PRABHUDAS VELJIBHAI CHAUDHARI vs. PRINCIPAL COMMISSIONER OF INCOME TAX 4

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SCA/16279/2018HC GujaratGJHC24063850201804 February 2021Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE ILESH J. VORA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the impugned order of the Principal Commissioner dated 20.03.2018 was to be quashed and set aside. The matter was remitted back to the Principal Commissioner of Income Tax for adjudicating the issue with regard to Section 50C of the Act. The Court clarified that the issue with regard to limitation stood concluded and would not be reopened by the Principal Commissioner. The Court explicitly stated that it had not expressed any opinion on the merits of the Section 50C issue, leaving it to the Principal Commissioner to decide in accordance with the law. Consequently, the issue of penalty, which was consequential to the Section 50C addition, was also to be decided afresh by the Principal Commissioner.

What were the facts?

The assessee, Prabhudas Veljibhai Chaudhari, filed a writ application challenging an order dated 20.03.2018 passed by the Principal Commissioner of Income Tax (PCIT), Ahmedabad. This order imposed a penalty under Section 271(1)(c) of the Income Tax Act, 1961, following an addition of Rs. 48,48,309 made under Section 50C of the Act. The PCIT had initially rejected the assessee's revision petition filed under Section 264 of the Act due to a delay of 29 days. However, the PCIT proceeded to decide the revision petition on merits, addressing issues related to Section 54B and Section 50C of the Act. The High Court had previously, on 18.01.2021, remitted the matter to the PCIT concerning the Section 50C issue.

What were the issues?

1. Whether the Principal Commissioner erred in rejecting the revision petition filed under Section 264 of the Income Tax Act, 1961, on grounds of limitation, despite proceeding to decide the matter on merits? 2. Whether the addition of Rs. 48,48,309 under Section 50C of the Act was justified, particularly concerning the applicability of the first proviso to Section 50C(1) regarding the date of agreement versus the date of registration and the mode of payment? 3. Whether the penalty imposed under Section 271(1)(c) of the Act was sustainable in light of the dispute regarding the addition under Section 50C? Assessee's contentions: The assessee argued that the PCIT did not record any finding on the issue of Section 50C and therefore, the matter should be remitted for adjudication on this specific issue. The assessee also relied on the first proviso to Section 50C(1) and contended that the Jantri rates revised on the date of registration could not be taken into account, as the payment was made through an account payee cheque. Revenue's contentions: The revenue did not explicitly record separate contentions for each issue, but their participation implies a defense of the PCIT's order. The judgment notes that the PCIT rejected the revision petition on limitation but then decided it on merits.

Which sections of the Income-tax Act were involved?

Section 264,Section 271(1)(c),Section 50C,Section 54B,Section 54

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/SCA/16279/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO.  16279 of 2018 ========================================================= = PRABHUDAS VELJIBHAI CHAUDHARI  Versus PRINCIPAL COMMISSIONER OF INCOME TAX 4  ========================================================== Appearance: MR MANISH J SHAH(1320) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA   Date : 04/02/2021

ORAL ORDER

(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)

1.

The subject matter of challenge in the present writ   application   is   to   the   order   dated 20.03.2018 passed by the Principal Commissioner of Income Tax, Ahmedabad, under Section 264 of the Income Tax Act, 1965 imposing penalty under Section 271 (1)(c) of the Act, on addition of Rs.48,48,309/­   made   under   Section   50C   of   the Act.

2.

In the aforesaid context, we may state that in the case of the very same writ applicant herein before us, we decided the issue of Section 50C of   the   Act   by   remitting   the   matter   to   the Principal   Commissioner.   We   quote   the   order passed by this Court on 18.01.2021:

“1. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs: “A) this Hon’ble Court be pleased to call for   the   records   of   the   proceedings,   look into them and be pleased to issue a writ of certiorari   or   any   other   appropriate   writ, order   or   direction   quashing   the   order   of Respondent at Annexure – H. B) this Hon’ble Court be further pleased to hold   that  Rs.48,48,309/­   is   wrongly   added u/s. 50C in the hands of the petitioner or in   the   alternative   this   Hon’ble   Court   be pleased to condone the delay in filing the application   before   the   Respondent   and   set aside the proceedings to the Respondent to be decided afresh on the issue of Section 50C with a direction that the same  may be considered on merits. C) Pending  the  final   hearing   and   final disposal of this  application, this Hon’ble Court be pleased to ask the Respondent and his subordinate officers to maintain status quo   in   any   follow­up   action   on   the petitioner consequent upon the above order at Annexure – H. D) this   Hon’ble   Court   be   pleased   to grant any further or  other relief as this Hon’ble Court deems just and proper in the interest   of   justice,   and   E)   this   Hon’ble Court be pleased to allow this application with costs against the respondent.”

2.

We need not delve much into the facts of this  case as  the order  passed   by a co­ordinate Bench   of   this   Court   dated   08.10.2018   while issuing   notice   is   quite   self   explanatory.   The order dated 08.10.2018 reads thus :

“1. The petitioner has challenged an order dated  19.03.2018 passed by the respondent Principal   Commissioner   of   Income   Tax rejecting

the petitioner’s

revision petition   under   section   264   of   the   Income Tax   Act,   1961   (’the   Act’   for   short).   In such order, the Commissioner noted that the revision   petition   was   filed   beyond   the period of limitation by 29 days. He was not convinced   by   the   explanation   rendered   by the petitioner

for such delay. Nevertheless,   he   proceeded   to   decide   the revision   petition   on   merits   as   well.   The petitioner had raised two issues. One was the decision of the Assessing Officer not granting exemption under section 54B of the Act and the other being the applicability of section 50C of the Act in relation to sell of land by the petitioner.

