MAILAKKATTU VARGHESE UTHUP vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX

PDF · subscribers
WP(C)/28693/2018HC KeralaKLHC01064075201801 April 2022Author: HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS11 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the order issued under Section 230 of the Income Tax Act, 1961, was liable to be set aside. The Court reasoned that the basis for the restrictive order had been removed. Firstly, the tax liability of the Company was found to have been wiped off by the order of the Appellate Tribunal, and the proceedings were to be considered afresh. As of the current assessment, the Company could not be stated to be liable to pay any tax, thus negating the applicability of Section 179 and any restrictive order against its directors or other persons under Section 230. Secondly, regarding the petitioner's individual liability, both parties conceded that he had cleared the amount based on the modified assessment order. Consequently, both liabilities mentioned in the impugned order (Ext.P20) were no longer in force, making the issuance or continuance of the Section 230 order unwarranted. The Court quashed the order dated 19.07.2018.

What were the facts?

The petitioner, Mailakkattu Varghese Uthup, challenged an order (Ext.P20) issued by the Deputy Commissioner of Income Tax under Section 230 of the Income Tax Act, 1961. This order prohibited him from leaving India without a tax clearance certificate. The order was based on two liabilities: the tax dues of M/s. Al Zarafa Travels and Manpower Consultants Pvt. Ltd. (the Company) under Section 179 of the Act, and a personal tax liability of Rs. 22,66,718/- imposed on the petitioner. During the pendency of the writ petition, the petitioner argued that the basis for the order had been removed. The company's tax liability was set aside by the Appellate Tribunal, and the petitioner's individual tax liability was reduced to Rs. 3,99,656/- and subsequently cleared.

What were the issues?

1. Whether the order under Section 230 of the Income Tax Act, 1961, prohibiting the petitioner from leaving India, remains valid when the underlying tax liabilities have been extinguished or substantially reduced? Assessee's Contentions: - The petitioner argued that the order under Section 230 was based on two liabilities: the company's tax dues and his personal tax liability. - He contended that the company's tax liability had been eroded due to an order of the Appellate Tribunal (ITA 25/2021 to 30/2021 & ITA No.88/2021 and ITA No.89/2021), rendering it non-existent. - Furthermore, his individual tax liability was reduced to Rs. 3,99,656/- by the Appellate Authority, which he had since cleared. - Therefore, both liabilities forming the basis of the Section 230 order had been wiped off. Revenue's Contentions: - The learned Standing Counsel for the Income Tax Department conceded that the petitioner had cleared his individual tax liability. - He submitted that while the order against the company was set aside and remanded, the issue was still open for reconsideration by the assessing officer.

Which sections of the Income-tax Act were involved?

Section 179,Section 230

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 BECHU KURIAN THOMAS FRIDAY, THE 1ST DAY OF APRIL 2022 / 11TH CHAITHRA, 1944 WP(C) NO. 28693 OF 2018 PETITIONER: MAILAKKATTU VARGHESE UTHUP AGED 50 YEARS MAILAKKATTU HOUSE PUTHUPPALLY P. O KOTTAYAM KOTTAYAM BY ADV PREETHA S.NAIR RESPONDENTS: 1 THE PRINCIPAL COMMISSIONER OF INCOME TAX C. R. BUILDING, I. S. PRESS ROAD, KOCHI ERNAKULAM, PIN - 682018 2 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAM, ALFA LIZA BUILDING, NEAR AMBADY CHAMBERS, CHITOOR ROAD, OPP. SRV LP SCHOOL, KOCHI-682011. 3 DIRECTOR GENERAL OF INCOME TAX (INV), S.A. ROAD, KOCHI - 682 020. 4 BUREAU OF IMMIGRATION (MINISTRY OF HOME AFFAIRS), COCHIN INTERNATIONAL AIRPORT LTD., KOCHI-682311. 5 THE REGISTRAR OF COMPANIES, KERALA, COMPANY LAW BHAVAN, B.M.C. ROAD, THRIKKAKARA, KOCHI-682021. BY ADVS. SRI.JOSE JOSEPH, SC, FOR INCOME TAX SMT.C.G.PREETHA, CGC MANU S., ASG OF INDIA OTHER PRESENT: SRI. JOSEPH MARKOSE THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 01.04.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 28693 OF 2018 2 BECHU KURIAN THOMAS,J -------------------------------- W.P.(C). No.28693 of 2018 ------------------------------------ Dated this the 1st day of April, 2022

JUDGMENT Petitioner was proceeded against under Section 179 of the Income Tax Act, 1961 for the income tax dues of a Company by name M/s.Al Zarafa Travels and Manpower Consultants Pvt.Ltd (for short the Company). Apart from the liability of the Company, petitioner was imposed with a personal tax liability of Rs.22,66,718/-. On the basis of the aforesaid two liabilities, proceedings under Section 230 of the Income Tax Act, 1961 (for short the ‘Act’) were initiated and an order was issued as Ext.P20 by the 2nd respondent, directing the petitioner not to leave the territory of India by land, sea or air, unless he furnishes a tax clearance certificate issued by the second respondent. The said order is impugned in this writ petition.

