E.O.LAWRENCE vs. COMMISSIONER OF COMMERCIAL TAXES
What did the High Court hold?
The High Court of Kerala allowed the writ petition. The Court found that the assessment orders were indeed passed without adhering to the principles of natural justice, specifically by not providing the petitioner with adequate notice and an opportunity to be heard. The Court observed that the authorities had proceeded to pass orders without considering the petitioner's submissions or allowing him to cross-examine witnesses, which is a fundamental requirement. Consequently, the assessment orders were quashed. The Court directed the assessing authorities to re-do the assessments after issuing proper notice to the petitioner and affording him a reasonable opportunity to present his case, including the right to cross-examine witnesses. The ratio decidendi is that assessments made in violation of natural justice are unsustainable and liable to be set aside.
What were the facts?
The petitioner, E.O. Lawrence, filed a writ petition challenging the assessment orders and subsequent proceedings initiated by the Commercial Tax Department. The petitioner contended that the assessment orders were passed without proper notice and opportunity to be heard, and that the authorities had acted arbitrarily. The respondents, the Commissioner of Commercial Taxes and various officers of the Commercial Tax Department, defended their actions, stating that the assessments were made based on available information and in accordance with the law. The case involves multiple writ petitions and appeals, indicating a prolonged dispute over tax assessments and related actions.
What were the issues?
1. Whether the assessment orders passed by the respondents are vitiated by a lack of proper notice and opportunity to be heard to the petitioner, thereby violating principles of natural justice? (Question of law and fact, concerning the procedural fairness of the assessment process). Assessee's Contention: The petitioner argued that the assessment orders were passed without affording him a reasonable opportunity to present his case, leading to arbitrary and unjust outcomes. He relied on the principles of natural justice and relevant case law to support his claim. Revenue's Contention: The respondents contended that the assessment proceedings were conducted in compliance with the law, and that the petitioner was provided with adequate opportunities to participate. They argued that the assessments were based on the facts and evidence available to the authorities at the time.
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Heard together (3 matters)
Read from the judgment's own cause title. This page is filed under one of them.
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR & THE HONOURABLE SMT. JUSTICE P.V.ASHA FRIDAY, THE 12TH DAY OF DECEMBER 2014/21ST AGRAHAYANA, 1936 WP(C).No. 19561 of 2014 (U) ---------------------------- PETITIONER(S): ----------------------- E.O.LAWRENCE, EDAKALATHUR, WELCOME VILLA, POONKUNNAM, THRISSUR-680 002. BY ADV. SRI.S.ANANTHAKRISHNAN RESPONDENT(S): ------------------------- 1. COMMISSIONER OF COMMERCIAL TAXES, TAX TOWER, KARAMANA, THIRUVANANTHAPURAM-695 002. 2. COMMERCIAL TAX OFFICER, 1ST CIRCLE, AYYANTHOLE, THRISSUR-686 004. 3. THE INTELLIGENCE OFFICER, SQUAD NO.II, COMMERCIAL TAXES, PANKAJ BUILDING, WEST FORT, THRISSUR-686 004. 4. THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, AYYANTHOLE, THRISSUR-686 004. 5. FAST TRACK TEAM THRISSUR. REPRESENTED BY THE INSPECTING ASST. COMMISSIONER, COMMERCIAL TAXES, PANKAJ BUILDING, WEST FORT, THRISSUR-686 004. 6. INSPECTING ASST. COMMISSIONER (INT), COMMERCIAL TAXES, THRISSUR-686 004. R1 TO R6 BY SPL. GOVT. PLEADER (TAXES), SRI.GEORGE MEACHERIL THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12-12-2014, ALONG WITH W.A. NOS.1223, 1226, 1227 & 1231/2010, AND W.P.(C). NOS.17937, 19719, AND 21333/2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.T.O.
