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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 10TH DAY OF JUNE, 2013
BEFORE
THE HON’BLE MR.JUSTICE ARAVIND KUMAR
WRIT PETITION NO. 7064/2013 (T-IT)
BETWEEN:
Sri. Dilip Surana, LR of late Ghevarchand Surana, Aged about 43 years, No.45/3, Fairfield Layout, Race Course Road, Bangalore-560 001.
... Petitioner
(By Sri.Malla Rao, Advocate for Sri.S.Parthasarathi, Associates, Advocates)
AND:
The Commissioner of Income-Tax, Bangalore-II, C.R.Building, Queen’s Road, Bangalore-560 001.
The Deputy Commissioner, Of Income-Tax, Circle 3(1), 4th Floor, Unity Building Annexe, P.Kalinga Rao Road, Bangalore-560 027.
…..Respondents
(By Sri. M.Thirumahesh, Advocate)
Writ petition is filed under Article 226 and 227 of the Constitution of India, praying to quash the order of R-2
passed under section 240 of the Act, dated 24.07.2002 vide Annexure-F.
This petition coming on for preliminary hearing this day, the Court made the following:
O R D E R
Petitioner is seeking for issue of a writ of certiorari to quash the order dated 24.07.2002 passed by second respondent - Annexure-F, order dated 30.03.2004- Annexure-G and order dated 08.01.2013- Annexure-H.
I have heard the arguments of Mr.Malhara Rao, learned Advocate appearing for petitioner and Sri M. Thirumalesh, learned Advocate and Junior Standing Counsel appearing for respondents.
Petitioner contends that pursuant to the search conducted under Section 132 of Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), notice was issued to the petitioner on 15.12.1997 under Section 158 BC of the Act calling upon the petitioner to file returns for the block period 1988-89 to 1998-99 and
same came to be filed on 29.06.1999 declaring the undisclosed income at ` 10 lakhs for the block period and after tax liability at ` 6 lakhs, a sum of ` 2,82,000/- was paid by way of tax as self assessment under Section 140A of the Act and remaining amount of ` 3,18,000/- which had been paid under the Voluntary Disclosure Income Scheme (hereinafter referred to as ‘VDIS’) was adjusted at the request of the assessee.
The return of income filed by petitioner- assessee came to be accepted and an assessment order came to be passed on 02.09.1999 - Annexure-A determining total undisclosed taxable income for the block period at ` 15,36,960/- and tax thereon at ` 9,22,176/- . Being aggrieved by this order, appeal came to be filed by the assessee before Commissioner of Income Tax (Appeals) and said appeal came to be allowed vide order dated 08.05.2002 holding that notice issued under Section 158BC(a)(ii) of the Act is invalid on account of sufficient time prescribed under the Act
having not been given to the assessee to file return of income and consequently, block assessment order was annulled. Being aggrieved by this order, revenue filed an appeal in ITA Nos.149 & 150/Bang/2002 before the Income Tax Appellate Tribunal and Revenue’s appeal came to be dismissed by order dated 06.05.2005. Revenue pursued the matter by filing an appeal under Section 260A of the Act before this Court in ITA No.3053/2005 which also came to be dismissed by answering the substantial question of law formulated therein in favour of the assessee vide order dated 14.09.2011-Annexure-E.
In the meanwhile, assessee filed an application on account of introduction of Voluntary Disclosure Income Scheme being brought, contending that he is entitled to the benefit envisaged under said Scheme, which was turned down by the Revenue. Aggrieved by the same, assessee filed a writ petition before this Court and he was unsuccessful and
undaunted by such dismissal a Writ Appeal No.6502/1997 which also came to be dismissed on 08.06.1999 and it was observed by Division Bench that if the assessee has not been given the benefit of the Scheme under Section 64(2)(ii) of the Act, the amounts paid thereof may be adjusted against the tax liability of the assessee. Proceedings giving effect to the order passed by this Court in W.A.No.6502/1997 came to be initiated and a demand for ` 6,43,352/- was raised on the assessee vide order dated 16.01.2002 – Annexure-B holding thereunder that assessee would not be entitled to refund.
