M/S. GOBIND BUILDERS AND DEVELOPERS vs. INCOME TAX SETTLEMENT COMMISSION AND ORS.

ORAL JUDGMENT (PER F.I. REBELLO, J.):

.

Rule. Heard forthwith.

for the assessment years 2003-2004, 2004-2005 and 2005-2006 respectively on 30th September, 2003, 26th

September, 2004 and 30th October, 2005. There was a search and seizure operation on the premises of the petitioner on 9th December, 2004 and 10th December,

2004, as a result of which certain books and papers

were found and seized. The petitioners contend that their firm came in existence on 1st May, 2002. During the search a diary relating to receipts and expenditure of the firm on its project was also seized. The entries in the diary are partly recorded

in the books of accounts on the basis of which regular returns were filed.

According to the petitioner as the entries in the diary, its reconciliation with books of accounts and their

interpretation involved complex investigation, the petitioner approached the respondent No.1 by filing

an application dated 14th September, 2006 under Section 245C of the Income Tax Act, hereinafter

referred to as the Act, under the cover of their

letter of their Chartered Accountant dated 20th

September, 2006. Uploaded on - 22/08/2020

under Section 245C of the Act. Section 245-C of the Act requires that where the income disclosed in the application relates to only one previous year and if the applicant has furnished a return in respect of the total income of that year, additional tax is to be calculated on the aggregate of the total income

returned and the income disclosed in the application

as if such aggregate were the total income. The petitioners accordingly took the returned income for the assessment year 2004-2005 which was the only

assessment year (P.Y.1.4.2003 to 31.3.2004) being the loss of Rs.93,112/- and added the additionally

disclosed income of Rs.53,57,375/- and arrived at the figure of Rs.52,64,263/- wherefrom brought forward

loss of Rs.93,193/- relating to the assessment year

2003-2004 was deducted under section 72 to arrive at the aggregate total income as required by Section 245-C. According to the petitioner Section 2(45)

defines "Total Income" to mean the total amount of aggregate total income of Rs.51,70,820/- at Rs.18,55,032/- and paid Rs.25,59,932/- together with interest on 26th May, 2007 i.e.well within time. A Uploaded on - 22/08/2020 letter dated 11th August, 2007 was sent to the Assessing Officer to that effect.

.

Prior to that the petitioner’s Chartered

Accountants M/s.Khandelwal Jain & Associates wrote a letter to the Respondent No.1 dated 11th July, 2007

bringing to its notice that in view of the amendment

made by Finance Act, 2007 to Section 245D (2D) there

was an obligation to pay the additional tax and the interest on or before 31st July, 2007 and that they

have already paid additional tax and interest on the income declared in the settlement petition and further requested the respondent No.1 to confirm

whether the said obligation has been complied with.

The petitioner also stated that in case it is found

that there is short fall in payment of additional

tax/interest, the applicant may kindly be intimated

so that the same can be paid and made good on or before 31st July, 2007. 4. The petitioners received a letter dated 21st

September, 2007 from respondent No.1 setting out that on examination of the application it is seen that there is no proof of payment of additional tax and asking the applicant to show cause why the application should not be treated as abated. The petitioner promptly replied by letter dated 3rd

October, 2007 stating that the additional tax and interest was paid on 26th May, 2007 and that proof of payment was produced on 13th August, 2007 and also Uploaded on - 22/08/2020 inviting attention to the letter dated 11th July,

passed an order on 28th November, 2007 holding that the petitioner’s application stood abated. It is this order which is the subject matter of the present

petition.

No.1 while rejecting the petitioners application as abated proceeded on the footing that on a plain

reading of the relevant provisions of the Act as reproduced in the order, it was clear that for the purpose of appreciating the compliance of the provisions of Section 245D(2A) carried forward loss

of an earlier year is not to be taken into account.

The petitioner had disclosed the income of Rs.53,57,375/- while taxes etc., have been paid on income of rs.51,71,070/- after adjusting not only the loss (Rs.93,112/-) of the relevant year but also the carry forward loss (Rs.93,193/-) of the preceding

assessment year. The respondent No.1 held that if the carried forward loss of the earlier year is ignored then the tax paid is rendered inadequate

thereby resulting in non-compliance of the provisions

of Section 245D(2A) and accordingly held that the proceedings abated.

(i) Whether the carry forward loss is not to be taken into account for computing the total

income.

(ii) Whether any payment made after 31st

July, 2007 can be considered for the purpose

of compliance with the requirement of Section 245-C(1).

Admittedly the excess amount based on the contentions

urged by the respondents was paid only on 13th

November, 2007 on payment of additional tax on Rs.92,317/- which is beyond the period prescribed in terms of Section 245-D(2A). The only contention

raised on behalf of the petitioners is by placing

reliance on the judgment of a learned Bench of the Karnataka High Court in the case of D.Komalakshi & D.Komalakshi & D.Komalakshi &

Anr. Anr. Anr. vs. Deputy Commissioner of Income-tax, 292 ITR vs. Deputy Commissioner of Income-tax, 292 ITR vs. Deputy Commissioner of Income-tax, 292 ITR

99 99 99 (Karnataka) (Karnataka) (Karnataka), where also the amount due and payable

was not paid on time. The learned Bench of the Karnataka High Court, however, granted four weeks

time to make payment of the admitted amount before

the authority. Section 245-D(2A) reads as under:-

"(2A). Where an application was made under Uploaded on - 22/08/2020 section 245C before the 1st day of June,

2007, but an order under the provisions of sub-section (1) of this section, as they

stood immediately before their amendment by the Finance Act, 2007, has not been made

before the 1st day of June, 2007, such application shall be deemed to have been allowed to be proceeded with if the additional tax on the income disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. Explanation.-- In respect of the applications

referred to in this sub-section, the 31st day

of July, 2007 shall be deemed to be the date

of the order of rejection or allowing the application to be proceeded with under sub-section (1)."

