KERALA STATE FINANCIAL ENTERPRISES LIMITED vs. UNION OF INDIA

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.S.DIAS TUESDAY, THE 23RD DAY OF MAY 2023 / 2ND JYAISHTA, 1945 WP(C) NO. 16117 OF 2023 PETITIONER/S: KERALA STATE FINANCIAL ENTERPRISES LIMITED BHADRATHA MUSEUM ROAD, CHEMBUKKAVU, THRISSUR, KERALA, INDIA., REPRESENTED BY ITS SENIOR MANAGER/ LIAISON OFFICER (LEGAL) - MR. UNNIKRISHANAN M., PIN - 680020 BY ADVS. RAJA KANNAN M.GOPIKRISHNAN NAMBIAR K.JOHN MATHAI JOSON MANAVALAN KURYAN THOMAS PAULOSE C. ABRAHAM RESPONDENT/S: 1 UNION OF INDIA REPRESENTED BY ITS REVENUE SECRETARY, MINISTRY OF FINANCE, NEW DELHI, PIN - 110004 2 THE COMMISSIONER OF INCOME TAX (APPEALS), UNIT-3, 5TH FLOOR, INCOME TAX BUILDING,63,RACE COURSE ROAD, COIMBATORE., PIN - 641018 3 ASSESSMENT UNIT, NEAC MAYUR BHAWAN, CONNAUGHT LANE, BARAKHAMBA, NEW DELHI, DELHI, PIN - 110001 4 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) & TPS, AAYAKAR BHAVAN, INCOME TAX OFFICE, SHAKTANTAMPURAN NAGAR, THRISSUR, KERALA., PIN - 680001 5 PRINCIPAL COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE, PIN - 673001 SRI.JOSE JOSEPH SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23.05.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NO. 16117 OF 2023 2 JUDGMENT The writ petition is filed, inter-alia, to quash Ext.P12 order passed by the 2nd respondent directing the petitioner to deposit 50% of the demand amount to consider Ext.P3 appeal filed by the petitioner. 2. The brief relevant facts are that, aggrieved by Ext.P1 assessment order and Ext.P2 demand notice issued by the 3rd respondent, the petitioner has preferred Ext.P3 appeal under Section 250 of the Income Tax Act, 1961 before the 2nd respondent. Along with the appeal, the petitioner has also filed Ext.P9 stay petition to stay the operation of Exts.P1 and P2. However, the 2nd respondent, by the impugned Ext.P12 order, has directed the petitioner to deposit 50% of the assessed amount as a pre-condition to entertain the appeal. Ext.P12 is patently wrong and passed in gross violation of the settled law, especially the precedent of this Court in Archana Agencies vs. Commercial Tax Officer [2014 (2) KLT 715]. Hence, the writ petition.

WP(C) NO. 16117 OF 2023 3 3. Heard; Sri.Raja Kannan, the learned Counsel appearing for the petitioner and Sri.Jose Joseph, the learned Standing Counsel appearing for the respondents. 4. This Court in Archana (supra) while considering a challenge under the Value Added Tax Act, 2003 (Kerala) has held as follows: "3. On a perusal of the stay order, it is seen that while the Appellate Authority admits that there is a prima facie case established for the grant of a conditional stay, the order does not disclose the basis for insisting on the payment of even 30% of the dues conferred against the petitioner. In my opinion, a quasi judicial authority considering a stay application of an assessee under a taxation statute has to give reasons to support the order directing payment of any amount towards tax/interest pending disposal of the appeal. He has to bear in mind the Constitutional Mandate under Article 265 of the Constitution that there shall be no levy or collection of tax except by the authority of law. In taxation matters therefore, more than in any other matter, reasons must support not only the decision to waive payment of amounts due but also the decision that directs an assessee to make some payments pending consideration of the appeal. No doubt, this would require the adjudicating authority to look into the merits of the matter for the purposes of deciding the extent of waiver from payment that he can grant to an assessee while deciding the conditions for the grant of stay. This, however is a legal requirement that must be read into the exercise of the statutory discretion by the said authority.

