Wp(C)/6417/2017 Of Ms.grihalakshmi Films, Calicut v. Joint Commissioner Of Income Tax, Range 1, Calicut

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 26TH DAY OF MAY 2017/5TH JYAISHTA, 1939 WP(C).No. 6417 of 2017 (B) --------------------------- PETITIONER(S): ------------- MS.GRIHALAKSHMI FILMS, KTC BUILDING, Y.M.C.A. ROAD, CALICUT - 673001, REPRESENTED BY P.V. GANGADHARAN, PARTNER. BY ADVS.SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENT(S): -------------- 1.JOINT COMMISSIONER OF INCOME TAX, RANGE 1, KOZHIKODE. 2.PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT-673001. AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT-673001. 3.COMMISSIONER OF INCOME TAX, (APPEALS), AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, CALICUT-673001. 4.CENTRAL BOARD OF DIRECT TAXES, NEW DELHI, REPRESENTED BY CHAIRMAN, CBDT, NEW DELHI. CBDT, NEW DELHI. 5.UNION OF INDIA, MINISTRY OF FINANCE, NEW DELHI, REPRESENTED BY SECRETARY, MINISTRY OF FINANCE, NEW DELHI. BY ADVS. SRI.CHRISTOPHER ABRAHAM, SRI.K.M.V.PANDALAI, EL THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26-05-2017, ALONG WITH WPC. 6418/2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONER(S)' EXHIBITS ----------------------- P1TRUE COPY OF THE ORDER U/S 271D DATED 23/07/2012 P2TRUE COPY OF THE ORDER U/S 271E DATED 23/07/2012P3TRUE COPY OF THE ORDER U/S 272A(2) (C) DATED 23/07/2012P3TRUE COPY OF THE ORDER U/S 272A(2) (C) DATED 23/07/2012 P4TRUE COPY OF THE DIRECT TAXES DISPUTES RESOLUTION SCHEME, 2016SCHEME, 2016 P5TRUE COPY OF THE DECLARATION IN FORM 1 UNDER RULE 3 (1) OF THE RULES IN RESPECT OF EXHIBIT-P1(1) OF THE RULES IN RESPECT OF EXHIBIT-P1 P6TRUE COPY OF THE DECLARATION IN FORM 1 UNDER RULE 3 (1) OF THE RULES IN RESPECT OF EXHIBIT-P2(1) OF THE RULES IN RESPECT OF EXHIBIT-P2 P7TRUE COPY OF THE DECLARATION IN FORM 1 UNDER RULE 3 (1) OF THE RULES IN RESPECT OF EXHIBIT-P3(1) OF THE RULES IN RESPECT OF EXHIBIT-P3 P8TRUE COPY OF THE INTIMATION DATED 28/12/2016 RE: EXHIBIT-P5 DECLARATIONEXHIBIT-P5 DECLARATION P9TRUE COPY OF THE INTIMATION DATED 28/12/2016 RE. EXHIBIT-P6 DECLARATIONEXHIBIT-P6 DECLARATION P10TRUE COPY OF THE INTIMATION DATED 28/12/2016 RE: EXHIBIT-P7 DECLARATIONEXHIBIT-P7 DECLARATION P11TRUE COPY OF THE CIRCULAR NO. 33 DATED 12/09/2016 P12TRUE COPY OF THE CIRCULAR NO. 42 DATED 23/12/2016 RESPONDENT(S)' EXHIBITS ----------------------- NIL TRUE COPY P.S. TO JUDGE (CR) A.K.JAYASANKARAN NAMBIAR, J.............................................................. W.P.(C).Nos.6417 & 6418 of 2017 .............................................................Dated this the 26[th] day of May, 2017 J U D G M E N T As both these writ petitions involve a common issue inrespect of sister units, they are taken up together for considerationand disposed by this common judgment. For the sake ofconvenience, the reference to facts and exhibits is from W.P.(C).No.6417 of 2017. 2. The petitioners are assessees under the Income tax Act,engaged in the production and distribution of cinematographicfilms and other allied activities. The grievance of the petitioners inthese writ petitions is against the refusal by the 2[nd] respondent -Principal Commissioner of Income Tax to process an applicationthat was preferred by them for obtaining the benefit of the DirectTax Dispute Resolution Scheme, 2016 (hereinafter referred to as'the Amnesty Scheme') in respect of penalties that were imposed onthe petitioner under Sections 271D, 271E and 272A (2) (C) of the W.P.(C).Nos.6417 & 6418 of 2017 2. The petitioners are assessees under the Income tax Act,engaged in the production and distribution of cinematographicfilms and other allied activities. The grievance of the petitioners inthese writ petitions is against the refusal by the 2[nd] respondent -Principal Commissioner of Income Tax to process an applicationthat was preferred by them for obtaining the benefit of the DirectTax Dispute Resolution Scheme, 2016 (hereinafter referred to as'the Amnesty Scheme') in respect of penalties that were imposed onthe petitioner under Sections 271D, 271E and 272A (2) (C) of the W.P.