LAVIA INFRA LTD vs. THE CENTRAL BOARD OF DIRECT TAXES

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WP(C)/2006/2024HC KeralaKLHC01004276202417 January 2024Author: HONOURABLE MR. JUSTICE D. K. SINGH5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the writ petition, granting the petitioner liberty to file its return and submit all requisite documents in response to the notice dated 09.01.2024 within a period of six weeks from the date of the order (i.e., by 16.02.2024). The court reasoned that this extension would serve as a last chance for the petitioner to comply. The court explicitly stated that failing to meet this deadline would result in the revenue proceeding to finalize the assessment under Section 144 of the Income Tax Act. No specific finding was made on the merits of the unexplained income, as the matter was disposed of procedurally.

What were the facts?

The petitioner, Lavia Infra Ltd., is a company incorporated under the Companies Act, 2013, engaged in trading construction materials and hardware. The company faced financial difficulties, leading to proceedings under the SARFAESI Act, 2002, with Bank of Baroda filing an application for recovery of ₹20.13 crores. The petitioner failed to file its income tax return for assessment year 2019-2020 and did not respond to notices under Section 148 of the SARFAESI Act and Section 148 and 142(1) of the Income Tax Act, 1961. A show cause notice under Section 144 proposed treating ₹4,33,57,333/- as unexplained income under Section 69A. The petitioner sought time to submit documents, citing the Managing Director's mental illness.

What were the issues?

1. Whether the petitioner should be granted an extension of time to file its income tax return and submit supporting documents for assessment year 2019-2020, considering the alleged mental illness of its Managing Director? (Mixed question of law and fact, concerning principles of natural justice and procedural fairness under the Income Tax Act, 1961). Assessee's Contention: The petitioner argued that due to the Managing Director's mental illness, relevant documents could not be submitted. They requested a further six weeks as a last chance to produce these documents. Revenue's Contention: The revenue stated that the petitioner had been seeking time for over a year without complying with notices and had not filed its return, leading to an unexplained income of ₹4,33,57,333/-. However, the revenue left it to the court's discretion to grant reasonable time as a last chance for the petitioner to submit documents.

Which sections of the Income-tax Act were involved?

Section 148,Section 142(1),Section 144,Section 69A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH WEDNESDAY, THE 17TH DAY OF JANUARY 2024 / 27TH POUSHA, 1945 WP(C) NO. 2006 OF 2024 PETITIONER/S: LAVIA INFRA LTD N K TOWER, KALLUVATHUKKAL KOLLAM, REPRESENTED BY ITS MANAGING DIRECTOR SATHEESAN V, PIN - 691578 BY ADVS. K.P.PRADEEP T.T.BIJU T.THASMI M.J.ANOOPA RESPONDENT/S: 1 THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE, MINISTRY OF FINANCE GOVERNMENT OF INDIA, NORTH BLOCK NEW DELHI- , REPRESENTED BY ITS CHAIRMAN, PIN - 110001 2 PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX KOCHI AAYAKAR BHAVAN, OLD RAILWAY STATION ROAD, KOCHI-, PIN - 682018 3 INCOME TAX OFFICER WARD 1 & TPS KOLLAM, AAYAKAR BHAVAN, INCOME TAX OFFICE, NEAR KARBALA JUNCTION, RAILWAY STATION ROAD, KOLLAM, PIN - 691001 4 NATIONAL FACELESS ASSESSMENT CENTRE (NFAC), DELHI, ROOM NO. 401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI- REPRESENTED BY PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (NAFAC), PIN - 110003 5 INCOME TAX OFFICER ASSESSMENT UNIT NATIONAL FACELESS ASSESSMENT CENTRE (NAFAC), DELHI, ROOM NO. 401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI, PIN - 110003 OTHER PRESENT: AJITH KUMAR-SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 17.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 2006 OF 2024 2

JUDGMENT The petitioner company got incorporated under the provisions of the Companies Act, 2013. The petitioner company is engaged in trading of construction materials and hardware goods. It appears that the petitioner company had a run with bad financial management, and therefore, the Bank of India has proceeded against the company under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. An application had been filed by the Bank of Baroda for recovery of 20.13 crores.

2.

