Madras High Court
M/S.K.Velusamy-Major Huf vs The Principal Commissioner Of on 6 September, 2021
WA.Nos.2208 & 2209 of 2021
In the High Court of Judicature at Madras
Dated : 06.9.2021
Coram
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP
Writ Appeal Nos.2208 & 2209 of 2021 & CMP.Nos.13978 & 13981 of
2021
M/s.K.Velusamy-Major HUF ...Appellant in
WA.2208/2021
Smt.S.Chandralekha ...Appellant in
WA.2209/2021
Vs
1.The Principal Commissioner of
Income Tax, Central-2,
Income Tax Department,
No.46, MG Road, Chennai-34.
2.The Income Tax Settlement
Commission, Additional Bench,
replaced by the Interim Board,
Income Tax Department,
640, Anna Salai, Chennai-35. ...Respondents
in both WAs
APPEALS under Clause 15 of the Letters Patent against the
common order dated 03.3.2021 in W.P.Nos.31351 and 31352 of 2015.
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WA.Nos.2208 & 2209 of 2021
For Appellants : Mr.A.S.Sriraman
For Respondent-1: Mr.A.P.Srinivas, SSC
COMMON JUDGMENT
(Judgment was delivered by T.S.SIVAGNANAM,J)
We have heard Mr.A.S.Sriraman, learned counsel appearing for
the appellants and Mr.A.P.Srinivas, learned Senior Standing Counsel
accepting notice for the first respondent – Revenue. In the light of
the judgment, this Court wishes to render in these appeals,
notice to the second respondent is dispensed with and the writ
appeals are taken up for final disposal.
2. These writ appeals have been filed by the assessees
challenging the common order dated 03.3.2021 passed in W.P.Nos.
31351 and 31352 of 2015.
3. The said writ petitions were filed by the first respondent
herein namely the Revenue.
4. The challenge in the said writ petitions was to the orders
passed by the second respondent herein namely the Income Tax
Settlement Commission (for short, the ITSC) dated 02.3.2015 settling
the case of the assessees for the assessment years 2006-07 to 2012-
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WA.Nos.2208 & 2209 of 2021
5. From the averments set out in the affidavits filed in support
of the said writ petitions, we are able to see that the challenge by the
Revenue to the orders passed by the ITSC was primarily on two
grounds.
6. Firstly, with regard the issue relating to deemed dividend
under Section 2(22)(e) of the Income Tax Act, 1961, the Revenue
contended that the ITSC erred in accepting the contention of the
assessee for not including the advance amount received as liable to
be taxed as deemed dividend under Section 2(22)(e) of the Act and
that the decision relied upon by the ITSC could not be applied to the
facts and circumstances of the case.
7. The second issue was with regard to levy of interest under
Section 234A of the Act. The Revenue contended that though the
Assessing Officer was directed to keep in mind the decision of the
Hon'ble Supreme Court in the case of Brij Lal Vs. CIT [reported in
(2010) 328 ITR 477], yet he directed to charge interest under
Section 234A of the Act only for the delay in filing original returns
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WA.Nos.2208 & 2209 of 2021
under Section 139/153A/153C, as the case may be, which was against
the clear cut observations made by the Hon'ble Supreme Court. With
these grounds, the Revenue was before the learned Single Judge.
8. The learned Single Judge upheld the view of the ITSC and no
relief was granted to the Revenue. With regard to the aspect relating
to charging of interest, the learned Single Judge directed the
Assessing Officer to recompute the interest in terms of the orders
passed by the Hon'ble Supreme Court in the case of Brij Lal. Thus,
the Revenue partly succeeded in the said writ petitions wherein the
learned Single Judge set aside the orders settling the case of the
appellants herein in respect of the assessment year 2012-13.
9. In our considered view, a truncated challenge to the orders of
the ITSC either at the instance of the assessees or at the instance of
the Revenue cannot be maintained. As has been held in several
decisions consistently, the Court, while examining the correctness of
the orders passed by the ITSC, will examine the decision making
process and not the decision itself.
10. Admittedly, in the instant case, the assessees, at the time of
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WA.Nos.2208 & 2209 of 2021
filing applications for settlement under Section 245C of the Act, did
not offer any additional income for the assessment year 2012-13. The
Revenue filed a report under Rule 9 of the Income Tax Settlement
Commission (Procedure) Rules contending that the assessees might
be directed to produce the books of accounts and other documents
pertaining to the year 2012-13 before the Assessing Officer. The
assessees submitted their books of accounts along with profit and loss
account, balance sheet, etc.
11. The tax audit report dated 28.9.2012 was also furnished.
Pursuant to the said submission, the Revenue filed further report to
the assessees' reply to the report under Rule 9 of the said Rules. In
the said report, there was an elaborate discussion with regard to the
matter concerning the assessment year 2012-13 and the report also
stated as to what were all the additions, which were suggested by the
Revenue. On those submissions, the assessees were heard by the
ITSC and ultimately, the cases were settled. In such circumstances, it
will be too late for the Revenue to now contend that the ITSC could
not have settled the cases in respect of the assessment year 2012-13
and especially when this was never the ground raised by the Revenue
either in the report filed under Rule 9 of the said Rules or in the
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WA.Nos.2208 & 2209 of 2021
subsequent report filed to the reply given by the assessees.