2.

Counsel for the petitioner submitted that he does not dispute the Commissioner’s order in connection with the claim of the petitioner   under   section   54   of   the   Act. However,   with   respect   to   revised   capital gain under section 50C of the Act, counsel relied on the 1st proviso to subsection (1) of   section   50C   of   the   Act   which   was inserted   with   effect   from   01.04.2000,   as per which, if the date of agreement fixing the amount of consideration and the date of registration   for   the   transfer   of   capital asset are not the same, the value adopted or   assessed   or   assessable   by   the   stamp valuation   authority   on   the   date   of agreement may be taken for the purposes of computing full value of consideration for such transfer. Counsel pointed out that the requirement   of   the   further   proviso   for applicability of the said proviso viz. That the payment should have been made through account   payee   cheque   or   bank   draft   or through   electronic   clearance   system   was satisfied in the present case. According to the petitioner therefore the Jantri rates as revised on the date of registration of the   sale   deed   could   not   have   been   taken into account. Counsel pointed out that the Commissioner in the impugned order though recorded   this   contention,   did   not   decide the same.

3.

NOTICE,   returnable   on   29.10.2018. Direct service is permitted.”

3.

We   have   heard   Mr.   Manish   J.   Shah,   the learned counsel appearing for the writ applicant and Mr. Manish Bhatt, the learned Senior  counsel assisted   by   Mrs.   Mauna   M.   Bhatt,   the   learned Senior   Standing   counsel   appearing   for   the respondent.

4.

A very unusual order came to be passed by the   Principal Commissioner   of   Income   Tax, Ahmedabad   while   disposing   of   the   Revision Application  filed  by the Assessee  under  Section 264   of   the   Act,   1961. We   may   first   quote   the relevant observations with regard to the delay in filing the application under Section 264 of the Act. The observations are as under: “As per provision contained in sub section (3) of section 264 application for revision under this section by the assessee, must be made within one year from the date on which the order in question  was communicated to him. In this case, the assessment order was served   on   29.01.2016   upon   the   assessee. Thus,   assessee   was   required   to   file application on or before 29.01.2017 but it has filed on 27.02.2017. Thus, there was a delay of 29 days in filing the application. Assessee   himself   admitted   that   the application was late and has not given any plausive/concrete   reason   except   health ground   with   supporting   evidence   for   this delay/lapse.  Thus, for want of justifiable reasons, assessee  application is barred by time   limitation   and   not   maintainable   as such,   the   case   of   the   assessee   does   not fall   in   proviso   of   sub   section   (3)   of Section 264 of the I.T. Act, and hence, the same is rejected.”

5.

Thus,  although  the  Principal   Commissioner recorded a finding that the revision application was   time   barred   and   the   same   was   liable   to   be rejected on such ground and in fact came to be rejected,   yet   the  Principal   Commissioner, thereafter   proceeded   to   consider   the   matter   on merits.

6.

As   noted   above,   there   were   two   issues before   the   Principal Commissioner,   one   with regard to the claim under Section 54 of the Act and another with respect to the revised capital gain under Section 50C of the Act.

7.

Mr.   Manish   Shah,   the   learned   counsel appearing   for   the   writ  applicant   would   submit that he is confining his case only to Section 50C of   the   Act.   According   to   him,   the   Principal Commissioner   has   not   recorded   any   finding,   as regards   Section   50C   of   the   Act   and   for  this limited   purpose,   the   matter   may   be   remitted   so that the issue of Section 50C can be considered.

8.

Mr.   Manish   Bhatt,   the   learned   Senior Counsel would submit that as the only issue that needs to be now to be decided is with regard to Section 50C of the Act, let the matter be sent back to the Principal Commissioner.

9.

For   the   forgoing   reasons,   this   writ application succeeds in part. The impugned order passed   by   the   Principal   Commissioner,  Ahmedabad dated 19th March, 2018, Annexure – H to this writ application,  page­99,  is hereby  quashed  and set aside.   The   matter   is   remitted   to   the   Principal Commissioner  of Income  Tax­4, Ahmedabad  for the purpose of adjudicating the issue with regard to Section 50C of the Act. 10.At  this  stage,  we may  once clarify  again  so that   there   may   not   be   any   confusion   in   future that the issue with regard to limitation  stands concluded.   The   issue   with   regard   to   limitation shall  not  be respondent­opened  by the  Principal Commissioner while adjudicating the claim of the writ applicant with respect to Section 50C of the Act. In this regard, we clarify that we have not expressed any opinion  on merits. We leave it to the Principal Commissioner to decide the same in accordance with law.”

3.

Thus, we are of the view that as the issue with regard   to   Section   50C   of   the   Act   is   to   be decided   afresh   by   the   Principal   Commissioner, the issue with regard to penalty also should be decided afresh by the Principal Commissioner.

4.

In the result, this writ application succeeds in part. The impugned order dated (at Annexure­A) dated 20.03.2018 is hereby quashed and set aside and   the   matter   is   remitted   to   the   Principal Commissioner   of   Income   Tax,   Ahmedabad.   The Principal   Commissioner   shall   decide   both   the issues with respect to Section 50C of the Act as well as the issue with regard to the penalty.

5.

With   the   above,   this   writ   application   stands disposed of. (J. B. PARDIWALA, J) (ILESH J. VORA,J) SUCHIT

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