Madras High Court
Principal Commissioner Of Income ... vs Shri M.Kiran Kumar on 5 January, 2021
TCA.No.496 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 05.01.2021
CORAM :
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Ms.Justice R.N.MANJULA
Tax Case Appeal No.496 of 2020
Principal Commissioner of Income Tax
Central – I,
No.108, Nungambakkam High Road,
Chennai – 600 034. ...Appellant
Vs
Shri M.Kiran Kumar,
123, Usman Road,
T.Nagar, Chennai – 600 017.
PAN: ACHPM2247E ...Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against the
order dated 29.10.2020 made in S.P.No.184/Chny/2020 in
ITA.No.3374/Chny/2019 on the file of the Income Tax Appellate Tribunal,
Madras 'C' Bench, for the assessment year 2015-16.
For Appellant: Mr.T.R.Senthil Kumar
Senior Standing Counsel
For Respondent: Mr.Baskar
1/14
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
JUDGMENT
(Judgment was delivered by T.S.Sivagnanam,J)
This appeal, filed by the Revenue under Section 260A of the
Income Tax Act, 1961 ('the Act' for brevity), is directed against the order
dated 29.10.2020 passed by the Income Tax Appellate Tribunal, Madras "C"
Bench ('the Tribunal' for brevity) in S.P.No.184/Chny/2020 in
ITA.No.3374/Chny/2019 for the assessment year 2015-16.
2. The Revenue has raised the following substantial questions of
law for consideration:
“1. Whether the Appellate Tribunal was
correct in extending the stay beyond a period of 185
days, when the delay in disposing of the appeal is
attributable to the assessee, which is contrary to
Section 254(2A) of the Income Tax Act?
2. Whether on the facts and in the
circumstances of the case, the Appellate Tribunal was
right in law in extending stay of collection of
demands beyond six months, without looking into the
jurisdictional High Court and Supreme Court rulings,
simply passed the impugned order which is perverse
in nature?
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
3. Whether on the facts and in the
circumstances of the case, the Appellate Tribunal was
correct in directing the Revenue from taking any
coercive action without appreciating that the assessee
has not made out the case before the first appellate
authority and also not paid any tax dues beyond 20%
of confirmed demand, when the issues in questions
are covered by the judgments of Hon'ble Supreme
Court of India?”
3.The assessee is an individual engaged in the business of trading
in gold jewellery and bullion. A search and seizure operation was conducted
in the business premises of the assessee and group companies on 02.09.2014
as well as the residential premises of the assessee, who was the Managing
Director of one of the group companies. For the assessment year under
consideration (AY 2015-16), the assessee filed return of income admitting a
total income of Rs.1,42,42,750/- in response to a notice issued under
Section 153A of the Act. Upon completion of such assessment, the taxable
income was computed to Rs.113,96,27,822/- against the income which was
returned, namely Rs.1,42,42,750/- with a consequent net demand of
Rs.46,30,29,450/-.
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
4. The Assessing Officer made disallowance under three heads,
namely,
(1) Excess claim of wastage on old gold - Rs.20,00,00,000/-.
(2) Disallowance u/s 2(22)(e) of the Act - Rs.76,19,00,000/-.
(3) Disallowance of capital gains exemption - Rs.16,24,68,072/-.
5. A sum of Rs.20 crores was added as undisclosed income of the
assessee since the assessee had surrendered the same during the course of
search under Section 132(4) of the Act. Further, during the search
operation, it came to light that there was no evidence that was produced by
the assessee with regard to the amount claimed for wastages on melting and
purification of old gold purchased. Furthermore, payments were also made
in cash of less than Rs.20,000/- by splitting the bills. A sum of Rs.76.19
crores was added as deemed dividend under Section 2(22)(e) of the Act,
being the cumulative credit balance in the books of the group companies, in
the hands of the assessee, for the reason that the assessee had indirectly
borrowed funds from the company through the books of other group
companies, which according to the department were only “paper” concerns.
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
6. The Assessing Officer further held that 98% of the shares held
by the assessee in the private limited company should be treated as deemed
dividend. The claim for exemption of Long Term Capital Gains (LTCG)
under Section 10(38) of the Act to the tune of Rs.16.24 crores was
disallowed for the reason that the gains computed were unrealistic (Penny
Stock) with the market conditions and the returns earned by the assessee
were 2613% of the investments.
