M/S.PALAKKAD SERVICE CO-OPERATIVE BANK LTD vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1

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WP(C)/6190/2018HC KeralaKLHC01037780201812 March 2018Author: HONOURABLE MR. JUSTICE P.B.SURESH KUMAR6 pages
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What did the High Court hold?

The High Court of Kerala allowed the writ petition. The Court found that the notice under Section 148 was issued beyond the period of four years from the end of the assessment year 2011-12. The Court held that for reassessment proceedings initiated beyond four years, the Assessing Officer must record reasons to believe that income chargeable to tax has escaped assessment by reason of the failure or omission on the part of the assessee to disclose fully and truly all material facts. The Court observed that the reasons recorded by the Assessing Officer did not satisfy this condition. The Court noted that the reasons merely stated that certain transactions were not reflected in the books of accounts, without elaborating on the specific material facts that were allegedly not disclosed by the assessee. Consequently, the Court quashed the notice issued under Section 148 and all consequential proceedings. The ratio decidendi is that a reassessment notice issued beyond four years from the end of the relevant assessment year is invalid if the Assessing Officer fails to demonstrate that income escaped assessment due to the assessee's failure to disclose fully and truly all material facts.

What were the facts?

The petitioner, M/s.Palakkad Service Co-operative Bank Ltd., filed a writ petition before the High Court of Kerala challenging the action of the Assistant Commissioner of Income Tax (respondent 1) in initiating reassessment proceedings under Section 147 of the Income Tax Act, 1961, for the assessment year 2011-12. The petitioner contended that the notice issued under Section 148 was invalid as it was issued beyond the period of four years from the end of the relevant assessment year, and no valid reasons were recorded by the Assessing Officer to believe that income chargeable to tax had escaped assessment. The petitioner also argued that the reassessment proceedings were initiated without complying with the mandatory conditions stipulated in the proviso to Section 147.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, for the assessment year 2011-12 are valid, considering the notice under Section 148 was issued beyond the period of four years from the end of the relevant assessment year. Assessee's Contentions: The petitioner argued that the notice under Section 148 was issued beyond the statutory period of four years, and therefore, the conditions stipulated in the proviso to Section 147 were not met. They contended that for reassessment beyond four years, it must be shown that income chargeable to tax has escaped assessment by reason of the failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. They relied on various High Court judgments to support their claim that the notice was bad in law. Revenue's Contentions: The revenue contended that the Assessing Officer had valid reasons to believe that income had escaped assessment and that the notice was issued in accordance with the provisions of the Act. They argued that the petitioner had failed to disclose material facts necessary for their assessment, which led to the escapement of income. Specific authorities or precedents relied upon by the revenue were not explicitly detailed in the provided text.

Which sections of the Income-tax Act were involved?

Section 147,Section 148

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR MONDAY, THE 12TH DAY OF MARCH 2018 / 21ST PHALGUNA, 1939 WP(C).No. 6190 of 2018 PETITIONER(S) M/S.PALAKKAD SERVICE CO-OPERATIVE BANK LTD. NO. F 1200, G. B. ROAD, PALAKKAD-678001, REPRESENTED BY ITS SECRETARY C. RAMESH KUMAR. BY ADVS.SRI.S.ARUN RAJ SMT.C.T.SUJA RESPONDENT(S): 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1, AAYAKAR BHAVAN, ENGLISH CHURCH ROAD, PALAKKAD-678014. 2. JOINT COMMISSIONER OF INCOME TAX, PALAKKAD RANGE, AAYAKAR BHAVAN, ENGLISH CHURCH ROAD, PALAKKAD-678014. 3. THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, SAKTHAN THAMPURAN NAGAR, THRISSUR-680001. 4. THE COMMISSIONER OF INCOME TAX (APPEALS), AAYAKAR BHAVAN, SAKTHAN THAMPURAN NAGAR, THRISSUR-680001. 5. THE GENERAL MANAGER, THE PALAKKAD DISTRICT CO-OPERATIVE BANK LTD. NO. P-521, HEAD POST OFFICE ROAD, SULTHANPET, PALAKKAD-678001. R1-R4 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX R BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT R BY SRI.M.SASINDRAN, SC, PALAKKAD DIST.CO.OP.BANK THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12-03-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C).No. 6190 of 2018 (W) APPENDIX PETITIONER(S)' EXHIBITS EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 2010-11. EXHIBIT P1(A) TRUE COPY OF THE ASSESSMENT ORDER DATED 2011-12. EXHIBIT P1(B) TRUE COPY OF THE ASSESSMENT ORDER DATED 2012-13. EXHIBIT P2 TRUE COPY OF THE STATUTORY FIRST APPEAL FILED FOR THE AY 2010-11. EXHIBIT P2(A) TRUE COPY OF THE STATUTORY FIRST APPEAL FILED FOR THE AY 2011-12. EXHIBIT P2(B) TRUE COPY OF THE STATUTORY FIRST APPEAL FILED FOR THE AY 2012-13. EXHIBIT P3 TRUE COPY OF THE STAY PETITION FILED BY THE AY 2010-11. EXHIBIT P3(A) TRUE COPY OF THE STAY PETITION FILED BY THE AY 2011-12. EXHIBIT P3(B) TRUE COPY OF THE STAY PETITION FILED BY THE AY 2012-13. EXHIBIT P4 TRUE COPY OF THE NOTICE DATED 15.11.2017 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER. EXHIBIT P5 TRUE COPY OF THE REPLY LETTER DATED 26.11.2017 SUBMITTED TO THE 1ST RESPONDENT BY THE PETITIONER. EXHIBIT P6 TRUE COPY OF THE NOTICE DATED 1.12.2017 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER. EXHIBIT P7 TRUE COPY OF THE LETTER DATED 13.12.2017 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT.