(C).Nos.6417 & 6418 of 2017 Income Tax Act. The facts in these writ petitions would indicatethat, for the assessment years 2007-2008, the petitioners haddeclared a Net Loss and the assessments were completed byaccepting the returns filed by the petitioners. The 1[st] respondentJoint Commissioner of Income Tax, however, noticed that thepetitioners had occasioned a violation of the provisions of Sections269SS, 269T and 285B of the Income Tax Act by acceptingloans/deposits otherwise than by way of account payee chequesand/or draft, by repaying loans/deposits, otherwise than by way ofaccount payee cheques and/or draft and by not filing statements asrequired by Section 285B regarding the film production carried onby them. The notices issued to the petitioners culminated in ordersof penalty that were imposed on the petitioners under Sections271D, 271E and 272A (2) (C) of the Income Tax Act. Thepetitioners, aggrieved by the orders of penalty passed againstthem, preferred appeals before the Commissioner of Income Tax(Appeals), the 3[rd] respondent herein and the said appeals arestated to be pending. While so, by Ext.P4 Amnesty Scheme, thepetitioners identified an opportunity to settle the disputed penaltyamounts under the provisions of the Amnesty Scheme. It ispointed out that under the Scheme, a declarant, who files a W.P.(C).Nos.6417 & 6418 of 2017 declaration before the designated authority in respect of taxarrears or specified tax could, notwithstanding anything containedin the Income Tax Act or any other law for the time being in force,settle the matter by paying, in the case of a disputed penalty, 25%of the minimum penalty levied, along with the tax and interestpayable on the total income finally determined. The phrase 'taxarrear' is defined in the Amnesty Scheme as meaning the amountof tax, interest or penalty determined under the Income Tax Act orthe Wealth-tax Act, in respect of which an appeal is pending beforethe Commissioner of Income Tax (Appeals) or the Commissioner ofWealth-tax (Appeals) as on the 29[th] day of February, 2016. Forease of reference the relevant provisions are extracted hereunder: “201. (1) In this Scheme, unless the contextotherwise requires,- (a) xxx (b) xxx (c) xxx (d) xxx (e) xxx (f) xxx (g) xxx (h) “tax arrear” means, the amount of tax,interest or penalty determined under theIncome-tax Act or the Wealth-tax Act, in respectof which appeal is pending before theCommissioner of Income-Tax (Appeals) or theCommissioner of Wealth-tax (Appeals) as on the29[th] day of February. 202. Subject to the provisions of thisScheme, where a declarant files, on or after the1[st] day of June, 2016 but on or before a date tobe notified by the Central Government in theOfficial Gazette, a declaration to the designatedauthority in accordance with the provisions ofsection 203 in respect of tax arrear, or specifiedtax, then, notwithstanding anything contained inthe Income-tax Act or the Wealth-tax Act or anyother provision of any law for the time being inforce, the amount payable under this Scheme bythe declarant shall be as under, namely:- (I) in case of pending appeal related to taxarrear being- (a) tax and interest, 202. Subject to the provisions of thisScheme, where a declarant files, on or after the1[st] day of June, 2016 but on or before a date tobe notified by the Central Government in theOfficial Gazette, a declaration to the designatedauthority in accordance with the provisions ofsection 203 in respect of tax arrear, or specifiedtax, then, notwithstanding anything contained inthe Income-tax Act or the Wealth-tax Act or anyother provision of any law for the time being inforce, the amount payable under this Scheme bythe declarant shall be as under, namely:- (I) in case of pending appeal related to taxarrear being- (a) tax and interest, (i) In a case where the disputed tax does notexceed ten lakh rupees, the whole of thedisputed tax and the interest on disputed taxtill the date of assessment or reassessment,as the case may be; or (ii) in any other case, the whole of disputedtax, twenty-five per cent of the minimumpenalty leviable and the interest on disputedtax till the date of assessment orreasssessment, as the case may be; (b) penalty, twenty-five per cent of the minimumpenalty leviable and the tax and interestpayable on the total income finally determined. (II) In case of specified tax, the amount of suchtax so determined.” 