M/S. AKAY NATURAL INGREDIENTS PRIVATE LIMITED, vs. THE DEPUTY COMMISSIONER OF INCOME TAX,

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WP(C)/17771/2020HC KeralaKLHC01044304202025 August 2020Author: HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the order of the Commissioner of Income Tax (Appeals) (Ext.P7) could not be legally sustained. The Court found that the order did not consider the merits of the petitioner's case and appeared to be passed under dictation based on CBDT instructions. The Court emphasized that a quasi-judicial authority cannot consider its discretion fettered by CBDT directions, especially when performing an adjudicatory function. Consequently, the Court quashed Ext.P7 order. It directed the 2nd respondent to consider and pass orders on the appeal (Ext.P2) within six months of receiving the judgment, after hearing the petitioner. Recovery steps for the amounts confirmed by the assessment order were to be kept in abeyance until the appeal was decided and the order communicated. The Court also noted that Ext.P7 was passed without considering the merits and acting on the dictates of the CBDT.

What were the facts?

The petitioner, M/s. Akay Natural Ingredients Private Limited, filed a writ petition challenging an assessment order (Ext.P1) passed under the Income Tax Act. The petitioner had preferred an appeal (Ext.P2) and a stay petition (Ext.P3) before the Commissioner of Income Tax (Appeals) (the 2nd respondent). Following a direction from the High Court, the 2nd respondent disposed of the stay petition by mechanically directing the petitioner to pay 20% of the disputed amount as a pre-condition for staying the balance, pending disposal of the appeal. The petitioner contended that the 2nd respondent erred in passing the stay order without considering the merits of the case, relying solely on CBDT Circulars.

What were the issues?

1. Whether the Commissioner of Income Tax (Appeals) erred in passing a stay order without considering the merits of the petitioner's case, by merely relying on CBDT Circulars, thereby fettering its quasi-judicial discretion? Assessee's Contentions: - The 2nd respondent erred in passing the stay order without considering the merits of the case. - The 2nd respondent mechanically relied on CBDT Circulars, which improperly fettered its discretion as a quasi-judicial authority. Revenue's Contentions: - No specific contentions for the revenue are recorded in the judgment.

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 A.K.JAYASANKARAN NAMBIAR TUESDAY, THE 25TH DAY OF AUGUST 2020 / 3RD BHADRA, 1942 WP(C).No.17771 OF 2020(V) PETITIONER: M/S. AKAY NATURAL INGREDIENTS PRIVATE LIMITED, (FORMERLY M/S. AKAY FLAVOURS AND AROMATICS (P) LIMITED), AMBUNAD, MALAIDAMTHURUTH P.O., KIZHAKKAMBALAM, ERNAKULAM- 683561, REPRESENTED BY ITS CHIEF FINANCIAL OFFICER, MR. K.J. THANKACHAN. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SRI.P.G.CHANDAPILLAI ABRAHAM SHRI.VIPIN ANTO H.M. SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA RESPONDENTS: 1 THE DEPUTY COMMISSIONER OF INCOME TAX, DCIT CORPORATE 1(1), CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI-682018. 2 THE COMMISSIONER OF INCOME TAX (APPEALS)-I, POORNIMA 28/243, MANORAMA JUNCTION, PANAMPILLY NAGAR, KOCHI- 682036. BY ADV.SRI.JOSE JOSEPH, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 25.08.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.17771 OF 2020(V) 2

JUDGMENT Aggrieved by Ext.P1 assessment order under the Income Tax Act, the petitioner has preferred Ext.P2 appeal together with Ext.P3 stay petition before the 2nd respondent. Further to a direction from this court, the 2nd respondent proceeded to dispose the stay petition by mechanically directing the petitioner to pay 20% of the disputed amount as a pre-condition for stay of the balance amounts confirmed against the petitioner, pending disposal of the appeal. The learned Senior counsel for the petitioner would submit that the 2nd respondent erred in passing the stay order without considering the merits of the case but by merely relying on CBDT Circulars.

2.

I have heard the learned counsel appearing for the petitioner and also the learned Standing counsel appearing for the respondents. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I find that Ext.P7 order of the 2nd respondent cannot be legally sustained inasmuch as it does not consider the merits of the petitioner’s case in the appeal, and further has to be seen as passed under dictation, based on the instructions issued by the CBDT. As a quasi-judicial authority, the 2nd respondent cannot see his

WP(C).No.17771 OF 2020(V) 3 discretion as fettered by the directions issued by the CBDT, especially when he is performing an adjudicatory function. I therefore quash Ext.P7 order and direct the 2nd respondent to consider and pass orders on Ext.P2 appeal within an outer time limit of six months from the date of receipt of a copy of this judgment, after hearing the petitioner. Recovery steps for recovery of amounts confirmed against the petitioner by Ext.P1 assessment order shall be kept in abeyance till such time as orders are passed in the appeal and the order communicated to the petitioner. In view of the direction issued above, Ext.P7 stay order passed by the 2nd respondent is quashed. I also find Ext.P7 order to be one passed without considering the merits of the case and the one that is passed acting on the dictates of the CBDT, which is referred to in that order. A.K.JAYASANKARAN NAMBIAR

JUDGE mns

WP(C).No.17771 OF 2020(V) 4

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF ASSESSMENT ORDER DATED 20/12/2019 FOR ASSESSMENT YEAR 2017-18. EXHIBIT P2 TRUE COPY OF RELEVANT CALCULATION OF DISALLOWANCES AND THE TAX THE TAX EFFECTED ON THE PETITIONER. EXHIBIT P3 TRUE COPY OF APPEAL DATED 20/01/2020 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P4 TRUE COPY OF THE STAY PETITION DATED 28/01/2020 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P5 TRUE COPY OF THE DEMAND NOTICE DATED 12/02/2020 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P6 TRUE COPY OF THE JUDGMENT DATED 18/02/2020 OF THIS HON'BLE COURT IN WPC NO.4533/2020. EXHIBIT P7 TRUE COPY OF THE ORDER DATED 04/08/2020 PASSED BY THE 2ND RESPONDENT. RESPONDENTS EXHIBITS:NIL //TRUE COPY// P.A TO JUDGE

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