After the Commissioner of Income Tax (Appeals) allowed the appeal of the assessee on 08.05.2002, an application was filed by the assessee before the Deputy Commissioner of Income Tax, Circle 3(1), Bangalore for refund of the tax paid. Deputy Commissioner of Income Tax, after adjudicating the said claim, vide order dated 24.07.2002 – Annexure-F
ordered for refund of a sum of `1,91,236/- which had been adjusted in excess of what has been declared by the assessee in the return of income. It is thereafter petition under Section 264 of the Act in No.LRP/5/02- 03/II was filed before Commissioner of Income Tax, Bangalore-II, Bangalore on 25.09.2002 seeking for refund of the tax paid under the return of income which came to be adjudicated and prayer of the assessee came to be rejected vide order dated 30.03.2004 – Annexure- G. This order was not pursued by the assessee and was virtually accepted by the assessee. Thereafter, on the revenue’s appeal being dismissed before this Court in ITA No.3053/2005 on 14.09.2011 assessee sought to revive the cause of action by submitting one more representation on 15.11.2012. This representation came to be considered and assessee was intimated about the earlier order passed on 30.03.2004 – Annexure-G rejecting his prayer for refund of the tax vide communication dated 08.01.2013 - Annexure-H. It is
these orders of rejection of refund of tax which have been assailed in this writ petition by the assessee.
The contention of Sri Malhara Rao is when assessment order having been annulled by the Commissioner of Income Tax (Appeals), the very foundation has crumbled and as such, nothing remained and as such revenue could not have retained the amount paid by the assessee pursuant to the block assessment made. Hence, he contends that assessee is entitled for refund. In support of his submission, he has relied upon the judgment of this Court in the case of COMMISSIONER OF INCOME TAX AND ANOTHER vs. MICRO LABS LTD. reported in 2012 (348) ITR 75 and COMMISSIONER OF INCOME TAX & ANOTHER VS MICRO NOVA PHARMACEUTICALS (P) LTD. reported in 2012 (340) ITR 118 (Karnataka).
Per contra, Sri. Thirumalesh, learned Advocate appearing for respondent would contend that
under Section 240(b) of the Act, the assessee would not be entitled for refund of the tax paid voluntarily under the return of income submitted by the assessee and adjustments made by the revenue in excess of what had been declared by the assessee has been ordered to be refunded to the extent of `1,91,236/- by the order dated 24.07.2012 and as such, question of refunding a sum of `6 lakhs paid by the assessee would not arise. He contends, it is only such tax assessed by the assessing officer in excess of what has been declared by the assessee would become refundable and not the tax paid under return of income as declared by the assessee himself. He would submit that two judgments relied upon by the petitioner is distinguishable on facts and same are not applicable to the facts on hand. He would contend that writ petition is liable to be dismissed on account of delay and latches inasmuch as, order passed by the Commissioner of Income Tax, Bangalore-II, Bangalore is of the year 2004 and same is questioned after a period of 9 years. In support of his submission,
he has relied upon judgment of COMMISSIONER OF INCOME TAX vs SHELLEY PRODUCTS AND ANOTHER reported in 2003 (261) ITR 367. He prays for dismissal of writ petition.
Having heard the learned Advocates appearing for parties, the following points would arise for consideration: 1. Whether writ petition is liable to be dismissed on the ground of delay and latches?
Whether the petitioner is entitled for the relief sought for in the writ petition?
FACTUAL MATRIX: 10. Petitioner is an individual assessee. Search proceedings were carried out under Section 132 of the Act in the residential premises of the assessee on 10.09.1997 pursuant to which notice under Section 158 BC of the Act was issued on 15.12.1997 calling upon
the petitioner to file the returns within 15 days from the date of notice for the block period 1988-89 to 1998-99. After seeking for time, assessee filed return of income on 29.06.1999 declaring undisclosed income as `10 lakhs and in the said returns, tax liability was shown as ` 6 lakhs by the assessee. Under the said return of income, assessee also paid a sum of `2,82,000/- as self assessment under Section 140A of the Act and remaining amount of `3,18,000/- was requested to be adjusted by the assessee under the VDIS since by that time, said Scheme has come into vogue and petitioner/ assessee had opted to seek umbrage under the said Scheme. On the basis of return of income filed, same came to be adjudicated by the assessing officer and an assessment order came to be passed on 02.09.1999. Undisputedly, notice under Sections 142(1) & 143(2) had also been issued to the assessee along with detailed questionnaire calling upon the assessee to explain with reference to the seized documents. Under the assessment order dated 02.09.1999 the undisclosed
income for the block period was arrived at as ` 15,36,960/- and tax demand therein was raised which was to the tune of ` 9,22,176/- and consequently interest under Section 158BFA of the Act was also raised.