3. A perusal of the Scheme also indicates that a declaration under Section 202 of the Finance Act, 2016, governing theAmnesty Scheme is to be made, by the applicant seeking thebenefit of the Scheme, before the designated authority in theprescribed form and in the prescribed manner and, on theapplication of the declarant being considered in terms of theScheme, the pending appeals with regard to the tax dispute wouldstand automatically withdrawn. Section 208 of the Finance Act,2016, which provides for exclusions from the operation of theScheme reads as follows: “208. The provisions of this Scheme shall notapply- (a) in respect of tax arrear or specified tax,- (i) relating to an assessment year inrespect of which an assessment has beenmade under Section 153A or 153C of theIncome-tax Act or assessment orreassessment for any of the assessmentyears, in consequence of a search initiatedunder Section 37A or requisition madeunder Section 37B of the Wealth-tax Act ifit relates to any tax arrear; (ii) relating to an assessment orreassessment in respect of which a surveyconducted under section 133A of theIncome-tax Act or section 38A of theWealth-tax Act, has a bearing if it relatesto any tax arrear; (iii) relating to an assessment year inrespect of which prosecution has beeninstituted or or before the date of filing ofdeclaration under section 202; (iv) relating to any undisclosed incomefrom a source located outside india orundisclosed asset located outside India; (v) relating to an assessment orreassessment made on the basis ofinformation received under an agreementreferred to in section 90 or section 90A ofthe Income-tax Act, if it relates to any taxarrear;” Thus, an overall reading of the Scheme indicates that the intentionis to grant an amnesty to a declarant, who declares his detailswith regard to disputed tax, interest or penalty, and the amnesty isto be granted to the extent contemplated in the Amnesty Scheme. 4. In the instant case, while the petitioners submitted theirdeclarations in the prescribed form before the designatedauthority, by Exts.P8, P9 and P10 intimations served on them,they were informed that the declarations submitted by them could W.P.(C).Nos.6417 & 6418 of 2017 -7- (v) relating to an assessment orreassessment made on the basis ofinformation received under an agreementreferred to in section 90 or section 90A ofthe Income-tax Act, if it relates to any taxarrear;” Thus, an overall reading of the Scheme indicates that the intentionis to grant an amnesty to a declarant, who declares his detailswith regard to disputed tax, interest or penalty, and the amnesty isto be granted to the extent contemplated in the Amnesty Scheme. 4. In the instant case, while the petitioners submitted theirdeclarations in the prescribed form before the designatedauthority, by Exts.P8, P9 and P10 intimations served on them,they were informed that the declarations submitted by them could W.P.(C).Nos.6417 & 6418 of 2017 -7- not be processed since, as per the Amnesty Scheme, the taxarrears in the case of penalty necessarily referred only to suchpenalty as was linked to the total income finally determined. Itwas pointed out that, inasmuch as the penalties that were imposedof the petitioners, were not linked to any assessment proceedings,the petitioners could not have preferred a declaration under theAmnesty Scheme referred above. In the writ petitions, thepetitioners impugn the said intimations served on them, and seek adirection to the 2[nd] respondent designated authority to process thedeclarations filed by them in accordance with Ext.P4 AmnestyScheme. 5. A statement has been filed on behalf of the respondents 1to 3, wherein the stand taken in Exts.P8 to P10 intimations servedon the petitioners is sought to be justified based on theclarificatory Circulars issued by the Central Board of Direct Taxes(CBDT) which purport to clarify the scope of Ext.P4 AmnestyScheme. In particular, it is reiterated that the petitioners wouldnot be entitled to the benefit of the Amnesty Scheme since thepenalties imposed on them were not linked to any assessmentproceedings, which determined the total income and the tax payable thereon. 6. I have heard the learned counsel appearing for thepetitioners in both the writ petitions as also the learned Standingcounsel appearing for the respondents. 