S.MANOHARAN vs. THE ASSISTANT COMMISSIONER

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TCA/403/2015HC Madras22 December 2020Bench: Hon`ble Mr Justice T. S. SIVAGNANAM10 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that it might not be necessary to decide the substantial questions of law due to subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020), providing an option for assessees to resolve tax disputes. The assessee informed the Court that they had filed a declaration under Section 4 of the Vivad Se Vishwas Act. Consequently, the Court found no useful purpose in keeping the appeals pending. The appeals were disposed of on the ground that the assessee had availed the benefit under the Act. The Court directed the Department to process the application under the Act at the earliest and communicate the decision to the assessee. The assessee was granted liberty to restore the appeals if the ultimate decision under the Vivad Se Vishwas Act was not in their favour. The substantial questions of law were left undecided.

What were the facts?

These six Tax Case Appeals (TCAs) were filed by the assessee, Mr. S. Manoharan, against the common order of the Income Tax Appellate Tribunal (ITAT) dated 28.08.2014. The appeals pertain to Assessment Years (AYs) 2002-03, 2004-05, 2005-06, 2006-07, 2007-08, and 2008-09. The core of the dispute involved the sustenance of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, following additions made to the assessee's taxable income under Section 143(3) read with Section 153A of the Act. The additions related to a sum of Rs. 5 Lakhs concerning an attempted property purchase on behalf of Shri Lakshmana Iyer.

What were the issues?

The Tribunal had to decide two substantial questions of law: 1. Whether the Tribunal was correct in sustaining the levy of penalty under Section 271(1)(c) of the Act, consequent to the sustenance of an addition of Rs. 5 Lakhs relating to a transaction for purchasing property on behalf of Shri Lakshmana Iyer, despite the alleged lack of statutory mandate for such addition and overlooking a confirmation letter from Shri Lakshmana Iyer. 2. Whether the Tribunal was correct in sustaining the action of the lower authorities in taxing the said amount as unexplained/unaccounted income of the appellant without cross-verification with the property owner and Shri Lakshmana Iyer. The assessee argued that the addition and subsequent penalty were unsustainable due to a lack of statutory basis and insufficient evidence, particularly the overlooked confirmation letter. The revenue contended that the amount was unexplained income and therefore taxable, justifying the penalty. The judgment does not explicitly detail the revenue's arguments beyond what is implied by the questions framed.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 153A,Section 260A

AI-generated summary — verify with the full judgment below

Heard together (6 matters)

I.T.A.No.337/Mds/2014
I.T.A.No.338/Mds/2014
I.T.A.No.339/Mds/2014
I.T.A.No.340/Mds/2014
I.T.A.No.341/Mds/2014
I.T.A.No.342/Mds/2014

Read from the judgment's own cause title. This page is filed under one of them.

T.C.A.Nos.403 to 408 of 2015 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.12.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.Nos.403 to 408 of 2015 Mr.S.Manoharan .. Appellant in all TCAs Versus The Assistant Commissioner of Income Tax, Central Circle – II, Madurai. .. Respondent in all TCAs Prayer in T.C.A.No.403 of 2015:- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in I.T.A.No.337/Mds/2014 dated 28.08.2014 and is filed to challenge the action of the Income Tax Appellate Tribunal in dismissing the appeal mainly relating to the grounds raised to challenge the sustenance of the penalty imposed u/s 271(1)(c) of the Act after the confirmation of the addition (s) in the computation of taxable total income forming part of the assessment framed u/s 143(3) r/w Section 153(A) of the Act relating to the Assessment Year 2002-03. 1/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 Prayer in T.C.A.No.404 of 2015:- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in I.T.A.No.338/Mds/2014 dated 28.08.2014 and is filed to challenge the action of the Income Tax Appellate Tribunal in dismissing the appeal mainly relating to the grounds raised to challenge the sustenance of the penalty imposed u/s 271(1)(c) of the Act after the confirmation of the addition (s) in the computation of taxable total income forming part of the assessment framed u/s 143(3) r/w Section 153(A) of the Act relating to the Assessment Year 2004-05. Prayer in T.C.A.No.405 of 2015:- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in I.T.A.No.339/Mds/2014 dated 28.08.2014 and is filed to challenge the action of the Income Tax Appellate Tribunal in dismissing the appeal mainly relating to the grounds raised to challenge the sustenance of the penalty imposed u/s 271(1)(c) of the Act after the confirmation of the addition (s) in the computation of taxable total income forming part of the assessment framed u/s 143(3) r/w Section 153(A) of the Act relating to the Assessment Year 2005-06. Prayer in T.C.A.No.406 of 2015:- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in I.T.A.No.340/Mds/2014 2/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 dated 28.08.2014 and is filed to challenge the action of the Income Tax Appellate Tribunal in dismissing the appeal mainly relating to the grounds raised to challenge the sustenance of the penalty imposed u/s 271(1)(c) of the Act after the confirmation of the addition (s) in the computation of taxable total income forming part of the assessment framed u/s 143(3) r/w Section 153(A) of the Act relating to the Assessment Year 2006-07. Prayer in T.C.A.No.407 of 2015:- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in I.T.A.No.341/Mds/2014 dated 28.08.2014 and is filed to challenge the action of the Income Tax Appellate Tribunal in dismissing the appeal mainly relating to the grounds raised to challenge the sustenance of the penalty imposed u/s 271(1)(c) of the Act after the confirmation of the addition (s) in the computation of taxable total income forming part of the assessment framed u/s 143(3) r/w Section 153(A) of the Act relating to the Assessment Year 2007-08. Prayer in T.C.A.No.408 of 2015:- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in I.T.A.No.342/Mds/2014 dated 28.08.2014 and is filed to challenge the action of the Income Tax Appellate Tribunal in dismissing the appeal mainly relating to the grounds raised to challenge the sustenance of the penalty imposed u/s 271(1)(c) of the Act after the confirmation of the addition (s) in the computation of 3/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 taxable total income forming part of the assessment framed u/s 143(3) r/w Section 153(A) of the Act relating to the Assessment Year 2008-09. For Appellant : Mr.K.G.Raghunath [in all TCAs] For Respondent : Ms.V.Pushpa Junior Standing counsel [in all TCAs] COMMON JUDGMENT [Order of the Court was made by

