has never been let go of. Indeed, the CBI registered crimeson the Company's complaint and those crimes are in progress. The Company entertains a notion—may be ill-founded—that it has beenvictimized and subjected to high pitched, repeated assessments. As theCompany's counsel puts it, for one year, the assessment was by six times,another year by 2-3 times and the next year it seemed normal. 11. As I see, a citizen has complained about a crime: the crime ofgraft. An organisation like CBI has registered a crime after laying the trap.Perhaps accidentally, though, the company that complained has been inthe departmental crosshairs ever since. As the learned Senior Counsel hasput it, the conditional stay in an appeal is only an interim arrangement.The repeated assessments and the preconditions may have left theCompany with the feeling of victimization. Its Directors have openedtheir mouth against the graft or alleged graft in the Department.Normally, it pays to complain. Here, the complainant is, it seems, made topay. So the Department could have taken a lenient view to inspireconfidence in the Company that it need not end up as a victim onlybecause it has pointed out a flaw in the system, as it were. WP(C).No. 35228 of 2018 & conn.cases WP(C).No. 35228 of 2018 & conn.cases 12. Therefore, first, I place on record that the pre-condition of theassessee's depositing 15% demanded tax can neither be termed perversenor illegal. Yet, I also hold it is a peculiar case that deserves an exception.So I set aside the Exts.P8, P14 and P13 in W.P.(C)Nos.35228, 35229and 35301 of 2018 respectively, to the extent of their requiring theCompany to deposit 15% as a precondition. Instead, the amount standsreduced to 5% per each assessment year. Once the Company pays 5% ofthe demanded tax, the appellate authority will hear the appeals onmerits, with no further coercive steps until the adjudication completed. Sd/- DAMA SESHADRI NAIDU JUDGE APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1TRUE COPY OF THE FIR FILED ON 19.03.2014 BY THE CBI. EXHIBIT P2 TRUE COPY OF THE RELEVANT PAGES OF THE FINAL REPORT FILED BY U/S 173 CR.PC ON COMPLETION OF INVESTIGATION. EXHIBIT P3 TRUE COPY OF THE ORDER OF ASSESSMENT DT. 30.3.2014 PASSED BY THE 1ST RESPONDENT U/S.143(3) OF THE ACT. EXHIBIT P4 TRUE COPOY OF THE FORM OF APPEAL, STATEMENT OF FACTS AND THE GROUNDS OF APPEAL FILED BEFORE 2ND RESPONDENT. EXHIBIT P5 TRUE COPY OF POSTING NOTICE DATED 14.9.2018 EXHIBIT P6TRUE COPY OF THE SUMMARY ARGUMENTS DT. 14.9.2018 EXHIBIT P7 TRUE COPY OF COVERING LETTER DT. 17.7.2018TRUE COPY OF INVOICE DT. 29.4.2010 EXHIBIT P7 A EXHIBIT P7 B EXHIBIT P7 C EXHIBIT P7 D EXHIBIT P7 E TRUE COPY OF SERVICE REPORTTRUE COPY OF SERVICE REPORTTRUE COPY OF SERVICE REPORTTRUE COPY OF SERVICE REPORT EXHIBIT P8TRUE COPY OF THE COMMON ORDER OF STAY DT. 18.9.2018 PASSED BY THE 2ND RESPONDENT. RESPONDENTS' EXHIBITS NIL // TRUE COPY // P.A. TO JUDGE SD