This sub-section along with some other sub-sections

to Section 245-D, were introduced by Finance Act,

2007 with effect from 1st June, 2007. The judgment

of the Division Bench of the Karnataka High Court is dated November 8, 2006 i.e. before the amendment.

That judgment, therefore, cannot be considered while

construing the provisions as amended. In our opinion

considering the mandate of Section 245-D(2A) the lprovision will have to be construed as mandatory,

meaning thereby that the additional tax had to be paid on or before 31st July, 2007. If that was not paid, in terms of Explanation, 31st July, 2007 shall Uploaded on - 22/08/2020 be deemed to be the date of the order of rejection.

There is, therefore, no discretion in the Respondent

No.1 to condone the delay or accept the additional

amount after 31st July, 2007 as the application

itself stands rejected by operation of law. Once

there being no power in the Respondent No.1 it is not possible to read a power in this Court in the exercise of the extra ordinary jurisdiction under Article 226 read with Article 227 of the Constitution

of India. The normal construction to be placed both

on literal construction and/or any other mode of construction is that the payment of additional tax

had to be made on or before 31st July, 2007. In the instant case that was not so done and consequently

the fact that the petitioners paid the purported

shortfall on 13th November,

2007 would be inconsequential and of no effect.

remains whether the tax paid on the income as declared by the petitioners is in terms of Section 245-C read with Section 245-D. What, therefore, is the meaning of the expression "Income" on which the tax had to be paid or the additional amount of Income

Tax payable on the income disclosed. In the normal

course the petitioner under the provisions of the Act

was entitled to carry forward the loss while

computing the tax to be paid.

under Section 245-C read with Section 245-D of the Income Tax Act. We may firstly refer to the judgment

relied upon by the petitioner in the case of Commissioner Commissioner Commissioner of Income-tax vs. Shirke Construction of Income-tax vs. Shirke Construction of Income-tax vs. Shirke Construction Section 80AB and would be governed by Section 80AB;

and (ii) losses were to be set off against the profits earned from export of self-manufactured

goods. Based on that it is submitted that while

considering the income it was open to the petitioners

to have set off the carry forward losses while

computing the total income and in that context the tax that had to be computed and paid had been correctly paid in terms of the income disclosed by the petitioners and consequently the petitioners

application could not have been treated as abated.

Section 245-C(1B) provides that in the event the applicant has not furnished a return in respect of the total income of that year, then, tax shall be calculated on the income disclosed in the application

as if such income were the total income. "Income"

has been defined under Section 2(45) of the I.T.

Act. In so far as Section 245-C is concerned the additional amount of income tax payable in respect of the income disclosed in the application related to the previous year in case where return has not been Uploaded on - 22/08/2020 filed the amount calculated under that clause and in case whether the return has been filed the amount of tax tax calculated on the total income return for that year. It would be clear, therefore, from considering the aforesaid provisions what is payable

is tax on the total income. That would mean that whatever allowance or disallowance that the assessee

is entitled to. If the assessee is entitled to carry

forward the loss of the previous year then the total

income has to be calculated in that manner. The Settlement Commission while considering as to whether

the tax has been paid as contemplated by Section 245D(2A) has to examine whether that tax is on the total income as disclosed. If the argument of the respondent-Revenue is to be accepted that would mean

that the assessee while working out the total income

if entitled to any deduction, would not be so entitled and because he has applied under Section 245-C would have to pay the tax on income which otherwise would not have been payable. In our

opinion this is not what Section 245C or for that matter Section 245D contemplates. The provisions

were enacted so as to enable tax compliance so that the additional tax is paid and the party can avail of the benefits including non-prosecution. A reading of the Section cannot result in holding that if otherwise the assessee was entitled to the benefits

of allowance or disallowance that cannot be considered for the purpose of working out the total

income under Section 245-C. Uploaded on - 22/08/2020 In our opinion the respondent NO.1 in holding

that the tax was also payable on the loss carried

forward totally ignored the imperative language of Section 245-C and 245-D. The tax payable would be on the income as set out in Section 245 of the Income

Tax Act. In the instant case if the petitioner was entitled to carry forward the loss of Rs.92,370/- the petitioner has correctly paid the tax and on this point there is no dispute. The only dispute was whether Petitioner could carry forward the loss of the preceding assessment year. In our opinion that could have been done by the assessee. Considering

the above in our opinion the finding recorded by respondent No.1 that the tax was not paid clearly

discloses an error of law apparent on the face of the record. The consequences is that finding recorded

that the application has abated, has to be set aside.

The application filed by the petitioner in the absence of any other reasons given by respondent No.1

for rejecting the application is to be treated as an application to be proceeded with.

(R.S.MOHITE, R.S.MOHITE, R.S.MOHITE, J.) J.) J.)

(F.I. (F.I. (F.I. REBELLO, J) REBELLO, J) REBELLO, J) Uploaded on - 22/08/2020 Powered by TCPDF (www.tcpdf.org)