In the meanwhile, as noted herein supra, Voluntary Disclosure Income Scheme has come into force and as such, petitioner/assessee made an application under the said scheme and same was not accepted by the revenue authorities and it was rejected on the ground that it was a search case. Being aggrieved by the same, petitioner approached this Court in W.P.Nos.32454/1997 which also came to be dismissed by order dated 20-11-1997. Said order of dismissal of writ petition came to be affirmed in W.A.No.6506/1007 vide order dated 08.06.1999. Liberty was granted by the Division Bench to the revenue to adjust the amount paid under the VDIS by the assessee against any tax liability of the assessee in the event of Department
coming to the conclusion that assessee is not entitled for the benefit of VDIS.
Being aggrieved by the assessment order dated 02.09.1999, assessee filed an appeal before Commissioner of Income Tax (Appeals) but, by order dated 08.05.2002 allowed the appeal by annulling the block assessment order on the ground that notice issued under Section 158 BC(a)(ii) is invalid. Said order came to be affirmed by the Income Tax Appellate Tribunal, Bangalore Bench ‘B’ on 06.05.2005. After order came to be passed by Commissioner of Income Tax (Appeals) allowing the appeal of the assessee, an application has been filed by the assessee seeking for refund, which came to be adjudicated by Deputy Commissioner of Income Tax and taking into consideration Section 240(b) of the Income Tax Act, it was held that assessee is entitled for adjustment made in excess of what has been declared by the assessee himself vide order dated 24.07.2002 - Annexure-F.
RE: POINT NO.(1): 13. The order rejecting application for refund has been passed on 30.03.2004. Assessee has not challenged the same and has virtually accepted it. It is only after revenue’s appeal filed challenging the order of ITAT and CIT(A) whereunder assessment order had been annulled, came to be dismissed on 06.05.2005 assessee has attempted to revive dead cause of action by submitting representation and there is delay and latches which is clearly attributable to the assessee. Prayer of the assessee is liable to be rejected on this ground alone.
Since Point No.1 formulated herein above is answered in favour of revenue, I am of the considered view that in view of the contentions raised by the respective learned Advocates appearing for both the parties on merits, point No.(2) formulated herein above is also adjudicated and answered herein below.
RE: POINT NO.(2): 15. It is contended by the assessee that under similar circumstances, Division Bench has held when assessment order has been annulled, assessee would be entitled to refund of the tax paid in the case of COMMISSIONER OF INCOME TAX & ANOTHER vs MICRO LABS LTD reported in 2012(348) ITR 75. In the said case, it is held while answering issue No.3 as to whether assessee is entitled for refund of the tax, it was held as under: “The assessee has not paid the tax along with the income declared in the block return. It is only by way of adjustment of tax paid under the Voluntary Disclosure of Income Scheme and the refund due to the assessee for the other assessment years, that are adjusted against the so- called demand raised. For clause (b) of the proviso to section 240 to apply, the taxes should have been paid by the assessee voluntarily. Therefore, the Revenue cannot contend that the refund adjusted is to be treated as tax paid, so as to deny the assessee the refund due, subsequently, due to annulment of assessment. Payment of taxes voluntarily is different from
adjusting the refund without reference to the assessee.”
In the said case, undisputedly, assessee had not paid tax with regard to income written in the block return. Tax paid under the VDIS scheme and refund due to the assessee for different assessment years was sought to be adjusted by assessing officer after assessment order was annulled. Though revenue contended that such adjustment is permissible under clause (b) of Section 240 of the Act, it came to be negatived by Division Bench of this Court on the ground that admittedly taxes had not been paid by the assessee voluntarily and department had adjusted the tax paid by assessee under VDIS, as such, payment of tax was held to be not voluntarily.
