K.R.SREEKUMAR vs. INCOME TAX OFFICER

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WP(C)/11199/2013HC KeralaKLHC01054396201319 December 2019Author: HONOURABLE MRS. JUSTICE ANU SIVARAMAN10 pages
AI SummaryDismissed

What did the High Court hold?

The Court found that the contention regarding the non-service of the assessment order could not be believed in view of Exhibit R1(a), which contained the admitted signature of the petitioner dated 03.01.2007. Consequently, the writ petition, filed on 19.04.2013, was considered belated. Regarding the legality of the assessment, the Court noted that the revisional authority (CIT) had set aside the earlier assessment on three grounds: failure to provide a cash flow statement, failure to provide statements from creditors, and failure to give an opportunity for cross-examination. The Court observed that the assessment order (Exhibit P5(a)) indicated that copies of the cash flow statement, the assessee's sworn statement, and the creditors' sworn statements were issued. The assessee was required to appear on 08.05.2006 to offer comments and produce evidence, and if required, produce and cross-examine creditors. A further notice was issued for 19.12.2006. The Court noted that the assessee appeared on 19.12.2006 but did not adduce fresh evidence or make creditors available for cross-examination, only seeking time. The assessment had to be completed by 31.12.2006. The Court held that the assessee had not availed the opportunity granted pursuant to the Exhibit P3 order to substantiate his case. Therefore, the assessee could not contend that the order was bad for want of consideration of his contentions. No further notice was required. The Court found no illegality or perversity vitiating the assessment order justifying interference under judicial review, especially in a belated proceeding. The writ petition was dismissed.

What were the facts?

This writ petition was filed by the legal heirs of the original petitioner, K.R. Sreekumar (deceased), challenging an assessment order dated 28.12.2006 and a demand notice. The original petitioner was reportedly suffering from schizoaffective disorder and schizophrenia. The dispute arose from the purchase of shares in 'John F Kennedy School' for Rs. 3 lakhs, where the petitioner later admitted to a consideration of Rs. 60 lakhs in a sworn statement under Section 131 of the Income Tax Act. An initial assessment was completed on 19.03.2004. A revision petition under Section 264 led to the assessment being set aside by the Commissioner of Income Tax (CIT) with directions for a fresh assessment, including providing cash flow statements, statements from creditors, and an opportunity for cross-examination. The petitioner alleged non-compliance with these directions, while the Revenue contended that notices were issued, opportunities were granted, and the petitioner failed to respond. The assessment order dated 28.12.2006 was issued subsequently.

What were the issues?

1. Whether the assessment order dated 28.12.2006 and the demand notice are illegal and arbitrary, particularly on the grounds of non-service and lack of pre-assessment notice. (Question of law and fact) 2. Whether the sale proclamation notice dated 30.03.2013 is illegal and arbitrary. (Question of law and fact) 3. Whether the respondents failed to reassess and make a fresh assessment as directed by the Commissioner of Income Tax in Exhibit P3, after affording the petitioner sufficient opportunity. (Question of law and fact) Assessee's Contentions: The petitioner initially challenged the assessment order on the grounds of non-receipt and lack of notice, but these contentions were withdrawn. The surviving contention was that the assessment order (Exhibit P5(a)) was not preceded by any pre-assessment notice. Furthermore, the letter issued after Exhibit P3 did not contain a fresh cash flow statement, only referring to the one in the set-aside order. No fresh evidence was relied upon, and the assessing officer failed to consider the petitioner's contentions as directed by Exhibit P3. Revenue's Contentions: The Revenue argued that re-assessment proceedings were initiated on 24.04.2006. Copies of cash flow statements, sworn statements of the assessee and creditors were forwarded, and an opportunity for cross-examination and production of fresh evidence was given by letter dated 24.04.2007. The petitioner failed to respond. The petitioner appeared on 19.12.2006 and sought an adjournment, but as the time limit for assessment was expiring on 31.12.2006, the assessment was completed. A copy of the order and demand notice was sent by registered post, and Exhibit R1(a) shows the postal articles were received.

Which sections of the Income-tax Act were involved?