7. Aggrieved by the additions, the assessee preferred appeal
before the Commissioner of Income Tax (Appeals) – 18, Chennai
(hereinafter referred as CIT(A)). When the appeal was pending before the
CIT(A), the assessee approached this Court by filing W.PNo.13319 of 2019
praying for an issuance of Writ of Certiorarified Mandamus to quash the
order passed by the CIT(A) dated 25.03.2019 and for a consequential
direction upon the Assessing Officer to restrain him from enforcing the
demand raised on the petitioner, vide demand notice dated 30.12.2016,
pending disposal of the appeal before the CIT(A). The writ petition was
disposed of by order dated 11.06.2019, by setting aside the order passed by
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
the Commissioner of Income Tax, Central-1, dated 25.03.2019 and directing
the CIT(A) to dispose of the main appeal within a time frame. Thereafter,
the appeal has been heard and dismissed by order dated 14.11.2019.
Aggrieved by the same, the assessee preferred an appeal before the Tribunal.
8. In terms of the directions issued in the writ petition in the stay
petitions filed therein, a sum of Rs.3 crores was paid by the assessee. Before
the Tribunal, the assessee filed stay petitions praying for stay of the demand
of Rs.37,05,16,734/- on the ground that the assessee has already paid 20%
of the demand, namely, Rs.9,25,12,716/-. The Tribunal passed an order in
the stay petition on 20.12.2019, whereby the Tribunal thought fit to fix the
hearing of the main appeal itself at an early date and till then directed the
Revenue not to initiate coercive action against the assessee for recovery of
the outstanding demand. The Tribunal has referred to the arguments of the
learned counsel for the assessee, who placed challans for the payment of
taxes to the tune of Rs.9.26 crores post assessment framed by the Assessing
Officer.
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
9. We find from the order that there is no discussion as to how the
Tribunal was satisfied in directing the Revenue not to initiate coercive
action against the assessee for recovery of outstanding demand. The power
to be exercised by the Tribunal should be in accordance with Section
254(2A) read with the proviso thereunder. We find the order to be devoid of
reasons though the order is a four page order, substantial part of the order is
only the submissions made by the assessee, which are touching upon the
merits of the matter and while holding that the order is devoid of reasons,
we find that the Tribunal was justified in observing that they are not
commenting upon the merits of the matter involved in the main appeal.
Further, we note that the Tribunal finally disposed of the stay petition by
order dated 20.12.2019, after noting that the appeal is fixed for hearing
before the Regular Bench on 13.01.2020.
10. Under normal circumstances, if the appeal is to be heard by a
different Bench than the Bench which is hearing the stay petition and the
case is set out for hearing on a particular date, Courts normally do not
dispose of the interlocutory applications, but would direct the application to
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
be called on the date when the appeal is heard. However, the Tribunal chose
to follow a different procedure in the instant case. It appears that the appeal
was not listed before the Regular Bench of the Tribunal on 13.01.2020.
Thus, the assessee had an unfair advantage in the sense that there was a
protection granted to the assessee by default, because the appeal has not
been taken up on 13.01.2020. The Tribunal thereafter issued a Corrigendum
order and from the copy furnished in the typed set of papers at page 105, we
find that there is no date mentioned in the said order, but the Tribunal chose
to exercise its power and rectify the earlier order dated 20.12.2019 by suo
motu correcting the order. Since the copy of the order furnished to us does
not contain the date, we are not clear as to whether the Corrigendum
order/suo motu order was passed by the Tribunal before 13.01.2020 or after
13.01.2020. In fact, we have seen several orders where the Tribunal refused
to exercise its power when an application is filed for rectification of
mistake. That apart, it is not very clear that whether the Revenue was heard
before such a rectification was done. Nevertheless, the appeal continued to
remain pending and not taken up for disposal.
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
11. We deprecate the practice adopted by the Tribunal in
exercising its suo motu power for issuing a Corrigendum to an order which
has already been signed and the petition having been disposed of. The
Tribunal becomes a functus officio and they can exercise their power of
rectification under Sub-Section (2) of Section 254, if the mistake is brought
to its notice by the assessee or the Assessing Officer and the procedure to be
followed while exercising the power is provided in the first and second
proviso under Sub-Section (2) of Section 254. Therefore, we are at a loss to
understand as to how the Tribunal exercised its power in issuing a suo motu
Corrigendum, that too by an undated order without hearing the Revenue or
the Assessing Officer. As mentioned above, the appeal was not taken up for
hearing on 13.01.2020 and obviously, the protection granted by the Tribunal
in its interim order dated 20.12.2019 enured in favour of the assessee and
the Revenue is right in its argument that the order of stay was in force
beyond the period provided in the proviso to Section 254(2A) of the Act.