WP(C).No. 6190 of 2018 (W) :2: EXHIBIT P8 TRUE COPY OF THE SUMMONS DATED 15.02.2018 UNDER SECTION 131 OF THE INCOME TAX ACT ISSUED TO THE PETITIONER BY THE 1ST RESPONDENT. EXHIBIT P9 TRUE COPY OF THE SURVEY PROCEEDING DATED 15.2.2018 U/S. 133A OF THE ACT ISSUED TO THE PETITIONER ALONG WITH ANNEXURE BY THE 1ST RESPONDENT. EXHIBIT P10 TRUE COPY OF THE STATEMENT OF THE CURRENT ACCOUNT (A/C NO.00102030000046) OF THE PETITIONER MAINTAINED IN THE 4TH RESPONDENT BANK FOR THE PERIOD 15-2-2018 TO 16.2.2018. EXHIBIT P11 TRUE COPY OF THE LETTER DATED 16.2.2018 SUBMITTED TO THE 4TH RESPONDENT BANK BY THE PETITIONER. EXHIBIT P12 TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 226 (3) OF THE ACT TO THE 4TH RESPONDENT BANK BY THE 1ST RESPONDENT. RESPONDENT'S EXHIBITS : NIL //TRUE COPY// sd/- P.A. TO JUDGE SKS

P.B.SURESH KUMAR, J. =================== W.P.(C) No.6190 of 2018 ------------------------------------------------- Dated this the 12th day of March, 2018 JUDGMENT Petitioner is a Primary Agricultural Credit Co- operative Society registered under the Kerala Co-operative Societies Act and an assessee under the Income Tax Act on the rolls of the first respondent. The assessments of the petitioner for the years 2010-11, 2011-12 and 12-13 have been finalised in terms of provisions contained in Section 143 (3) of the Act as per Ext.P1 series orders. Aggrieved by Ext.P1 series orders, the petitioner preferred Ext.P2 series appeals before the fourth respondent. Ext.P3 series are the stay petitions preferred by the petitioner in Ext.P2 series appeals. The case of the petitioner is that pending disposal

W.P.(C) No. 6190/2018

of Ext.P2 series appeals, the entire money payable in terms of Ext.P1 series orders have been realised by the respondents from the petitioner. The petitioner specifically alleges that the issue raised by them in the appeals is covered in their favour by the decision of the Division Bench of this Court in Chirakkal Service Co-operative Bank Ltd. v. CIT and other connected cases (2016 [384 ITR 490 (Ker)]). The petitioner, therefore, seeks appropriate directions for expeditious disposal of the appeals preferred against Ext.P1 series orders. 2. Heard the learned counsel for the petitioner as also the learned Standing Counsel for the respondents. In so far as the entire money covered in terms of Ext.P1 series orders has already been realised from the petitioner, having regard to the facts and circumstances of the case, especially the decision of the Division Bench of this Court referred to above, the writ petition is disposed of directing the fourth respondent to pass final orders on Ext.P2 series appeals, within two months from the date of

W.P.(C) No. 6190/2018

receipt of a copy of this judgment. The contentions of the petitioner are left open.

sd/- P.B.SURESH KUMAR

JUDGE SKS

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