WP(C) NO. 28693 OF 2018 3

2.

During the pendency of the writ petition, certain events occurred, which has brought in a change to the very basis of issuance of Ext.P20, contends the learned Senior Counsel Sri.Joseph Markose appearing on behalf of the petitioner, as instructed by Smt.Preetha S Nair.

3.

According to the learned Senior Counsel as held by this Court in W.P(C)No.28722 of 2018, due to the order of the Appellate Tribunal in ITA 25/2021 to 30/2021 & ITA No.88/2021 and ITA No.89/2021, the very basis of tax liability imposed against the Company has eroded and therefore no tax liability remains, as against the said company. It was further contended that, as far as the individual liability of the petitioner was concerned, in the appeal preferred against the order of assessment, the Appellate Authority had directed modification of the assessment, pursuant to which the assessing officer by order dated 28-10-2021 reduced the individual tax liability to Rs.3,99,656-/, pursuant to which, petitioner cleared the entire liability

WP(C) NO. 28693 OF 2018 4 as against him individually. Thus, the liabilities which were the basis of Ext.P20 order issued under Section 230 of the Act, became non-existent.

4.

According to the learned Senior Counsel, since the two liabilities mentioned in Ext.P20 and made the basis of imposing a restrictive order under Section 230 of the Act having been wiped off, petitioner cannot be burdened by an order under the said provision.

5.

Sri.Jose Joseph, the learned Standing Counsel for the Income Tax Department submitted that, though an order against the company has been set aside and remanded back to the assessing officer, the said question is still open for reconsideration by the assessing officer. The learned Standing Counsel fairly conceded that, as far as the individual liability was concerned petitioner had cleared the liability imposed by the modified assessment order, and that the said part of Ext.20 does not remain in force any longer.

6.

I have considered the rival contentions. In the judgment in W.P(C)No.28722 of 2018 rendered today, I

WP(C) NO. 28693 OF 2018 5 have already found that the basis tax liability due from the Company had been wiped off by the order of the Appellate Tribunal and the said proceedings are now to be considered afresh by the assessing officer. As of now the Company cannot be stated to be liable to pay any amount of tax, warranting imposition of any order, either under Section 179 of the Act or to be imposed with a restrictive order against the Directors of the Company or any other person under Section 230 of the Act. Therefore, the latter liability, referred to in Ext.P20, is no longer in existence. As far as, the individual liability made mention in Ext.P20 is concerned, both Counsel pointed out and rightly too, that, petitioner had cleared that liability on the basis of the modified orders issued. Thus, it is explicit that both liabilities made mention in Ext.P20 is no longer in force, warranting the issuance of an order under Section 230 of the Act or its continuance for the time being.

WP(C) NO. 28693 OF 2018 6

7.

In view of the above, Ext.P20 is liable to be set aside. Therefore the order dated 19.07.2018 issued under Section 230 of the Act is quashed. The writ Petition is allowed as above. BECHU KURIAN THOMAS JUDGE