In the present case, undisputedly, assessee has voluntarily filed return of income pursuant to the notice issued under Section 158BC of the Act and has declared the undisclosed income for the block
assessment period as ` 10 lakhs and tax payable therein as ` 6 lakhs. The assessee has also paid a sum of ` 2,82,000/- at the time of filing of the return of income. For the balance amount of ` 3,18,000/-, assessee as noted herein above, had attempted to take umbrage under the VDIS which come into vogue by that time. In fact, return filed under VDIS was not accepted by the revenue and it was rejected and as such, assessee had approached this Court in W.P.No.32454/1997 which petition came to be dismissed by order dated 20.11.1997 and same came to be affirmed in W.A.No.6506/1997 on 08.06.1999 by reserving liberty to the revenue to adjust the said amount against any tax liability of the assessee.
Giving effect to the order of Commissioner of Income Tax (Appeals) and while considering the claim of the assessee for refund, the Deputy commissioner of Income Tax was of the view and rightly so, that assessee would be entitled for refund of `1,91,236/- which had
been adjusted giving effect to the assessment order which was in excess of the tax declared and determined. However, in the order of refund, it has been categorically held under Section 240(b) of the Act, assessee would not be entitled for the tax declared under the return of income filed on 29.06.1999 and assessee would be entitled only for refund of tax paid in excess of tax chargeable on the total income returned by the assessee. In other words, after determination by the assessing officer, if the assessee had paid tax in excess of what has been declared in the return of income, it is only that excess or difference to which amount assessee would be entitled to and not the amount of tax paid under the return of income.
In the instant case, assessing officer while giving effect to the assessment order had in fact adjusted a sum of `1,91,236/- by construing the total taxable undisclosed income at `15,36,960/- after having raised a tax demand at ` 9,22,176/-.
Subsequently, after the assessment order came to be annulled by Commissioner of Income Tax (Appeals) and while giving effect to the said order in refund proceedings, it has been held that assessee would be entitled for the excess amount of tax adjusted namely to the tune of `1,91,236/- and not on the declared income and tax paid thereon which was to the tune of `6 lakhs. This order dated 24.07.2002 is in consonance with statutory provision namely 240(b) of the Act and there is no error committed by the respondent.
In COMMISSIONER OF INCOME TAX vs SHELLY PRODUCTS AND ANOTHER reported in 2003(261) ITR 367 referred to supra, it has been opined by their Lorships that when the Act enjoins upon the assessee a duty to file return of income disclosing his true income and on the basis of such return of income, if assessment is made, it would not be permissible for the assessee to contend at a later point of time that such return of income filed voluntarily by declaring
income thereon and tax paid thereon has to be ignored by the assessing officer and refund has to be made. In the event of assessing officer adjudicating the return of income, he may not accept the income declared and may make addition thereon, based on which tax demand would be raised. In such circumstances, assessee would be entitled to the difference thereof namely, tax demanded based on income determined by the assessing officer minus tax declared in the return of income filed by the assessee. In the instant case, it is this precise exercise which has been undertaken by the second respondent. when the assessment order came to be set aside by the CIT (A) and while giving effect to said order of CIT(A), second respondent has held that assessee is entitled to refund of ` 1,91,236/- only which had been adjusted namely ` 1,77,986/- adjusted vide intimation dated 22.03.1998, refund W.T for the assessment year 1998-99 and refund under Section 143(1) for assessment year 2000-01 in all, ` 1,91,236/- and not the amount of tax paid on undisclosed income
of ` 10,00,000/- declared in return of income since Section 240(b) is attracted. As such, I am of the considered view that there is no error committed by the authorities in rejecting claim of the assessee.
Hence, the following order is passed:
(1) Writ petition is hereby dismissed. (2) Order dated 24.07.2002 passed by second respondent – Annexure-F, order dated 30.03.2004- Annexure-G and order dated 08.01.2013-Annexure-H are hereby affirmed. (3) No order as to costs.
Sd/- JUDGE
*sp