Section 131,Section 264

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 MRS. JUSTICE ANU SIVARAMAN THURSDAY, THE 19TH DAY OF DECEMBER 2019 / 28TH AGRAHAYANA, 1941 WP(C).No.11199 OF 2013(Y) PETITIONERS: 1 K.R.SREEKUMAR AGED 52, S/O.RAMAKRISHNA PILLAI, KANNAMPALLIL VALIYATHU, S.V.MARKET P.O., KARUNAGAPPALLY, KOLLAM DISTRICT. [DECEASED] 2 MAYA SREEKUMAR AGED 46 YEARS W/O.LATE K.R.SREEKUMAR, R/AT KANNAMPILLIL VALIATHU, S.V.MARKET PO., KARUNAGAPALLY. 3 MEERA M.S AGED 28 YEARS D/O.SREEKUMAR, R/AT KANNAMPILLIL VALIATHU, S.V.MARKET PO., KARUNAGAPALLY. 4 GANGARAM AGED 20 YEARS S/O.SREEKUMAR, R/AT KANNAMPILLIL VALIATHU, S.V.MARKET PO., KARUNAGAPALLY. Impleaded as per order dated 8.10.2015 BY ADVS. SRI.D.S.SREEKUMARAN SMT.T.S.MAYA RESPONDENTS: 1 INCOME TAX OFFICER WARD IV, INCOME TAX OFFICE, ALAPPUZHA PIN - 688 001 2 THE TAX RECOVERY OFFICER ROOM NO.7 FIRST FLOOR PUBLIC LIBRARY BUILDING, SASTRI ROAD, KOTTAYAM 686 001. R1 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON, 3.12.2019, THE COURT ON 19.12.2019 DELIVERED THE FOLLOWING: W.P.(C).No.11199/13 2 JUDGMENT Dated this the 19th day of December 2019 1.This writ petition is filed seeking the following prayers:- “i) to issue a writ of certiorari and quash Exhibit P5(a) Assessment Order dated 28.12.2006 and Exhibit P5(b) Demand Notice attached with Exhibit P5(a) dated 28.12.2006 as illegal and arbitrary. ii) to issue a writ of certiorari and quash Exhibit P6 sale proclamation notice dated 30.3.2013 as it is highly illegal, arbitrary and against the principle of natural justice. iii) to issue a writ of mandamus or any other appropriate writ, order or direction to the respondents to reassess and make a fresh assessment as directed by the Commissioner of Income Tax, Kottayam in his Exhibit P3 order after hearing the petitioner giving him sufficient opportunity to explain his case.“ 2.Heard the learned counsel for the petitioner and the learned counsel appearing for the respondents. 3.It is submitted by the learned counsel for the petitioner that the original petitioner, who has since passed away was under treatment of schizoaffective disorder and Schizophrenia till his death on 14.12.2014. It stated that he was afflicted by delusions and hallucinations and that he had made certain statements during the course of enquiry with regard to W.P.(C).No.11199/13 3 assessment to Income Tax, which resulted in heavy tax liability being inflicted on him. It is stated that there was an aided school by name 'John F Kenedy School' established by the petitioner's father Ramakrishna Pillai in 1965 at Karunagapally. The petitioner and his siblings inherited the school and were managing the affairs of the school in rotation. It is stated that the shares of the petitioner's brothers were purchased by the petitioner by sale deeds dated 27.10.1998 and 22.02.1999. The apparent consideration of the sale of the shares was Rs.3 lakhs. An enquiry was conducted into the transaction and in a sworn statement given under Section 131 of the Income Tax Act on 12.2.2000, the petitioner admitted that he had purchased 2/3rd of shares for a total consideration of Rs.60 lakhs against the apparent consideration of Rs.3 lakhs and that he had raised personal loans from several persons for the said purpose. It is stated that the assessment was completed on 19.3.2004 on the basis of the sworn statement. A revision petition was filed by the petitioner under Section 264 of the Income Tax Act. The grounds raised were that the cash flow statement prepared by the assessing officer was not W.P.(C).No.11199/13 4 given to the petitioner and his contentions with regard to the same were not considered and that he was not given copies of the statements relied on and that the opportunity to cross- examine the creditors. On these grounds, the assessment was set aside by Exhibit P3. The assessing officer was directed to pass a fresh assessment order after giving copies of the cash flow statement and the statements recorded from the loan creditors of the assessee and allowing for cross- examination of the creditors, if so desired by the petitioner. The assessee was permitted to adduce fresh evidence, if any. The assessing authority was directed to examine the same before passing

fresh assessment order. 4.It is stated that nothing was done thereafter. The petitioner had submitted Exhibit P4 letter dated 29.11.2011, stating that he had not received any copy of the assessment order and that opportunity had not been granted to adduce evidence. Thereafter, Exhibit P5 letter was received by the petitioner forwarding the copy of the assessment order and demand notice. The petitioner was further informed that the assessment order had been despatched on 29.12.2006. Exhibit P5 is the assessment order, which is challenged by the petitioner primarily on the ground that it had not been served on him. 5.A counter affidavit has been filed by the respondents stating that re-assessment proceedings were initiated pursuant to Exhibit P3 on 24.4.2006. Copies of cash flow statements, sworn statements recorded from assessee and from creditors were forwarded to the petitioner and by letter dated 24.4.2007, the petitioner was given an opportunity to cross- examine the loan creditors and to produce fresh evidence if any. It is stated that the petitioner failed to respond to the above letter. It is stated that on 19.12.2006 the petitioner had appeared before the assessing officer pursuant to a further notice and had sought adjournment of the assessment proceedings for two months. However, since the time limit for completion of assessment was expiring on 31.12.2006, the assessment was completed by Exhibit P5(a) and a copy of the order along with demand notice was sent to the petitioner by registered post. It is stated that Exhibit R1(a) receipt would show that the postal articles were duly received by the petitioner.