WP(C) NO. 16117 OF 2023 4 4. The requirement of giving reasons, albeit minimal in stay orders, especially in matters of taxation cannot be understated. The duty to give reasons for a decision is one that is conducive to fairness in judicial/quasi judicial/administrative action. Reasons for a decision are required to address the primary concern of an assessee in knowing what weighed with the authority in question while deciding the issue against him. The practice accords with the concept of fairness in action and recognises the dignity of the individual whose rights are affected by the decision in question. The obligation to provide reasons for a decision will also ensure that the decision maker acts within the limits of his discretion and takes into account only those factors as are relevant to the decision making process. No doubt it could be argued that the imposition of a duty to provide reasons for every decision might lead to stifling or unduly burdening the administration but this is an aspect that has to be weighed against the rights of the person affected. In taxation matters where the Constitution of India itself gives ample indication that the rights of a citizen against arbitrary taxation are zealously guarded, I would think that the requirement of giving reasons to support even a conditional order of stay would not tantamount to unduly burdening the administration. The law has necessarily to strike a balance between the necessity to govern and the rights of those governed". 5. On an analysis of the ratio decidendi in Archana Agencies (supra), I am of the definite view that the very same principles are squarely applicable to the matters falling under the Income Tax Act, also. 6. A reading of Ext.P12 order undoubtedly

WP(C) NO. 16117 OF 2023 5 demonstrates that the 2nd respondent has not stated any reason in arriving at a conclusion that the petitioner has to deposit 50% of the amount. Thus, I hold that Ext.P12 order is passed without application of mind and in violation of the settled principles of law, particularly while dealing with a taxation statute. Hence, I am constrained to interfere with Ext.P12 order which is untenable in law. Resultantly, I allow the writ petition as follows: (i) Ext.P12 order is set aside. (ii) The 2nd respondent is directed to reconsider Ext.P9 stay petition after adverting to the law laid down in Archana Agencies vs. Commercial Tax Officer and other decisions on the point, after affording the petitioner an opportunity of being heard. (iii) The 2nd respondent shall issue notice to the petitioner fixing the date of hearing.

WP(C) NO. 16117 OF 2023 6 (iv) Needless to mention, until a decision is taken on Ext.P9 application all further coercive proceedings as against the petitioner pursuant to Exts.P1 and P2 shall be kept in abeyance. Sd/-

C.S.DIAS, JUDGE rkc/23.05.23

WP(C) NO. 16117 OF 2023 7 APPENDIX OF WP(C) 16117/2023 PETITIONER EXHIBITS Exhibit P1 THE TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE 3RD RESPONDENT UNDER SECTION 143(3) READ WITH SECTION 144B OF THE ACT ON 26.12.2022, FOR THE A.Y 2021- 22 Exhibit P2 THE TRUE COPY OF THE DEMAND NOTICE DATED 26.12.2022 ISSUED BY 3RD RESPONDENT UNDER SECTION 156 OF THE ACT Exhibit P3 A TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) DATED 24.01.2023 FILED BY THE ASSESSEE IN FORM 35 Exhibit P4 A TRUE COPY OF THE ACKNOWLEDGEMENT RECEIPT DATED NIL, GENERATED IN THE PORTAL OF THE INCOME TAX DEPARTMENT, WHEN THE APPEAL WAS FILED ONLINE Exhibit P5 A TRUE COPY OF THE LETTER DATED 10.02.2023 ISSUED BY THE 4TH RESPONDENT Exhibit P6 A TRUE COPY OF THE PETITION (WITHOUT ANNEXURES) DATED 28.02.2023 SUBMITTED BY THE PETITIONER BEFORE THE 5TH RESPONDENT Exhibit P7 THE TRUE COPY OF THE ORDER DATED 15.03.2023 PASSED BY THIS HON'BLE COURT IN W.P.(C) NO. 9016 OF 2023 Exhibit P8 THE TRUE COPY OF THE COVERING LETTER DATED 18.03.2023 (WITHOUT ANNEXURES) ADDRESSED TO THE 4TH RESPONDENT Exhibit P9 THE TRUE COPY OF THE STAY PETITION (WITHOUT ANNEXURES) DATED 17.03.2023 ADDRESSED TO THE NFAC Exhibit P10 THE

TRUE

COPY

THE

ONLINE ACKNOWLEDGEMENT NO. 985520291180323 DATED NIL EVIDENCING THE UPLOADING OF APPEAL MEMORANDUM, EXT. P7 ORDER, COPY OF W.P.

WP(C) NO. 16117 OF 2023 8 (C). NO. 9016 OF 2023 AND EXT. P9 STAY PETITION IN THE PORTAL OF INCOME TAX DEPARTMENT Exhibit P11 THE TRUE COPY OF THE JUDGMENT DATED 10.04.2023 PASSED BY THIS HON'BLE COURT IN W.P.(C). NO. 9016 OF 2023 Exhibit P12 THE TRUE COPY OF THE LETTER DATED 02.05.2023 ISSUED BY THE 2ND RESPONDENT Exhibit P13 THE TRUE COPY OF THE TRACKING REPORT DATED NIL OBTAINED FROM THE WEBSITE OF INDIA POST, EVIDENCING THE DATE OF RECEIPT OF EXT. P12 LETTER