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ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.947 OF 2009
Mahesh Gupta ]
Karta of Mahesh Gupta HUF ] having its office at 18, Surti Chambers ]
2nd
Dhoti Talao Lane, Mumbai 400 002. ] .. Petitioner.
Chambers, Mumbai 400 034. ]
2 Joint Commissioner of Income Tax ]
Range 14(3), Mumbai having his ] office at Earnest House, Nariman ]
Point, Mumbai 400 021. ]
3 The Union of India ] through Ministry of Law, ]
Aaykar Bhavan, M. K. Road, ]
Mumbai 400 020. ] .. Respondents.
Mr. Ajay R. Singh with Mr. Akshay Pawar i/b. Mr. S. J. Mehta, for
Petitioner.
Mr. Suresh Kumar, for Respondents.
DATED : 14th JULY 2023.
ORAL JUDGMENT
2 The Petitioner is the Karta of Mahesh Gupta HUF. The Petitioner carried on business of trading in textile and of running a business centre in the name and style of M/s. Shivam Business Center. Further, the Petitioner also carried on business in the name and style of Subhelene Fabrics at Silvasa.
3 A survey action under Section 133-A of the Act was conducted on 4th November 2004 at the office premises of the Petitioner at 18, Surti Chambers, in Mumbai, and also at Silvasa. The possession of various documents was taken by the survey party from both the places and statements of various persons were recorded.
4 The Petitioner filed an Application dated 17th May, 2006, under Section 245-C of the Act, for the Assessment Years 2002-03, 2003- 04 and 2004-05. By the said Application, the Petitioner disclosed additional income and the tax on the additional income as under:- Asst. Year Additional Income Disclosed (Rs.) Tax on the amount Disclosed (Rs.) 2002-03 28,80,300.00 8,81,387.00 2003-04 33,26,896.00 10,47,972.00 2004-05 28,31,540.00 9,34,408.00 Total: 28,63,767.00 5 The Commissioner of Income Tax-XIV, Mumbai, forwarded his Report dated 17th July 2006 in the prescribed proforma under Section S.R.JOSHI 2 of 14 245D(1) of the Act for the Assessment Years 2002-03 to 2004-05.
6 The said Application of the Petitioner in respect of Assessment Years 2003-04 and 2004-05 was admitted by Respondent No.1 by an Order dated 30th November, 2006. The said Order directed the Petitioner, in accordance with the provisions of sub-section 2(A) of Section 245-D of the Act, to pay the additional amount of income tax payable on the income disclosed in the Application within 35 days of the receipt of the said Order and to furnish proof of such payments.
7 The Petitioner paid the tax as calculated by it on the total income as originally and additionally disclosed by it and informed Respondent No.2 about the same by his letter dated 4th January, 2007. The Petitioner annexed to the said letter a Statement showing the tax liability on the additional income offered by the Petitioner in the Settlement Application for Assessment Years 2002-03 to 2004-05 and also challans demonstrating payment of the tax.
8 Further, the Petitioner also made an Application dated 22nd March 2007 to Respondent No.1, under Section 245-C of the Act, in respect of Assessment Year 2005-06. The Petitioner disclosed an additional income of Rs.34,19,586/- and tax payable thereon of Rs.12,22,386/-. S.R.JOSHI 3 of 14
9 By his letter dated 14th August 2007, the Petitioner once again informed Respondent No.2 about the taxes paid by him on the additional income disclosed by him in the Application in respect of Assessment Years 2002-03, 2003-04 and 2004-05.
10 It is stated in the Petition that Respondent No.1 fixed the hearing of Petitioner’s Application for settlement on 11th December, 2007, that the Vice Chairman of Respondent No.1 directed the Petitioner and Respondent No.2 to exchange requisite working / calculation of additional tax and interest liability for the Assessment Years 2002-03 to 2005-06 and thereafter prepare a reconciliation statement, if any, so that the matter could be recorded within shortest time on 19th December, 2007. Pursuant thereto, the Petitioner, by his letter dated 14th December, 2007, submitted details of calculation of additional tax and interest payable on the additional income disclosed by the Petitioner. The statements and challans annexed to the said letter show that the Petitioner had paid the taxes for all the Assessment Years i.e. 2002-03 to 2005-06 as per the Petitioner’s Applications on or before 30th July, 2007.