6.

Faced with the said contentions, the learned counsel for the petitioner submits that the challenge to the impugned order on the ground that it was not received and that no notice preceeded it are withdrawn. The only surviving question is with regard to legality of Exhibit P5(a), which is an appealable order. The learned counsel for the petitioner would then submit that Exhibit P5(a) was not preceded by any pre-assessment notice. It is further submitted that the letter issued to the petitioner after Exhibit P3 proceedings did not contain a fresh cash flow statement, but only referred to the cash flow statement as contained in Exhibit P1 original order of assessment which had been set aside in Exhibit P5(a). It is stated that no fresh evidence is relied on by the assessing officer and the assessing officer did not consider the contentions of the petitioner as had been directed in Exhibit P3. 7.I have considered the contentions advanced. The contention that the order of assessment has not been served on the petitioner cannot be believed in view of Exhibit R1(A) which contains the admitted signature of the petitioner affixed on 3.1.2007. In the above view of the matter, the writ petition which has been filed only on 19.4.2013 is obviously belated. The surviving issue which requires consideration is the legality of the assessment. It is seen from Exhibit P3 that the assessment carried out had been set aside by the revisional authority on three grounds. The first was that the Assessing Officer did not prepare and give the cash flow statement to the assessee before the assessment was completed. Secondly, it was found that the records do not show that copies of the statements recorded from the creditors were given to the assessee. Thirdly, it was found that no opportunity was given to the assessee to cross-examine the creditors who had contradicted the assessee regarding the payments. It is not in dispute that Exhibit P2 order of assessment contained a cash flow statement at paragraph 5 thereof. The contention of the assessee was that the said statements had not been put to him and his contentions were not considered before the assessment order was passed. It is seen from Exhibit P5(a) proceedings that copy of the cash flow statement prepared by the assessing officer, copy of the sworn statement recorded from the assessee and copies of the sworn statement recorded from the loan creditors were issued to the assessee and the assessee was required to be present on 8.5.2006 to offer comments on the cash flow statement and to produce evidence in support of his case and if he so requires, to produce and cross-examine the loan creditors. It is stated that on 13.12.2006, another letter was issued posting the case on 19.12.2006. It is submitted that the assessee appeared on 19.12.2006, but did not adduce any fresh evidence or make available the loan creditors for cross-examination. He only sought time. It is in the above circumstances that Exhibit P5(a) assessment order had been issued. 8.It is clear that the assessee had obtained Exhibit P3 order requiring a fresh assessment and opportunity to place his contentions on record or to adduce further evidence. However it is clear from the narration in Exhibit P5(a) that such opportunity was not availed by the assessee. The assessment had to be completed before 31.12.2006. It was in the above view of the matter that Exhibit P5(a) assessment order had been issued. Having considered the contentions advanced, I find no illegality or perversity vitiating the order of assessment justifying an interference in the same in exercise of the jurisdiction of judicial review, that too, in an obviously belated proceedings. The assessee who did not avail of the opportunity to substantiate his case in spite of issuance of notice and grant of opportunity cannot be heard to contend that the order is bad for want of consideration of his contention. No further notice was required to be issued in a matter of this nature where the opportunity is granted pursuant to Exhibit P3 order in revision. The writ petition, therefore, fails and the same is accordingly dismissed. Anu Sivaraman, Judge sj

Appendix — schedule of exhibits
APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 TRUE COPIES OF THE MEDICAL CERTIFICATES WITH RESPECT TO THE PETITIONER ISSUED BY DOCTOR LATE M.R.R.MENON EXHIBIT P1(A) TRUE COPY OF THE MEDICAL CERTIFICATE ISSUED BY DR.SUBHASH EXHIBIT P2 TRUE COPY OF THE ORDER DATED 19.3.2004 ISSUED BY THE 1ST RESPONDENT EXHIBIT P3 TRUE COPY OF THE REVISION ORDER C.NO.308(C)/56/264/CIT-KTM/2004-05 DATED 29.3.2006 EXHIBIT P4 TRUE COPY OF THE PETITIONERS LETTER DATED 29.11.2011 EXHIBIT P5 TRUE COPY OF THE COVERING LETTER DATED 29.11.2011 BY THE 2ND RESPONDENT. EXHIBIT P5(A) TRUE COPY OF THE ASSESSMENT ORDER DATED 28.12.2006 EXHIBIT P5(B) TRUE COPY OF THE DEMAND NOTICE ATTACHED WITH EXHIBIT P5 DATED 28.12.2006. EXHIBIT P6 RESPONDENTS EXHIBITS EXHIBIT R1(A) TRUE COPY OF THE NOTICE DATED 30.3.2013. TRUE COPY OF THE POSTAL ACKNOWLEDGMENT. True copy PS to Judge

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