AJM

WP(C) NO. 28693 OF 2018 7

Appendix — schedule of exhibits
APPENDIX OF WP(C) 28693/2018 PETITIONER’S EXHIBITS EXHIBIT P1 TRUE COPY OF THE BAIL ORDER DATED 10/08/2017 IN B.A 4615/2017 EXHIBIT P2 TRUE COPY OF THE ORDER DATED 21/12/2017 PASSED BY THE COURT OF THE ADDITIONAL SPECIAL SESSIONS JUDGE (SPE-CBI)III-ERNAKULAM IN CRL.M.P. 685/2017 IN C.C 1/2017 EXHIBIT P3 TRUE COPY OF THE LETTER ISSUED TO VARGHESE UTHUP MAILAKKATTU, THE PETITIOENR HEREIN FIXING THE DATE OF APPOINTMENT WITH THE OSC SK NEPHROLOGY TO 18/03/2018 EXHIBIT P4 TRUE COPY OF THE DOCUMENT DATED 04/01/2018 GIVING APPOINTMENT TO THE PETITIONER FOR CONSULTATION AT IMPERIAL COLLEGE OF LONDON DIABETES CENTRE EXHIBIT P5 TRUE COPY OF THE ORDER DATED 06/03/2018 IN CRL.M.A 1971/2018 IN B.A NO. 4615/2017 EXHIBIT P6 TRUE COPY OF THE APPLICATION DATED 13/03/2018 FILED BY THE PETITIONER (WITH ANNEXURES) BEFORE THE CBI COURT FOR RELEASE OF HIS PASSPORT EXHIBIT P7 TRUE COPY OF THE ORDER DATED 15/03/2018 OF THE CBI COURT IN CRL.M.P. 182/2018 IN C.C 1/2017 EXHIBIT P8 TRUE COPY OF THE ORDER DATED 05/03/2018 PASSED BY THE 2ND RESPONDENT U/S 230 OF THE I.T ACT EXHIBIT P9 TRUE COPY OF THE FORM 32 RETURN FILED BY THE COMPANY BEFORE THE ROC, KERALA, KOCHI EXHIBIT P10 TRUE COPY OF THE COMMUNICATION DATED 23/03/2018 REGARDING STAY FOR BALANCE DEMAND ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 4. EXHIBIT P11 TRUE COPY OF THE ORDER PASSED U/S 170 DATED 14/08/2017 EXHIBIT P12 TRUE COPY OF THE ATTACHMENT ORDER WP(C) NO. 28693 OF 2018 8 DATED 16/08/2016 ISSUED BY THE 2ND RESPONDENT EXHIBIT P13 TRUE COPY OF THE JUDGMENT DATED 11/06/2018 IN W.P(C) 10675/2018 EXHIBIT P14 TRUE COPY OF THE JUDGMENT DATED 25/06/2018 IN W.A 1180/2018 EXHIBIT P15 TRUE COPY OF THE NOTICE DATED 06/06/2018 (TO BE READ AS 29/06/2018) ISSUED BY THE 2ND RESPONDENT U/S 179 EXHIBIT P16 TRUE COPY OF THE OBJECTIONS DATED 06/07/2018 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P17 TRUE COPY OF THE ORDER DATED 10/07/2018 PASSED BY THE 2ND RESPONDENT U/S 179 EXHIBIT P18 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 11/07/2018 ISSUED BY THE 2ND RESPONDENT EXHIBIT P19 TRUE COPY OF THE OBJECTIONS DATED 12/07/2018 FILED BY THE PETITIONER TO EXHIBIT-P18 SHOW CAUSE NOTICE EXHIBIT P20 TRUE COPY OF THE IMPUGNED ORDER DATED 19/07/2018 PASSED BY THE 2ND RESPONDENT EXHIBIT P21 TRUE COPY OF THE PETITIONER'S MEDICAL APPOINTMENT IN ABU DHABI SCHEDULED ON 23/09/2018 EXHIBIT P22 TRUE COPY OF THE NEW INSURANCE CARD NO. 796018 EFFECTIVE FOR THE PERIOD 01.01.2019 TO 31.12.2019. EXHIBIT P23 TRUE COPY OF THE APPOINTMENT LETTER WITH THE ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL, DEPARTMENT OF ENDOCRINOLOGY FOR 05.12.2019. EXHIBIT P24 TRUE COPY OF THE APPOINTMENT LETTER WITH RADIOLOGY DEPARTMENT FOR 09.12.2019. EXHIBIT P25 TRUE COPY OF THE APPOINTMENT LETTER WITH NEPHROLOGY DEPARTMENT FOR 18.12.2019. EXHIBIT P26 TRUE COPY OF THE APPOINTMENT LETTER WITH IMPERIAL COLLEGE, LONDON DIABETES CENTRE FOR 10.12.2019. EXHIBIT P27 TRUE COPY OF THE DISCHARGE SUMMARY ISSUED BY CHRISTIAN MEDICAL COLLEGE, VELLORE. WP(C) NO. 28693 OF 2018 9 EXHIBIT P28 TRUE COPY OF THE APPOINTMENT LETTER WITH SEHA HOSPITAL IN THE DEPARTMENT OF GASTROENTROLOGY FOR 08.12.2019. EXHIBIT P29 TRUE COPY OF THE APPOINTMENT LETTER WITH TAWAM HOSPITAL IN THE DEPARTMENT OF PEDIATRICS, CLINICAL GENETICS FOR 15.12.2019. EXHIBIT P30 TRUE COPY OF THE ORDER DATED 22.08.2019. EXHIBIT P31 TRUE COPY OF THE ORDER DATED 