11 By a letter dated 18th December, 2007, Respondent No.2 gave the details of tax and interest payable by the Petitioner for the Assessment Years 2002-03 to 2005-06 as under:- S.R.JOSHI 4 of 14 Asst. Year Amount payable (Rs.) 2002-03 2,94,265.00 2003-04 1,78,676.00 2004-05 6,48,007.00 2005-06 6,83,081.00 18,04,029.00
12 Thereafter, Respondent No.1 fixed the hearing of the Petitioner’s case on 19th December, 2007. At the time of the hearing, Respondent No.2 raised an objection that the Petitioner had not paid the appropriate tax on the additional income disclosed. On the other hand, the Petitioner submitted that he had paid taxes as per his own calculation, that he was willing to pay the difference in tax, if any, that may be directed by Respondent No.1 and that if there was any shortfall, Respondent No.2 had authority under Section 245D(2D) of the Act to recover the amount due from the Petitioner but the application of the Petitioner cannot abate on the ground of alleged shortfall in payment of taxes and interest. The Petitioner submitted that this was more particularly so when the Petitioner had, in January, 2007, informed Respondent No.2 about the tax payable by the Petitioner and the taxes paid and Respondent No.2 had never informed the Petitioner till 17th December, 2007 about the alleged short fall in payment of taxes and interest on the additional income disclosed by the Petitioner. S.R.JOSHI 5 of 14
13 However, Respondent No.1, by its Order dated 11th January, 2008, held that the proceedings arising out of the two Applications of the Petitioner had abated in accordance with the provisions of Section 245HA (1)(ii) of the Act and directed that the Assessing Officer should now dispose of the cases in accordance with the provisions of sub-sections (2), (3) and (4) of Section 245HA of the Act.
14 The Petitioner filed the present Writ Petition on 25th March,
2008. By an order dated 27th March, 2008, this Court issued Rule and by way of interim relief directed that, during the pendency of the Petition, Respondent No.1 shall not treat the Settlement Applications filed by the Petitioner as having abated.
15 In paragraph 20 and ground ‘E’ of the Writ Petition, the Petitioner had challenged the validity of Section 245-D (2D) and Section 245HHA of the Act, even though no declaration has been sought in the Petition for declaring these provisions as being ultra vires the Constitution of India. However, Mr. Ajay Singh, appearing on behalf of the Petitioner, submitted that the said challenge was not being pressed by the Petitioner.
16 The main submission of Mr. Singh was based on the provisions of Section 245-D (2D) of the Act. Mr. Singh submitted that, under the provisions of Section 245D (2D) of the Act, an application filed S.R.JOSHI 6 of 14 under sub-section (1) of Section 245C of the Act had to be allowed to be further proceeded with if the additional tax on the income disclosed in such an application and the interest thereon is paid on or before the 31st day of July, 2007.
17 Mr. Singh submitted that, by the Order dated 30th November 2006, Respondent No.1 had directed that the Petitioner shall within 35 days of the receipt of the Order pay additional amount of tax payable on the income disclosed in the application. It must mean that the additional tax had to be calculated and paid by the Petitioner. If the taxes and interest as calculated by the Petitioner are paid, there could not be any default in payment of taxes and interest. If, according to Respondent No.1 or Respondent No.2, there was a shortfall, it was incumbent on the part of the Respondents to inform the Petitioner about the alleged shortfall. Without any such intimation to the Petitioner, it could not be stated that there was shortfall in payment of tax and interest.
18 Mr. Singh submitted that, the Petitioner had paid taxes calculated by him and had informed Respondent No.2 about the same by his letter dated 4th January 2007. Even in respect of the Application made by the Petitioner in respect of Assessment Year 2005-06, the Petitioner had paid the taxes on the additional income disclosed by it. Mr. S.R.JOSHI 7 of 14 Singh submitted that, in these circumstances, the Petitioner had complied with the provisions of Section 245D (2D) of the Act and, therefore, the Applications of the Petitioner under Section 245C(1) of the Act ought to have been allowed to proceed further. Mr. Singh submitted that the Order dated 11th January, 2008 passed by Respondent No.1 holding that the Applications filed by the Petitioner had abated in accordance with the provisions of Section 245HA (1)(ii) of the Act was erroneous and contrary to the provisions of Section 245D(2D) of the Act.
19 On the other hand, Mr. Suresh Kumar supported the said Order dated 11th January, 2008 passed by Respondent No.1 and submitted that, since the Petitioner had not paid the taxes and interest as calculated by the Revenue by its letter dated 18th December, 2007, the Applications of the Petitioner could not be allowed to be further proceeded with under the provisions of Section 245D(2D) of the Act. Therefore, Respondent No.1 had correctly held that the Applications had abated in accordance with the provisions of Section 245HA(1)(ii) of the Act.
20 The applicable provisions will be Section 245D(2D) of the Act. This is because an order under sub-section (1) of Section 245D had been passed on 30th November 2006 i.e. before the amendment by the Finance Act, 2007 that came into force with effect from 1st June 2007, S.R.JOSHI 8 of 14 admitting the application and allowing it to be proceeded with. Section 245D(2D) of the Act reads as under:- “(2D) Where an application was made under subsection (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June 2007, but an order under the provisions of sub-section (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007.”
