R.ANBUKKARASU vs. COMMISSIONER OF INCOME TAX

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TCA/836/2019HC Madras13 October 2020Bench: Hon`ble Mr Justice T. S. SIVAGNANAM8 pages
AI SummaryRemanded

What did the High Court hold?

The High Court did not decide the substantial questions of law. Instead, the Court disposed of the appeal based on the assessee's intention to avail the Vivad Se Vishwas Scheme (VVS Scheme). The Court directed the assessee to file Form No.I by November 9, 2020. The competent authority was instructed to process the application and pass appropriate orders expeditiously, preferably within six weeks from the date of filing. The Court granted liberty to the assessee to restore the appeal if the decision on the VVS declaration was not in their favor. In such a scenario, the Registry was directed to entertain the restoration prayer without insisting on a delay condonation application. Consequently, the substantial questions of law were left open. The operative direction was to dispose of the appeal with the aforementioned liberty.

What were the facts?

The assessee, R. Anbukkarasu, filed a Tax Case Appeal before the High Court of Judicature at Madras, challenging an order dated April 29, 2013, passed by the Income Tax Appellate Tribunal (ITAT), Chennai, 'D' Bench. The appeal pertains to Assessment Year 2004-05. The appeal was filed under Section 260-A of the Income Tax Act, 1961. The High Court noted that the assessee intended to avail the benefit of the Vivad Se Vishwas Scheme (VVS Scheme) and was taking steps to file the necessary declaration. Due to this development, the Court deemed it unnecessary to decide the substantial questions of law framed for consideration.

What were the issues?

The Tribunal had to decide six substantial questions of law. The primary questions concerned the applicability of Section 28(iv) of the Income Tax Act, 1961, to the imaginary value of shares assessed as deemed profits in the hands of the assessee-HUF (Question 1). The assessee also questioned whether the officer and Tribunal correctly established the nexus between share allotment and the assessee's business to attract Section 28(iv) (Question 2). Further, the assessee argued that deemed profits should not be assessed in the HUF's hands when shares were allotted at par value to the individual status of Anbukkarasu (Question 3). The assessee also raised concerns about the Tribunal's conclusion being perverse due to the absence of findings on the benefit arising from a restrictive covenant on unquoted shares (Question 4). The assessee questioned the confirmation of addition as deemed profits under Section 153A without reference to incriminating material found during search (Question 5). Finally, the assessee challenged the addition of amounts exceeding the par value of unquoted shares as deemed profit, given the company's financial position (Question 6). The assessee contended that the Tribunal erred in applying Section 28(iv) without establishing the necessary nexus and that the assessment under Section 153A lacked incriminating material. The assessee also argued that the deemed profit was incorrectly attributed to the HUF instead of the individual. The revenue's contentions are not explicitly recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 28(iv),Section 153A

AI-generated summary — verify with the full judgment below

T.C.A.No.836 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.10.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.836 of 2019

R Anbukkarasu .. Appellant Versus Commissioner of Income-tax, Central – II, Chennai. .. Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras 'D' Bench, Chennai, dated 29.4.2013 made in I.T.A.No.1980/Mds/2010 relating to the Assessment Year 2004-05. For Appellant : Mr.T.Vasudevan For Respondent :Mr.T.R.Senthil Kumar Senior Standing counsel Assisted by M/s.K.G.Usha Rani

1/8 http://www.judis.nic.in T.C.A.No.836 of 2019 JUDGMENT [Order of the Court was made by

T.S.SIVAGNANAM

, J.]

This appeal has been filed by the assessee under Section 260 A of the Income Tax Act, 1961 ('the Act' for brevity), challenging the order dated 29.04.2013 passed by the Income Tax Appellate Tribunal, Chennai, 'D' Bench ('the Tribunal' for brevity) in I.T.A.No.1980/Mds/2010 for the Assessment Year 2004-05. The appeal has been filed, raising the following Substantial Questions of Law for consideration: “1.Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that Section 28(iv) of the Act applies and the imaginary value of shares is to be assessed as deemed profits in the hands of assessee-HUF? 2. Whether the Tribunal was correct in law in upholding the addition by the officer without establishing the nexus between the allotment of shares and the business of assessee for attracting the provisions of Section 28(iv) of the Act? 3. Whether the Tribunal was right in law in holding that deemed profits is to be assessed in the appellant-HUF hands whereas the shares allotted by the company at par value was to Anbukkarasu in his 'Individual' status? 4. Whether on the facts and in the circumstances of the 2/8 http://www.judis.nic.in T.C.A.No.836 of 2019 case, the conclusion of the Tribunal is perverse in the absence of finding as to benefit that has arisen to appellant in view of the restrictive covenant on transfer of the unquoted shares? 5. Whether the Tribunal was right in confirming the addition as deemed profits in the assessment under Section 153A, considering that the officer had made the addition without reference to any incriminating material found in the course of search? 6. Whether on the facts and in the circumstances of the case, the Tribunal was right in adding the amount in excess of par value of unquoted shares as deemed profit in the appellant's hands, even though the financial position of company does not ascribe for a higher value?” 2. We have heard Mr.T.Vasudevan, learned counsel appearing for the appellant/assessee and Mr.T.R.Senthil Kumar, learned Senior Standing counsel assisted by M/s.K.G.Usha Rani, learned counsel for the respondent/Revenue. 3. The learned counsel for the appellant / assessee, on instructions, submitted that the appellant / assessee intends to avail the benefit of Vivad Se Vishwas Scheme ('VVS Scheme' for brevity) and in this 3/8 http://www.judis.nic.in T.C.A.No.836 of 2019 regard, the assessee is taking steps to file the application / declaration in Form No.I. 4. 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 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. 5. 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 4/8 http://www.judis.nic.in T.C.A.No.836 of 2019 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. 6. The First Proviso to Section 3 states that in case, where an 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 5/8 http://www.judis.nic.in T.C.A.No.836 of 2019 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. 7. As observed, the assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration to be 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 appeal 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. In the light of the above, We direct the appellant / assessee to file the Form No.I on or before 09.11.2020 and the competent authority shall process the application / declaration in accordance with the Act and pass appropriate orders as expeditiously as possible preferably within a 6/8 http://www.judis.nic.in T.C.A.No.836 of 2019 period of six (6) weeks from the date on which the declaration is filed in the proper form. 9. With this direction, the Tax Case Appeal stands disposed 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) 13.10.2020 Kak Index: Yes / No Internet: Yes / No Speaking Order/Non-Speaking Order To The Income Tax Appellate Tribunal, 'D' Bench, Chennai. 7/8 http://www.judis.nic.in T.C.A.No.836 of 2019 T.S.SIVAGNANAM, J. AND V.BHAVANI SUBBAROYAN, J. Kak T.C.A.No.836 of 2019 13.10.2020 8/8 http://www.judis.nic.in

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