12. That apart, on a reading of Section 245C(1) Proviso (i), it
can be seen that no such application shall be made unless in a case
where proceedings for assessment or reassessment for any of the
assessment years referred to in Clause (b) of Sub-Section (1) of
Section 153A or Clause (b) of Sub-Section (1) of Section 153B in case
of a person referred to in Section 153A or Section 153C have been
initiated, the additional amount of income-tax payable on the income
disclosed in the application exceeds fifty lakh rupees.
13. Admittedly, the jurisdiction to assess income of the
assessee for six years would arise as a block assessment only in the
event of search and therefore, the ITSC rightly took into consideration
the year of search namely 2012-13. As pointed out earlier, these are
all issues, which are on the merits of the matter and more particularly
with regard to the maintainability of the application before the ITSC,
which was considered by the ITSC at two stages and it was never the
case of the Revenue that the year of search should be excluded. That
apart, we find that the ITSC directed the Assessing Officer to follow
the decision of the Hon'ble Supreme Court in the case of Brij Lal and
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WA.Nos.2208 & 2209 of 2021
the Assessing Officer followed it and had given effect to the orders
passed by the ITSC in the year 2015.
14. The learned Senior Standing Counsel appearing for the
Revenue would contend that in paragraph 11.3, the ITSC dealt with
charging of interest and observed as follows :
“Prayer for waiver of interest is not
accepted and the same may be charged as per
law. While calculating the interest, the
Assessing Officer will keep in view the decision
of the Hon'ble Supreme Court in Civil Appeal
Nos.516 to 527 of 2004 dated 21.10.2010 in
the case of Brij Lal & Others Vs. CIT [328 ITR
477]. In view of Section 234A read with
Section 245C, interest under Section 234A is
to be charged for delays in filing of original
return under Section 139/153A/153C as the
case may be on the total income determined
under Section 245D(4) of the Act. Interest
under Section 234B is to be charged from the
1st day of the assessment year till the date of
order passed by the Settlement Commission
under Section 245D(1). Further, as has been
decided by the Hon'ble High Court of Calcutta,
reversing the decision of the Special Bench in
the case of M/s.G.M.Foods and another in W.P.
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WA.Nos.2208 & 2209 of 2021
No.44 of 2015, interest under Section 234B
has also to be charged on the income as
disclosed in the application under Section
245C of the Act.”
15. It is submitted by the learned Senior Standing Counsel
appearing for the Revenue that the ITSC mentioned that the interest
under Section 234B of the Act has to be charged on the income as
disclosed in the applications under Section 245C of the Act. The
Revenue is, thus, of the view that the Tribunal wrongly mentioned
that the interest would be chargeable on the income disclosed.
16. Though the word 'disclosed' gives a slightly distorted
meaning, a clear picture emerges if we see paragraph 11.2 of the
order passed by the ITSC, which deals with settlement of income. The
total income arrived at by the ITSC is Rs.28,04,72,938/-, which alone
shall be considered as the income disclosed for the purposes of an
application under Section 245C of the Act. The Revenue need not
have any apprehension over the income, which was initially disclosed
at the time of filing the application under Section 245C of the Act
because the said income, which was offered at the first instance was
not accepted by the Revenue and a report under Rule 9 of the said
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WA.Nos.2208 & 2209 of 2021
Rules was filed and based on that, the Revenue suggested four
additions and thereafter, the case was proceeded and the matter was
settled.
17. Therefore, in our considered view, there may not be any
necessity to remand the matter for a fresh consideration and the
interest under Section 234B of the Act has to be charged on the
income settled by the ITSC and in terms of the decision of the Hon'ble
Supreme Court in the case of Brij Lal, the interest would be
chargeable upto the date of order under Section 245D(1) of the Act
and not upto the date of the order of the ITSC under Section 245D(4).
18. With the above clarification, the writ appeals are allowed
and the common order passed in the writ petitions is set aside. No
costs. Consequently, the connected CMPs are closed.
06.9.2021
RS
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WA.Nos.2208 & 2209 of 2021
T.S.SIVAGNANAM,J
AND
SATHI KUMAR SUKUMARA KURUP,J
RS
To
1.The Principal Commissioner of Income Tax, Central-2, Income Tax
Department, No.46, MG Road, Chennai-34.
2.The Income Tax Settlement Commission, Additional Bench, replaced
by the Interim Board, Income Tax Department, 640, Anna Salai,
Chennai-35.
WA.Nos.2208 & 2209 of 2021 &
CMP.Nos.13978 & 13981 of 2021
06.9.2021
http://www.judis.nic.in