The petitioner did not file the return of his income for the assessment year 2019-2020. The petitioner was issued with notice under Section 148 of the SARFAESI Act, however, no reply was filed, and thereafter, an order under Section 148(b) came to be passed, as evident in Ext.P8. 3. The petitioner, thereafter, was issued with a notice under Section 148 for filing the return, and the petitioner did not file the return nor complied with the notices issued under Section 142(1) of the Income Tax Act,1961. 4.A show cause notice under Section 144 of the Income Tax Act has been issued on 26.12.2023 to the petitioner giving him an opportunity to show, why the assessment should not be completed

WP(C) NO. 2006 OF 2024 3 under Section 144 of the Income Tax Act and an amount of Rs. 4,33,57,333/- should not be treated as an unexplained income under Section 69A of the Income Tax Act. Petitioner has filed a reply to the said notice on 05.01.2024. Thereafter, notice dated 09.01.2024 has been issued for adding the variation as pointed out ie, Rs.4,33,57,333/-. The petitioner has not filed any reply to the said show cause notice, and the petitioner has sought time till 20.01.2024. 5.I have heard Dr. K.P Pradeep, learned counsel for the petitioner and the Adv. Ajith Kumar, the learned Standing counsel for the respondents. 6.Dr. K.P Pradeep, learned counsel for the petitioner submits that the Managing Director of the company is suffering with certain kind of mental illness and for that reason the relevant documents could not be submitted by the petitioner’s company before the Income Tax Department. The petitioner company maybe granted a further time of six weeks for producing the relevant documents, as a last chance. Considering the illness of the Managing Director.

7.

Adv. Ajith Kumar, the learned Standing counsel for the respondents submits, that for the past one year the petitioner has been seeking time and has not complied with the notices issued to him. The petitioner has not filed its return. There is an unexplained income of the petitioner of Rs.4,33,57,333/-. He however submits

WP(C) NO. 2006 OF 2024 4 that he would leave it to the discretion of this court to grant reasonable time to the petitioner, as a last chance to submit the requisite documents in support of its case. Considering the aforesaid submission, the present writ petition is disposed of, with liberty to the petitioner to file return and submit all the requisite documents in response to the notice dated 09.01.2024, within a period of six weeks from today (16.02.2024), failing which, the revenue will proceed to finalize the assessment under Section 144 of the Income Tax Act. DINESH KUMAR SINGH JUDGE SJ

WP(C) NO. 2006 OF 2024 5

Appendix — schedule of exhibits
APPENDIX OF WP(C) 2006/2024 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE CERTIFICATE OF INCORPORATION DATED 5-4-2018 ISSUED TO THE PETITIONER Exhibit P2 TRUE COPY OF THE NOTICE SAMB /EKM/2018- 19/680 DATED 01-03-2019 ISSUED BY THE STATE BANK OF INDIA Exhibit P3 TRUE COPY OF THE CURRENT DETAILS OF THE PETITIONER COMPANY IN THE RECORDS OF MINISTRY OF CORPORATE AFFAIRS Exhibit P4 TRUE COPY OF THE NOTICE DATED 27-1-2023 ISSUED UNDER SECTION 133 (6) Exhibit P5 TRUE COPY OF THE REPLY DATED 4-2-2023 SUBMITTED BY THE PETITIONER Exhibit P5(a) TRUE COPY OF THE REPLY DATED 13-03-2023 Exhibit P6 TRUE COPY OF THE NOTICE DATED 5-3-2023 ISSUED TO THE PETITIONER COMPANY Exhibit P7 TRUE COPY OF THE REPLY DATED 13-03-2023 SUBMITTED BY THE PETITIONER COMPANY Exhibit P8 TRUE COPY OF THE ORDER DATED 16-3-2023 ISSUED BY THE 3RD RESPONDENT Exhibit P9 TRUE COPY OF THE NOTICE DATED 16-3-2023 ISSUED BY THE 3RD RESPONDENT Exhibit P10 TRUE COPY OF THE NOTICE DATED 26-09-2023 ISSUED UNDER SECTION 142 (1) OF THE INCOME TAX ACT, 1961 Exhibit P11 TRUE COPY OF THE NOTICE DATED 20-10-2023 ISSUED TO THE PETITIONER Exhibit P12 TRUE COPY OF THE NOTICE DATED 22-11-2023 ISSUED TO THE PETITIONER Exhibit P13 P13 TRUE COPY OF THE REPLY DATED 30-11-2023 SUBMITTED BY THE PETITIONER Exhibit P14 TRUE COPY OF THE NOTICE DATED 26-12-2023 ISSUED TO THE PETITIONER COMPANY Exhibit P15 TRUE COPY OF THE REPLY SUBMITTED IN EXT P14 ON 5-1-2024 Exhibit P16 TRUE COPY OF THE NOTICE DATED 9-1-2024 ISSUED TO THE PETITIONER Exhibit P17 TRUE COPY OF THE MEDICAL CERTFICATE DATED 13-1-2024 ISSUED BY THE SREEKANTAPURAM HOSPITAL, MAVELIKARA

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