THE COMMISSIONER OF INCOMETAX vs. K.J. MARYKUTTY

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN MONDAY, THE 2ND MARCH 2009 / 11TH PHALGUNA 1930 ITR.No. 53 of 2000() -------------------- (AGAINST THE ORDER IN R.A.NO.71/COCH//1998 IN ITA.402/COCH/96 of I.T.A.TRIBUNAL,COCHIN BENCH ) .................... APPLICANT(S): -------------- THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI. JOSE JOSEPH, SC FOR IT RESPONDENT(S): --------------- SMT.K.J.MARYKUTTY, KOITHARA HOUSE, KADAVANTHARA, COCHIN 20 (DIED) ADDL. 2. SEBI JOSEPH, LEGAL HEIR AND EXECUTOR, KOITHARA HOUSE (WEST) KOITHARA ROAD, KOCHUKADAVANTHARA , KOCHI 36 ADDL. 3. SABU JOSEPH, KOITHARA HOUSE (WEST), DO.DO. ADDL. 4. SAJAN JOSEPH, DO.DO. ADDL. 5. SINDHU JOSEPH, KOITHARA HOUSE (WEST), DO.DO. ADDL. R2 TO R5 ARE IMPLEADED AS SUCH AS PER ORDER DATED 23.7.2004 ON I.A.NO. 219 OF2004 BY ADV. SRI.K.VINOD CHANDRAN FOR R2 TO 5 THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 02/03/2009, ALONG WITH ITR NO. 54 OF 2000 ITR NO. 55 OF 2000 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C .N. RAMACHANDRAN NAIR & K. SURENDRA MOHAN, JJ. -------------------------------------------- I.T.R. Nos. 53,54 & 55 OF 2000 -------------------------------------------- Dated this the 3rd day of March, 2009 JUDGMENT Ramachandran Nair,J. In the connected reference cases, the question raised is whether the Tribunal was justified in cancelling an order issued by the Commissioner under Section 263 of the Income Tax Act pertaining to assessments made in respect of one Smt. Marykutty, who is no more, for the assessment years 1985-86 to 1988-89. Even though assessments pertain to four years, reference cases before us are only for three years, except the assessment for 1985-86. After filing the original returns, the late assessee filed revised returns declaring interest income received on enhancement of compensation received in land acquisition proceedings. The tax was also paid along with revised returns. Since the revised returns filed were beyond time, the assessing officer did not act upon the same. However, taking the information available from the revised returns, the assessing officer issued notice under Section 148

2 proposing to make income escaping assessment under Section 147 of the Act. However, the assessing officer passed orders on 7.2.1994 dropping the proceedings to reopen the assessment. This order was not communicated to the late assessee. Later, the Commissioner invoked power under Section 263 of the Act and set aside the proceedings of the assessing officer dropping Section 147 proceedings initiated by him. The late assessee questioned the order of the Commissioner under Section 263 before the Tribunal on the ground that an order not communicated to the assessee cannot be revised under Section 263 proceedings. The Tribunal allowed the case of the late assessee. It is against this common order of the Tribunal that the above three reference cases are filed by the revenue. 2. We have heard senior counsel appearing for the revenue and counsel appearing for one of the legal heirs, who got impleaded after the death of the assessee. Counsel appearing for the legal heir who is already on record submitted that the deceased assessee has left other legal heirs also to be impleaded before proceeding with the case. On going through the orders and after hearing counsel on both sides, we do

3 not propose to answer the questions for the following reasons. 3. The assessee is no more and assessments pertain to the period more than 20 years back. Along with revised returns the assessee had in fact remitted tax due and even though revised returns were not accepted or revised assessments made, the late assessee has not made any application for refund of the tax paid. In other words, tax on the additional income sought to be assessed under Section 147 proceedings initiated by the assessing officer has already been remitted to the department. The balance grievance of the department is that in dropping the proceedings the assessing officer failed to charge interest for non-payment of advance tax and tax due along with revised returns. In fact assessing officer has power to waive interest under these provisions if the assessee submits grounds in accordance with rules. It is not known whether the assessing officer has dropped Section 147 proceedings by taking into account these aspects of the matter. At this distance of time, we feel even if we answer the questions in favour of the revenue, the matter will go back to the Tribunal for disposal of the ; appeals and thereafter the Officer will have to revise the assessments

4 giving credit for the tax already paid and charging interest or grant waiver of interest, if the legal heirs file application for waiver. If interest is partially or fully waived, Revenue gets no benefit in the continued litigation to be initiated pursuant to our judgment as tax is already paid. In the circumstances, and since more than 20 years have elapsed and original assessee is no more, and tax is already paid, we do not find any justification to issue notice in respect of opening of a matter which does not involve any sizable stakes towards interest for the revenue. We therefore dispose of the reference cases by declining to answer the questions referred. (C.N.RAMACHANDRAN NAIR) Judge. (K. SURENDRA MOHAN) Judge. kk