KUNNAMKULAM CO-OPERATIVE URBAN BANK LTD NO. 698, vs. THE COMMISSIONER OF INCOME TAX APPEALS,

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WP(C)/34530/2018HC KeralaKLHC01078412201829 October 2018Author: HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU5 pages
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What did the High Court hold?

The High Court acknowledged the general policy of not interfering with the discretion exercised by judicial and quasi-judicial authorities unless the order suffers from well-recognized legal infirmities like arbitrariness or unreasonableness. However, considering the petitioner is a cooperative bank working for the welfare of its members and has admittedly been in losses, the Court found mitigating circumstances to scale down the rigor of the interim direction. The Court held that if the petitioner pays 20% of the demand within two months, the CIT(A) shall consider the petitioner's appeal on merits. The issue of whether the bank could claim losses from previous years was not directly decided, as the court focused on modifying the stay condition.

What were the facts?

The petitioner, Kunnamkulam Co-operative Urban Bank Ltd., faced an adverse income tax assessment. The Commissioner of Income Tax Appeals (CIT(A)) imposed a precondition for hearing the bank's appeal: the deposit of 30% of the demand. The bank, reportedly incurring losses, found this condition impossible to meet. Their request to the Principal Commissioner of Income Tax (PCIT) to waive this condition was rejected, with the PCIT stating it was inappropriate to interfere with an order passed by a parallel authority. Consequently, the bank filed a writ petition challenging both the CIT(A)'s order and the PCIT's rejection.

What were the issues?

1. Whether the High Court should interfere with the discretion exercised by quasi-judicial authorities in imposing conditions for stay of demand, particularly when the assessee claims financial hardship. (Question of law and fact, turning on principles of judicial review and discretion). Assessee's Contention: The bank argued that it has been incurring huge losses, making it impossible to comply with the 30% deposit condition, which amounts to a substantial sum given the ₹18 lakh demand. They relied on a judgment of the High Court (Ext.P8) in support of their plea. Revenue's Contention: The Income Tax Department argued that there is no method for carrying forward losses, and therefore, the petitioner cannot use previous losses as an excuse for the current assessment year.

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 DAMA SESHADRI NAIDU MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 WP(C).No. 34530 of 2018 PETITIONER/S: KUNNAMKULAM CO-OPERATIVE URBAN BANK LTD NO. 698, KUNNAMKULAM, THRISSUR - 680503, REPRESENTED BY ITS SECRETARY. BY ADV. SRI.P.C.SASIDHARAN RESPONDENT/S: 1 THE COMMISSIONER OF INCOME TAX APPEALS, AAYAKAR BHAVAN, SHAKTAN NAGAR, THRISSUR- 680001. 2 THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, SHAKTAN NAGAR, THRISSUR - 680001. 3 THE INCOME TAX OFFICER, WARD I, GURUVAYOOR - 680101. OTHER PRESENT: SC. SRI. JOSE JOSEPH THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 29.10.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -2- W.P.(C). No. 34530 of 2018

JUDGMENT The petitioner, a Cooperative Bank, suffered an adverse income tax assessment. In appeal, the first respondent imposed a precondition of the petitioner's depositing 30% of the demand to have the proceedings stayed before the appeal could be considered. The Bank complains that it has been in loss and it could not comply with the condition. So it approached the second respondent, who through Ext.P7, rejected the petitioner's request. The authority has held that since a parallel authority has already passed an order, it is inappropriate for him to interfere. In that context, assailing both the Exts.P5 and P7, the petitioner has filed this writ petition.

2.

The Standing Counsel for the Cooperative Bank has taken me through the record and contended that the Bank has been incurring huge losses and it is almost impossible for it to comply with the precondition as set out in the Ext.P5. According to him, the demand is for 18 lakhs rupees, and 30% comes to substantial amount, which given the Bank's financial position, could not be complied with. In this regard, he has drawn my attention to the Ext.P8 judgment of -3- this Court.

3.

The Standing Counsel for the Income Tax Department has, however, submitted that there is no method of carrying forward the losses. And for this assessment year, the petitioner cannot have the excuse of the previous losses.

4.

As I reckon, this Court has been consistently following the policy of not interfering with the discretion exercised by the judicial and quasi judicial authorities.

5.

Indeed, this Court has always been averse to interfering with the Tribunal's discretion. The law is well settled that unless any order of discretion suffers from well recognised legal infirmities— arbitrariness, unreasonableness, or lacking its very source—the courts at higher échelons would not interfere. Here, the Tribunal has acted well within its powers.

6.

At any rate, the assessee is an institution and its affairs involve public interest. So the Court finds mitigating the circumstances to scale down the rigor of the interim direction.

7.

Here, to reiterate, the petitioner is a Cooperative Bank

-4- working for the welfare of its members. And admittedly, it has been in losses. I, therefore, hold that if the petitioner pays 20% of the demand, in two months, the first respondent will consider the petitioners appeal, on merits. DAMA SESHADRI NAIDU JUDGE das

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 16.3.2016. EXHIBIT P2 TRUE COPY OF THE DEMAND NOTICE DATED 16.3.2016. EXHIBIT P3 TRUE COPY OF THE MEMORANDUM OF APPEAL PREFERRED BEFORE THE COMMISSIONER OF INCOME TAX APPEALS DATED 1.4.2016. EXHIBIT P4 TRUE COPY OF THE APPLICATION DATED 1.4.2016. EXHIBIT P5 TRUE COPY OF THE INTERIM ORDER DATED 24.5.2017. -5- W.P.(C). No. 34530 of 2018 EXHIBIT P6 TRUE COPY OF THE APPEAL PETITION. EXHIBIT P7 TRUE COPY OF THE ORDER DATED 25.6.2018. EXHIBIT P8 TRUE COPY OF THE JUDGMENT IN WPC.NO.25262/2016 AND CONNECTED CASES DATED 7.4.2017.

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