T.S.SIVAGNANAM

, J.]

These appeals filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the common order dated 28.08.2014 passed by the Income Tax Appellate Tribunal, 'A' Bench, Chennai ('the Tribunal' for brevity) in I.T.A.No.337/Mds/2014, I.T.A.No.338/Mds/2014, I.T.A.No.339/Mds/2014, I.T.A.No.340/Mds/2014, I.T.A.No.341/Mds/2014, I.T.A.No.342/Mds/2014 for the Assessment Years 2002-03, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 respectively. These appeals were admitted on 07.09.2015 on the following Substantial Questions of Law: “T.C.A.Nos.403 to 408 of 2015: 1. Whether the Appellate Tribunal is correct in law in sustaining the levy of penalty under Section 271(1)(c) of the Act consequent to the sustenance of the addition of Rs.5 Lakhs 4/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 relating to the transaction entered into for and on behalf of Shri Lakshmana Iyer in an attempt to purchase the property for him in the computation of taxable total income forming part of the search assessment under consideration in spite of lack of statutory mandate to make such addition as well as overlooking the evidence in the form of confirmation letter filed from the said person? And 2. Whether the Tribunal is correct in law in sustaining the action of the lower authorities in bringing to tax the said amount as unexplained/unaccounted income of the appellant herein without cross verification of the facts with the property owner as well as with Shri Lakshmana Iyer?” 2. We have heard Mr.K.G.Raghunath, learned counsel for the appellant/assessee and Ms.V.Pushpa, learned Junior Standing counsel for the respondent/Revenue. 3. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax 5/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020.

4.

In terms of the said Act, the assessee has been given an option to put an end to the tax disputes, which may be pending at different levels either before the First Appellate Authority or before the Tribunal or before the High Court or before the Hon'ble Supreme Court of India. Under Section 2(j) “disputed tax” has been defined. In terms of Section 3, where a declarant means a person, who files a declaration under Section 4 on or before the last date files a declaration to the designated authority in accordance with the provisions of Section 4 in respect of tax arrears, then, notwithstanding anything contained in the Income Tax Act or any other law for the time being in force, the amount payable by the declarant shall be determined in terms of Section 3(a-c) thereunder. 5. The First Proviso to Section 3 states that in case, where an 6/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 Appeal or Writ Petition or Special Leave Petition is filed by the Income Tax authority on any issue before the Appellate Forum, the amount payable shall be one-half of the amount in the table stipulated in Section 3 calculated on such issue, in such a manner as may be prescribed. The second proviso deals with the cases, where the matter is before the Commissioner (Appeals) or before the Dispute Resolution Panel. The third proviso deals with cases, where the issue is pending before the Income Tax Appellate Tribunal. The filing of the declaration is as per Section 4 of the Act and the particulars to be furnished are also mentioned in the Sub Sections of Section 4. Section 5 of the Act deals with the time and manner of the payment and Section 6 deals with Immunity from initiation of proceedings in respect of offence and imposition of penalty in certain cases. Section 9 of the Act deals with cases, where the Act 3 of 2020 will not be applicable. 6. We are informed by the learned counsel for the appellant/assessee that the assessee has already filed the declaration under Section 4 of the Act. 7/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 7. In the light of the fact that the assessee has already availed the benefit under the Act, no useful purpose would be served in keeping these appeals pending. At the same time, safeguarding the interest of the assessee in the event the order to be passed by the Department under the Act is not in favour of the assessee. Accordingly, all the Tax Case Appeals stand disposed of on the ground that the assessee has already filed a declaration and the Department shall process the application at the earliest in accordance with the said Act and communicate the decision to the assessee at the earliest. As observed, the assessee is given liberty to restore these appeals in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeals and on such request made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders. 8. With this observation, all the Tax Case Appeals stand disposed 8/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 of with the aforementioned liberty and Consequently, the Substantial Questions of Law are left open. No costs. (T.S.S.,J) (V.B.S.,J) 22.12.2020 (2/2) Kak Index: Yes / No Internet: Yes / No Speaking Order/Non-Speaking Order To The Income Tax Appellate Tribunal, 'A', Chennai. T.S.SIVAGNANAM, J. AND 9/10 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.403 to 408 of 2015 V.BHAVANI SUBBAROYAN, J. Kak T.C.A.Nos.403 to 408 of 2015 22.12.2020 10/10 https://www.mhc.tn.gov.in/judis/

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