11.11.19 IN CRL.M.P. NO. 973 OF 2019 IN C.C NO.1/17. EXHIBIT P32 TRUE COPY OF THE NEW INSURANCE CARD NO.796018 EFFECTIVE FOR THE PERIOD 0101/2020 TO 31/12/2020. EXHIBIT P33 TRUE COPY OF THE EVIDENCE OF THE PETITIONER'S CONSULTATION / TREATMENT IN SHEIKH KHALIFA MEDICAL CITY HOSPITAL WITH FURTHER APPOINTMENT BEFORE THE IMPERIAL COLLEGE OF LONDON DIABETES CENTRE, ABU DHABI. EXHIBIT P34 TRUE COPY OF THE APPOINTMENT LETTER FOR 04/03/2020 WITH THE ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL, DEPARTMENT OF NEPHROLOGY. EXHIBIT P35 TRUE COPY OF THE MEDIAL EVALUATION REPORT ISSUED BY SEHA HOSPITAL ON 07/01/2020. EXHIBIT P36 TRUE COPY OF MEDICAL EVALUATION REPORT BY NMC SPECIALTY HOSPITAL. EXHIBIT P37 TRUE COPY OF THE APPOINTMENT CONFIRMATION OF THE PETITIONER'S DAUGHTER IN TAWAM HOSPITAL, UAE ON 02/03/2020. EXHIBIT P38 TRUE COPY OF THE ENROLMENT DETAILS, EXAMINATION DETAILS AND HALL TICKET OF THE PETITIONER'S SON THOMAS MAILAKKATU UTHUP. EXHIBIT P39 TRUE COPY OF THE ORDER DATED 20/02/2020 IN CRL.M.P.NO.119 OF 2020 IN C.C.NO.1/2017 OF THE ADDITIONAL SPECIAL SESSIONS COURT (CBI) ERNAKULAM. EXHIBIT P40 TRUE COPY OF INVESTIGATION RESULTS AND CONCLUSIONS WITH RESPECT TO THE INVESTIGATION DONE ON 9.12.2019 ON WP(C) NO. 28693 OF 2018 10 THE BASIS OF WHICH PATIENT VISIT SUMMARY WAS PREPARED. Exhibit P41 TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 22/02/2020 (SUBSEQUENTLY CORRECTED TO 22/02/2021 BY CORRIGENDUM ORDER) ALONG WITH CORRIGENDUM ORDER DATED 17/03/2021 FOR ASSESSMENT YEAR 2009-10 Exhibit P42 TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 22/02/2020 (SUBSEQUENTLY CORRECTED TO 22/02/2021 BY CORRIGENDUM ORDER) ALONG WITH CORRIGENDUM ORDER DATED 17/03/2021 FOR ASSESSMENT YEAR 2010-11 Exhibit P43 TRUE COPY OF THE ORDER DATED 12/7/2021 OF THE COMMISSIONER OF INCOME TAX (APPEALS) Exhibit P44 TRUE COPY OF THE APPLICATION DATED 12/7/2021 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. Exhibit P45 TRUE COPY OF THE NEW INSURANCE CARD NO.796018 EFFECTIVE FOR THE PERIOD 01/01/2021 TO 31/12/2021 Exhibit P46 TRUE COPY OF THE EVIDENCE OF THE PETITIONER'S CONSULTATION/TREATMENT IN SHEIKH KHALIFA MEDICAL CITY HOSPITAL Exhibit P47 A TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 12/8/2021 Exhibit P47 B TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 19/8/2021 Exhibit P47 C TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 29/8/2021 Exhibit P47 D TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 22/8/2021 Exhibit P48 TRUE COPY OF THE TOUR ITINERARY OF THE PETITIONER. Exhibit P49 A TRUE COPY OF THE MEDICAL APPOINTMENT WP(C) NO. 28693 OF 2018 11 LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 25/02/2022 Exhibit P49 B TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 28/02/2022 Exhibit P49 C TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 02/03/2022 Exhibit P49 D TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 15/03/2022 Exhibit P49 E TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 01/03/2022 Exhibit P50 TRUE COPY OF THE INSURANCE CARD NO.796018 VALID TILL 31/12/2021 Exhibit P51 TRUE COPY OF TOUR ITINERARY Exhibit P419(A) TRUE COPY OF THE MEDICAL APPOINTMENT LETTER OBTAINED BY THE PETITIONER WITH THE ABU DHABI SHEIKH KHALIFA MEDICAL CITY HOSPITAL ON 25/2/2022 //TRUE COPY// PA TO JUDGE

More judgments on Section 179

All 36 judgments and leading authorities on Section 179 →

Recent GST High Court judgments

Search GST case law →