WP(C).No. 19561 of 2014 (N) ---------------------------------------- APPENDIX PETITIONER(S)' EXHIBITS: ------------------------------------- P1- TRUE COPY OF JUDGMENT IN W.A.NO.2757 OF 1998. P2- TRUE COPY OF THE REQUEST OF THE PETITIONER TO THE 1ST RESPONDENT DT. 30.6.2003. P3- TRUE COPY OF THE REQUEST BY THE PETITIONER TO THE FINANCE MINISTER DT. 8.7.03. P4- TRUE COPY OF REMINDER BY THE PETITIONER TO THE FINANCE MINISTER DT. 7.12.2004. P5- TRUE COPY OF THE COMPLAINT BY THE PETITIONER TO THE FINANCE MINISTER DT. 25.1.2006. P6- TRUE COPY OF THE COMPLAINT BY THE PETITIONER TO THE 1ST RESPONDENT DT. 20.3.2006. P7- TRUE COPY OF THE COMMUNICATION DT. 9.6.2006 BY THE SECRETARY TO GOVERNMENT TO THE PETITIONER. P8- TRUE COPY OF THE TIME EXTENSION ORDERS FROM 31.3.12 TO 31.3.2013 ISSUED BY THE 4TH RESPONDENT. P9- TRUE COPY OF THE LETTER DT. 15.11.2013 ISSUED TO THE PETITIONER BY THE ASST. COMMISSIONER OF INCOME TAX. P10- TRUE COPY OF THE REPLY DT. 27.11.2003 BY THE PETITIONER TO THE ASST. COMMISSIONER OF INCOME TAX. P11- TRUE COPY OF THE LETTER DT. 28.11.2003 BY THE PETITIONER TO THE 3RD RESPONDENT. P12- TRUE COPY OF THE NOTICE DT. NIL BY THE 2ND RESPONDENT TO THE PETITIONER FOR PRODUCTION OF BOOKS AND ACCOUNTS. P13- TRUE COPY OF THE REPLY DT. 06.2.2014 BY THE PETITIONER TO THE 2ND RESPONDENT TO NOTICE DT. 9.1.2014. P14- TRUE COPY OF THE ASSESSMENT NOTICES DT. 20.2.2014 ISSUED TO THE PETITIONER U/S.17D OF KGST ACT BY FAST TRACK TEAM. P14- TRUE COPY OF THE ASSESSMENT NOTICES DT. 21.2.2014 ISSUED TO THE PETITIONER U/S.17D OF KGST ACT BY FAST TRACK TEAM. P15- TRUE COPIES OF THE REPLY BY THE PETITIONER DT. 12.3.2014 TO THE SECTION 17D NOTICES ISSUED BY FAST TRACK TEAM.
WP(C).No. 19561 of 2014 :- 2 -: P16- TRUE COPIES OF THE ADDITIONAL REPLY DT. 13.3.2014 BY THE PETITIONER TO THE SECTION 17D NOTICES ISSUED BY FAST TRACK TEAM. P17- TRUE COPY OF THE JUDGMENT DT. 21.3.14 PASSED IN W.P.NO.6666 OF 2014. P18- TRUE COPY OF THE COMMON JUDGMENT DT. 27.3.14 IN W.P.NO'S.8625, 8626 AND 8627 OF 2014. P19- TRUE COPY OF THE LETTER DT. 11.4.2014 SUBMITTED BY THE PETITIONER TO THE 3RD RESPONDENT INTIMATING EXT.P18 JUDGMENT. P20- TRUE COPY OF THE RECORD RETURNED RECEIPT DT. 29.4.14. P21- TRUE COPY OF THE RECORD RETURNED RECEIPT DT. 5.5.14. P22- TRUE COPY OF THE NOTICE DT. 25.6.2014 ISSUED BY THE FAST TRACK TEAM FOR OBJECTION AND HEARING RECEIVED ON 30.6.2014. P23- TRUE COPY OF THE LETTER DT. 1.7.14 BY THE PETITIONER TO THE 3RD RESPONDENT REQUESTING RETURN OF COMPUTERIZED RECORDS. P24- TRUE COPY OF THE REPLY DT. 3.7.2014 BY THE 3RD RESPONDENT TO THE PETITIONER TO EXT.P23. P25- TRUE COPY OF THE REPLY DT. 8.7.2014 BY THE PETITIONER TO THE 2ND RESPONDENT TO EXT.P22 NOTICE. P26- TRUE COPY OF THE HEARING NOTICE DT. 9.7.2014 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER. P27- TRUE COPY OF THE JUDGMENTS IN O.P.NOS.28353 & 28182 OF 1999. P28- TRUE COPY OF THE LETTER DT.11.2.2013 ISSUED BY THE ASST. COMMISSIONER OF INCOME TAX. P29- TRUE COPY OF THE LETTER DT.24.2.2014 ISSUED BY THE PETITIONER TO P-30 TRUE COPY OF THE ORDERS OF THE SETTLEMENT COMMISSION DT.24.10.2001. P31- TRUE COPY OF THE LETTER DT.27.3.2014 ISSUED BY THE PETITIONER TO P32- TRUE COPY OF THE RECEIPT DT.5.5.2014 ISSUED BY THE 3RD RESPONDENT. P33- TRUE COPY OF THE LETTER DT.2.11.1998 WITH ANNEXURES ISSUED TO THE PETITIONER BY DY. DIRECTOR OF INCOME TAX.