7. On a consideration of the facts and circumstances of thecase and the submissions made across the bar, I find from aperusal of Ext.P4 Amnesty Scheme that, the Scheme contemplatesthe making of a declaration of tax arrears, which phrase is definedas meaning an amount of tax, interestorpenalty determined, interalia, under the Income Tax Act, and in respect of which an appealis pending before the appellate authority as on 29.02.2016. TheScheme also envisages that, in the case of a pending appealrelated only to penalty,the amount payable by an eligible declarantwould be 25% of the minimum penalty leviable, along with the taxand interest payable on the total income finally determined. It isnot in dispute that, in the instant case, the declarations submittedby the petitioners were in respect of penalties that were imposedon them by the authorities concerned. It is also not in dispute thatin the declaration, the petitioners had offered to pay 25% of the W.P.(C).Nos.6417 & 6418 of 2017 W.P.(C).Nos.6417 & 6418 of 2017 mandatory penalties that were imposed on them. Thecontention of the Department is essentially that, inasmuch as thereis a reference to a payment of tax and interest payable on the totalincome finally determined, along with 25% of the minimum penaltyleviable, the Scheme must be intended to cover only such penaltiesas have been imposed on an assessee along with the assessmentorder. The clarification of the CBDT in the context of a penaltyorder under Section 271(C) or 271 (C) (A) of the Income Tax Actalso suggests that, such penalties, as are not linked to assessmentproceedings, would not be covered under the Scheme. On anoverall consideration of the Scheme, however, I do not see anyscope for such a restrictive interpretation of the ambit of theAmnesty Scheme, in the manner suggested by the learned counselfor the respondents. Firstly, the definition of tax arrears does notexclude a situation where the dispute of an assessee is only inrespect of a penalty that has been determined against him underthe Income Tax Act. Secondly, while the procedure envisagedincludes the filing of a declaration solely in respect of penalty, theScheme suggests that when a declaration is only with regard topenalty, the obligation of the declarant is to pay 25% of theminimum penalty levied, and also to pay the tax and interest payable on the total income finally determined for the assessmentyear in question. The object of the Scheme appears to be to ensurethat, while a person seeking an Amnesty Scheme only in respect ofthe penalty that is imposed on him, avails the benefit of theScheme to that extent, it should also be ensured that the saiddeclarant discharges the tax and interest liability under theIncome Tax Act for the assessment year in question. In otherwords, a person, who defaults on the tax and interest liabilityunder the Income Tax Act for the assessment year, cannot claimthe benefit of amnesty in respect of the penalty alone. It is alsosignificant to note that the exclusions from the Scheme, that areenumerated in Section 208 of the Finance Act, 2016, also do notexpressly provide for the exclusion of a declaration, such as thosefiled in the instant writ petition, where the amnesty is sought onlyin respect of a penalty that is imposed under the Income tax Act.Thus, I find that, the reasons stated in Exts.P8, P9 and P10intimations served on the petitioners cannot be legally sustained todeny the petitioners the benefit of Ext.P4 Amnesty Scheme. Resultantly, I quash Exts.P8, P9 and P10 intimations in boththe writ petitions and direct the 2[nd] respondent to process Exts.P5, W.P.(C).Nos.6417 & 6418 of 2017 P6 and P7 declarations submitted by the petitioners in both thewrit petitions expeditiously and in terms of Exts.P4 Scheme, asclarified in this judgment. Needless to say, the processing of thedeclarations as directed shall be untrammelled by Exts.P11 andP12 Circulars that have been issued by the CBDT. The 2[nd]respondent shall pass orders, after processing the declarations,within a period of six weeks from the date of receipt of a copy ofthis judgment, after hearing the petitioners. Sd/- A.K.JAYASANKARAN NAMBIAR JUDGE mns/26.05.17 W.P.(C).Nos.6417 & 6418 of 2017 -12-