12. It is not clear as to why the assessee moved a second stay
application before the Tribunal in SP.No.50/Chny/2019. The said stay
application was dismissed by order dated 14.02.2020, fixing the appeal for
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
hearing on 25.02.2020. It was made clear that the assessee should not seek
adjournment on the date of hearing and in case the Revenue seeks
adjournment, the entire amount will be stayed automatically. On the date
fixed for hearing, the matter was not heard by the Tribunal. From the order
sheet dated 25.02.2020, it is seen that when the appeal was taken up, the
assessee's counsel sought for a Passover and the matter was subsequently
taken up at 12.15 PM and the learned counsel for the assessee submitted
that he would take 2 hours to complete his arguments. The Tribunal has
recorded that, since the matter could not be completed due to paucity of
time, the case is adjourned to 17.03.2020 with consent of both the parties.
The learned counsel for the assessee pleaded that the interim protection for
recovery proceedings for the demand may be granted to the assessee.
Accordingly, the Tribunal directed the Departmental representative to
suitably inform the Assessing Officer, having jurisdiction over the assessee's
case, not to initiate coercive measure for the recovery of the demand till the
date of hearing on 17.03.2020 and the matter was adjourned to 17.03.2020.
13. In our considered view, the Tribunal, while issuing directions
to the Departmental representative, not to exercise its jurisdiction against
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
the assessee, should be traceable to the statutory provisions. We find that no
such power has been conferred on the Tribunal under Section 254 of the
Act. Therefore, issuing such directions and restraining the Assessing Officer
to exercise his statutory function is beyond the jurisdiction of the Tribunal
and therefore, the order and direction issued to the Department through the
Departmental representative is non-est in the eye of law. The learned
Departmental representative has no jurisdiction to give any concession or
consent on behalf of the Department without the written approval of the
competent authority. Therefore, the stand taken by the learned Departmental
representative is of little avail as he has no jurisdiction to agree to the
directions issued by the learned Tribunal, which itself is without
jurisdiction. Challenging the said order, the Revenue is before us by way of
this appeal.
14. Subsequently, the assessee filed the third stay petition in
S.P.No.184/Chny/2020, since a recovery notice was issued to the assessee
on 20.10.2020. The Tribunal, by order dated 29.10.2020, disposed of the
third stay petition, where it has noted that after the interim order was passed
on 25.02.2020 and extended on 17.03.2020, the Tribunal did not function.
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
The Tribunal has also noted that the assessee did not file any document
establishing financial difficulties. However, it took note of the submission
of the learned counsel for the assessee that due to pandemic, the assessee
was unable to run his business and is facing difficulties to pay the
outstanding demand. Considering the pandemic situation, the Tribunal fixed
the date of hearing for the appeal on 07.12.2020 with a direction to the
assessee as well the Department to cooperate for concluding the final
hearing of the appeal. The Tribunal directed the Department not to take any
coercive steps to recover the outstanding demand till the next date of
hearing i.e. 07.12.2020. We are informed by the learned Senior Standing
Counsel for the Revenue that the appeal was heard on 07.12.2020 and
orders have been reserved on 07.12.2020 itself and orders are awaited.
15. We have elaborately set out the manner in which the Tribunal
proceeded with the matter. It is no doubt ture that the assessee cannot be
blamed for the non-functioning of the Tribunal, which is also beyond the
control of the Tribunal due to pandemic situation. But however, we are on a
larger issue with regard to the power of the Tribunal to be exercised while
granting interim orders. We find that the exercise of power by the Tribunal
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
is not to be in accordance with Section 254(2A) of the Act. Further, we have
also commented upon the direction issued by the Tribunal to the Department
through its Departmental representative not to initiate coercive action.
16. In our opinion, the Tribunal has no such power to issue
directions, but has got power to grant an interim order under Section 254,
subject to the conditions stipulated therein. Therefore, we are compelled to
answer the substantial questions of law in favour of the Revenue and against
the assessee. However, we do not wish to interfere with the impugned order
which had been passed by the Tribunal, though we are deciding the
substantial questions of law in favour of the Revenue on account of the fact
that the Tribunal has already heard the appeal on 07.12.2020 and reserved
orders and the issue regarding whether the assessee should be put on further
condition etc., has become academic because the main appeal is to be
disposed of shortly and we are informed by the learned Senior Standing
Counsel for the Revenue that the Tribunal will dispose of the matter at the
earliest, probably in the next two or three weeks.
https://www.mhc.tn.gov.in/judis/
TCA.No.496 of 2020
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
hvk
17. For the above reasons, while declining to exercise jurisdiction
and interfere with the impugned order, we answer the substantial questions
of law in favour of the revenue. The appeal stands disposed of accordingly.
No costs.
(T.S.S.,J.) (R.N.M.,J.)
05.01.2021
Index: Yes/No
Internet:Yes/No
Speaking Judgment/Non speaking Judgment
hvk
To
1. The Income Tax Appellate Tribunal,
Madras 'C' Bench,
2. The Commissioner of Income Tax,
Chennai.
TCA.No.496 of 2020
https://www.mhc.tn.gov.in/judis/