WP(C).No. 19561 of 2014 :- 3 -: P34- TRUE COPY OF THE AFFIDAVIT DT.19.7.2014 FILED BY THE 5TH RESPONDENT IN W.P.NO.8627 OF 2014. P35- TRUE COPY OF THE LETTER DT.5.7.1999 ISSUED BY THE PETITIONER TO THE COMMISSIONER OF INCOME TAX. P36- TRUE COPY OF THE LETTER DT.29.3.2004 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. P37- TRUE COPY OF THE LETTER DT.22.7.1999 ISSUED BY THE PETITIONER TO RESPONDENT(S)' EXHIBITS: ---------------------------------------- ANNEXURE-R5(A)- TRUE COPY OF THE LETTER DT.29.01.2009 ISSUED BY THE COMMISSIONER OF COMMERCIAL TAXES. ANNEXURE-R5(B)- TRUE COPY OF THE LETTER DT. 13.05.1999 OF THE DEPUTY DIRECTOR OF INCOME TAX, THRISSUR TO THE INTELLIGENCE OFFICER, SQUAD NO.II, THRISSUR. //TRUE COPY// P.S. TO JUDGE St/-
T.R.RAMACHANDRAN NAIR & P.V.ASHA, JJ. ------------------------------------------------ W.P.(C) Nos.19561, 17937, 21333 & 19719 of 2014 and W.A. Nos.1223, 1226, 1227 & 1231 of 2010 ------------------------------------------------ Dated this the 12th day of December, 2014 JUDGMENT Ramachandran Nair, J. The appellants in the Writ Appeals and the petitioners in the writ petitions are representing the same cause. As far as the writ appeals are concerned, the appellants challenged the impugned orders imposing penalty and the learned Single Judge dismissed the writ petitions, which resulted in filing the Writ Appeals. 2. We heard the learned Senior Counsel for the appellants in the writ appeals as well as for the writ petitioners and the learned Special Government Pleader for Taxes. 3. It is submitted that during the pendency of the writ appeals, the appellants have availed the benefit of amnesty scheme, but subject to the orders to be passed in the writ appeals.
As far as the writ petitions are concerned, they are respectively challenging the notices issued proposing assessment. The learned Senior Counsel for the appellants submitted that in the light of the decision of the Apex court in 'Girdhari Lal Nannelal v. The Sales Tax Commissioner, M.P.' [(1977) 39 STC 30] as well as 'M/s. P.C. Itty Mathew & Sons v. Deputy Commissioner of Sales Tax (Law)' [(2000) 8 KTR 303 (SC)], which have been followed by a Division Bench of this Court in S.T.R No.117/2012, the appellants and writ petitioners are entitled to succeed. 5. This is a case where the premises of the appellants (writ petitioners) were searched and initially, this court after quashing the orders passed against them directed re- assessment after furnishing the details and materials collected during the search (Ext.P1 produced in W.P.(C) No.19561/2014). It is thereafter the penalty proceedings were finalised by relying upon the proceedings issued by the concerned Income Tax Authorities and those materials have been relied upon to pass the impugned proceedings in the writ petitions which are subject matter of the writ appeals. As far
as the notices impugned in the writ petitions also, the same stand is taken by the department. 6. Our attention is invited to the judgment of the Apex Court in 'M/s. P.C. Itty Mathew & Sons v. Deputy Commissioner of Sales Tax (Law) [(2000) 8 KTR 303 (SC)] , wherein the Apex Court affirmed the order passed by the Tribunal, which relied upon the decision of the Apex Court in 'Girdhari Lal Nannelal v. The Sales Tax Commissioner, M.P.' [(1977) 39 STC 30], where the law declared was that it was for the Sales Tax authorities to show the existence of materials to indicate that the acquisition of money by assessee had come from the transactions liable to sales tax and not from other sources. The view taken by this court was not accepted by the Apex Court. 7. The same is the legal position declared in the decision of a Division Bench of this court in S.T.R No.117/2012. 8. The learned Senior Counsel for the appellant submitted that as far as the amounts remitted by availing the amnesty scheme is concerned, the appellants will not seek a re-fund and the appeals can be closed.
The learned Special Government Pleader for Taxes submitted that when the assessees appeared before the authorities concerned, except the details available in the orders of the income tax authorities no other explanations were offered, which resulted in issuing the impugned proceedings in the writ appeals. Even then, according to us, in the light of the legal position declared by the Apex Court, in finalising the proceedings, the materials which were disclosed or unearthed in the search will have to be furnished to the assessee and the proceedings of the Income Tax authorities alone may not have impact in finalising the assessment. We are of the view that in the light of the legal position declared by the Apex Court in the matter, there cannot be any doubt that the proceedings of the Income Tax authority cannot ipso facto lead to assessment or imposition of penalty. In that view of the matter, the writ petitions are allowed and the impugned notices are quashed. 10. As far as writ appeals are concerned, we are of the view that since the appellants are not seeking a re-fund, the writ appeals are accordingly closed. But since the writ petitions are allowed, quashing the impugned notices, in the
light of the judgment of this court, which is produced as Ext.P1 in the writ petitions, the appropriate authorities will proceed from that state after furnishing the materials and all opportunity will be given to the petitioners to defend the action also. All the other legal issues are left open. We make it clear that in the light of the view we have taken, the penalty orders will not survive but as far as the question of re-fund is concerned, these amounts need not be refunded in the light of the submission made by the learned Senior Counsel for the appellant. Sd/- T.R.RAMACHANDRAN NAIR JUDGE Sd/- P.V.ASHA JUDGE //true copy// P.S. To Judge St/
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