ABRAHAM THOMAS vs. INCOME TAX OFFICER

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WP(C)/23704/2022HC KeralaKLHC01049329202227 July 2022Bench: HONOURABLE MR. JUSTICE GOPINATH P.5 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the proceedings initiated under Section 148A of the Income Tax Act and the consequent notice under Section 148 were unsustainable. The Court reasoned that there could be no escapement of income warranting the exercise of power under Section 148 for Assessment Year 2015-2016, particularly because the provisions of Section 56(2)(x) of the Income Tax Act, as they currently stand, were not applicable for that assessment year. The Court found that the difference between the actual consideration paid and the stamp duty valuation could not be taxed as income in the hands of the petitioner for the said assessment year. Consequently, the writ petition was allowed, and the impugned proceedings and notice were quashed. No issue was expressly left undecided.

What were the facts?

The petitioner, Abraham Thomas, a non-resident Indian, purchased an immovable property in Tuticorin for Rs. 1.82 crores during Assessment Year 2015-2016. The stamp duty valuation for the property was Rs. 2.29 crores under the Tamil Nadu Stamp (Prevention of under valuation of instruments) Act, 1968. The Income Tax Officer initiated proceedings under Section 148A of the Income Tax Act, alleging non-filing of return and potential income escapement. The petitioner responded, stating he was a non-resident and the difference between consideration and stamp duty valuation did not constitute income. He argued no income had escaped assessment, making Section 148 proceedings unwarranted.

What were the issues?

1. Whether the difference between the actual consideration paid for the property (Rs. 1.82 crores) and the stamp duty valuation (Rs. 2.29 crores) for Assessment Year 2015-2016 can be treated as income in the hands of the petitioner, thereby warranting proceedings under Section 148 of the Income Tax Act? Assessee's contention: The difference in stamp duty valuation does not constitute income in the hands of the petitioner. Proceedings under Section 148 are illegal and without jurisdiction, liable to be quashed under Article 226 of the Constitution of India. Revenue's contention: The Standing Counsel fairly conceded that the provisions of Section 56(2)(x) of the Income Tax Act, as they currently stand, were not applicable for Assessment Year 2015-2016. Therefore, the difference in consideration and stamp duty valuation could not be taxed in the hands of the petitioner for that assessment year.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 56(2)(x)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. WEDNESDAY, THE 27TH DAY OF JULY 2022 / 5TH SRAVANA, 1944 WP(C) NO. 23704 OF 2022 PETITIONER: ABRAHAM THOMAS AGED 62 YEARS G-80, PANAMPILLY NAGAR P.O., PANAMPILLY NAGAR, KOCHI, ERNAKULAM - 682 036, KERALA, REPRESENTED BY HIS POWER OF ATTORNEY HOLDER JIBY ANTONY, RESIDING AT PADALODIYIL, KALLUVAYAL P.O., IRUTTY, KERALA - 670 703. BY ADVS. ANIL D. NAIR TELMA RAJU EDATHARA VINEETA KRISHNAN P.K.BIJU RESPONDENT: INCOME TAX OFFICER NON CORP. WARD (1), KOCHI - 682 018. OTHER PRESENT: SRI. CHRISTOPHER ABRAHAM (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 27.07.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NO. 23704 OF 2022 2 JUDGMENT

The petitioner has approached this Court being aggrieved by Ext.P5 order issued under Section 148 A of the Income Tax Act. The brief facts of the case are that the petitioner is a non-resident Indian. During the assessment year 2015-2016, the petitioner purchased an immovable property in Tuticorin, Tamil Nadu for a total consideration of Rs.1.82 crores. Owing to the provisions contained in the Tamil Nadu Stamp (Prevention of under valuation of instruments) Act 1968, the value of the property for the purposes of determination of stamp duty was taken to be Rs.2.29 crores. On the basis of information received by the department, a notice was issued to the petitioner on finding that the petitioner had not filed his return of income for the relevant assessment year. The petitioner filed a reply to the notice pointing out that he was a non-resident Indian and was therefore not required to furnish his return of Income under the provisions of the Income Tax Act. He stated that the actual consideration for the purchase of property was Rs.1.82

WP(C) NO. 23704 OF 2022 3 crores and the amount of Rs.2.29 crores only represented the value considered for the purposes of determining the stamp duty payable. He submitted that there is no escapement of income warranting the initiation of proceedings under Section 148. 2. The learned counsel appearing of the petitioner states with reference to the pleadings and the grounds raised in the writ petition that the difference in the stamp duty cannot be treated as income in the hands of the petitioner and therefore the proceedings under Section 148 of the Income Tax Act are illegal. It is submitted that the proceedings are therefore without jurisdiction and are liable to be quashed under Article 226 of the Constitution of India. 3. The learned Standing Counsel appearing for the respondent department would very fairly state that the provisions of Section 56(2)(x) of the Income Tax Act as they now stand were not applicable for the assessment year 2015- 2016 and in that view of the matter the difference in the actual consideration paid and the amount of stamp duty shown for the purposes of valuation cannot be taxed in the

WP(C) NO. 23704 OF 2022 4 hands of the petitioner for the assessment year 2015-2016. 4. Having heard the learned counsel for the petitioner and the learned Standing Counsel for the department, I am of the view that Ext.P5 proceedings and consequently Ext.P6 notice under Section 148 of the Income Tax Act cannot be sustained for the reason that there cannot be any escapement of income warranting excise of power under Section 148 for the assessment year 2015-2016, especially since the provisions of Section 56(2)(x) of the Income Tax Act as they now stand were not applicable for the assessment year 2015- 2016. This writ petition is therefore allowed and Exts.P5 and P6 will stand quashed. Sd/-

GOPINATH P.

JUDGE ats

WP(C) NO. 23704 OF 2022 5 APPENDIX OF WP(C) 23704/2022 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE NOTICE DATED 31/03/2022 PASSED BY THE RESPONDENT FOR THE A.Y.2015-16. Exhibit P2 TRUE COPY OF THE LETTER DATED 18/04/2022 SUBMITTED BY THE PETITIONER. Exhibit P3 TRUE OF LETTER DATED 19/4/2022 ISSUED BY THE RESPONDENT. Exhibit P4 TRUE COPY OF THE REPLY DATED 25/04/2022 SUBMITTED BY THE PETITIONER ALONG WITH ACKNOWLEDGMENT. Exhibit P5 TRUE COPY OF THE ORDER DATED 06/05/2022 ISSUED BY THE RESPONDENT. Exhibit P6 TRUE COPY OF THE NOTICE UNDER SEC.148 A DATED 06/05/2022 PASSED BY THE RESPONDENT. RESPONDENTS’ EXHIBITS: NIL

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