21 The provisions of Section 245D (2D) of the Act require that for an Application made under sub-section (1) of Section 245C of the Act to be allowed to be further proceeded with, the additional tax on the income disclosed in such application and the interest thereon had to be paid on or before 31st day of July, 2007. Sub-section (2D) says “….unless the additional tax on the income disclosed in such application and the interest thereon, is … paid on or before 31st day of July 2007”. Therefore what has to be paid before 31st July 2007 is the additional amount of tax on the income disclosed ‘in such application’ and the interest S.R.JOSHI 9 of 14 thereon. This is what Respondent No.1 also has understood because paragraph 8 of the Order dated 30th November 2006 passed by Respondent no.1, allowing the application of the Petitioner to be proceeded with reads as under:
Therefore, what has to be paid before 31st July 2007 is the amount of income tax disclosed in the application and nothing more.
22 In the present case, the Petitioner paid the additional tax and interest on the income disclosed by him in his Applications for Assessment Years 2002-2003 upto 2005-2006 before 31st July, 2007 as per his calculations. On or before 31st July, 2007, the Respondents did not give S.R.JOSHI 10 of 14 any intimation to the Petitioner that there was any short fall in the tax and interest paid by the Petitioner as per the income disclosed in his Applications. Much later, it was only by his letter dated 18th December, 2007 that Respondent No.2 intimated to the Petitioner what, according to Respondent No.2, was the correct tax and interest to be paid by the Petitioner under the provisions of Section 245D (2D) of the Act. Further, one day after the said intimation, Respondent No.1 held a hearing on 19th December, 2007 and by its Order dated 11th January, 2008 came to the conclusion that the proceedings arising out of the two Applications filed by the Petitioner had abated in accordance with the provisions of Section 245HA(1)(ii) of the Act.
23 In our view, the Petitioner had complied with the provisions of Section 245D(2D) of the Act by paying the additional tax and interest on the income disclosed by him in his Applications before 31st July, 2007 as per his calculations, as required by Section 245D(2D) of the Act, and that is what was required of the Petitioner. Therefore, his Applications have to be allowed to be further proceeded with. This is more so, as, at no point of time prior to 31st July, 2007, the Respondents intimated to the Petitioner that the taxes and interest paid by him on the additional income disclosed by him in his Applications were not correct. In our S.R.JOSHI 11 of 14 view, the fact that Respondent No.2 intimated to the Petitioner by his letter dated 18th December 2007 what, according to Respondent No.2, was the correct tax and interest to be paid by the Petitioner under the provisions of Section 245D(2D) of the Act, is irrelevant. In our view, it is absurd to interpret the provisions of Section 245D(2D) as suggested by Respondents. How is one expected to know before 31st July 2007, the figure disclosed only in December 2007. Therefore, it says “disclosed in the application.”
24 In these circumstances, in our view, the Order dated 11th January, 2008, which holds that the proceedings arising out of the two Applications filed by the Petitioner had abated in accordance with provisions of Section 245HA(1)(ii) of the Act,is erroneous and contrary to the provisions of Section 245D (2D) of the Act.
25 Section 245HA(1)(ii) of the Act, inter alia, provides that the proceedings before the Settlement Commission would abate if the application made under Section 245C is not allowed to be proceeded with under sub-section (2D) of Section 245D of the Act. Since, as stated hereinabove, the Petitioner had complied with the requirements of Section 245D(2D) of the Act, Respondent No.1 ought to have allowed the Applications of the Petitioner to be further proceeded with and wrongly S.R.JOSHI 12 of 14 came to the conclusion that the same had abated in accordance with the provisions of Section 245HA(1)(ii) of the Act.
26 For the aforesaid reasons, the said Order dated 11th January, 2008 is required to be quashed and set aside. Therefore, the Rule issued in this Petition is made absolute in terms of prayer clause (A) of the Petition, which reads as under:- “(A) This Hon’ble Court may be pleased to issue order Article 226 of the Constitution of India an appropriate direction, order or writ including a writ in the nature of Certiorari calling for the records of the case and after satisfying itself as to the legality thereof, quash and set aside the order dt. 11.1.2008 (Ex.G) passed by the Respondent No.1 u/s. 245HA of the Act holding that the Applications filed u/s. 245C of the Act have abated.”
27 We direct the matter be placed before the Interim Board for Settlement constituted under Section 245AA for consideration. Since the matter is old, Petitioner shall file copies of the Applications that were originally filed on 17th May, 2006 and 22nd March, 2007 before the Board within two weeks of this order being uploaded. The photocopy shall be certified as true copy by the Advocates/ Chartered Accountant of the Petitioner. The Interim Board shall dispose the Applications on merits in accordance with law. S.R.JOSHI 13 of 14
28 In the facts and circumstances of the case, there shall be no order as to costs. (FIRDOSH P. POONIWALLA,J.) (K. R. SHRIRAM,J.) S.R.JOSHI 14 of 14