Chief Commissioner of Income - Tax and Another vs Sajan Verghis Mathew

Elipe Dharma Rao, J.—These writ appeals are filed against the order dated March 22, 2010, April 7, 2010, and March 12, 2010, passed by the learned single judge of this court in W.P. Nos. 4292, 6027 and 2504 of 2010, respectively, whereby the writ petitions were allowed. The above writ petitions have been filed for issuance of a writ of certiorarified mandamus to call for the records of the first respondent in C. No. CCIT III/ condonation of delay 7(9)/10-II, dated September 20, 2010, C. No. 3(58) condonation of delay/CIT-V/10-11, dated August 3, 2010, C No. 2063 (39)/2002-03/CIT-V, dated July 15, 2009, C No. 2063 (41) condonation of delay/CIT-V/10-11, dated August 10, 2010, and corrigendum C. No. 2063(41) condonation of delay/CIT-V/10-11, dated August 25, 2010, and C. No. 7031(183)/CIT VII/2000-01, dated January 19, 2007, respectively, and quash the same as illegal, arbitrary and without authority of law and further direct the second respondent to refund the tax amount of Rs. 12,73,416, Rs. 6,81,264, Rs. 1,83,933 and Rs. 8,49,811, respectively, along with admissible interest in respect of W.P. Nos. 16375 of 2010 and 217, 279 and 347 of 2011 and direct the second respondent to issue interest from that date of TDS, i.e., December 24, 1999, till June 16, 2003, for already received refund amount of Rs. 25,28,168 in respect of W.P. No. 25031 of 2010.

Since the issue involved in all these cases are similar in nature, the material facts as contained in W.A. No. 1542 of 2010 are taken to narrate the background facts as follows :

(i) The case of the employer of the respondent-writ petitioner in W.A. No. 1542 of 2010 is that based on the demand raised by the Assistant Commissioner of income tax, TDS, Bangalore, on October 7, 1999, for the failure to deduct tax at source in respect of perquisite value of stock options allotted to its employees, who were covered by the Employees Stock Option Scheme, otherwise known as the ESOS of the company, his employer had paid the tax amount of Rs. 49,52,35,650 u/s 201(1) of the income tax Act along with interest of Rs. 4,82,85,475 u/s 201(1 A) of the income tax Act, which was subsequently recovered by the employer from the respective employees. Hence, the respondent-writ petitioner filed revised returns though belatedly on January 11, 2003, but the same was not acted upon by the Assessing Officer.

(ii) In the meanwhile, the employees, whose employer is in Bangalore, challenged the demands raised by the Deputy Commissioner of income tax, TDS, Bangalore, before the Commissioner of income tax (Appeals) IV, Bangalore, but the same was rejected, by an order dated September 12, 2000. The respondent filed an appeal before the income tax Appellate Tribunal and the Tribunal held "allotting of shares to employees did not amount to a perquisite, a liability under the Act to deduct tax at source". The appeals filed by the Department before the High Court, Bangalore, and the hon''ble Supreme Court were decided against the Department.

(iii) The respondent-employee filed two petitions on February 11, 2003, for refunding the TDS amount along with interest along with a request to condone the delay in filing the returns before the Commissioner of income tax V, Chennai, who sent a report on September 29, 2009, to the first respondent by citing the Board''s instructions dated December 22, 2006, and requested the first respondent to decide the issue since the refund claimed was between Rs. 10 lakhs and Rs. 50 lakhs. The first respondent, after accepting that the collection was wrong, went on observing that the order passed by the Assistant Commissioner of income tax (TDS), Bangalore, on August 14, 2002, while giving effect to the order of the income tax Appellate Tribunal, Bangalore, was wrong and not in accordance with law. The first respondent further observed in his order dated January 21/25, 2010, in the condonation of delay petition, that once the deduction of tax at source was held to be not in accordance with law, the amount of tax recovered should have been refunded to the employer company along with interest and rejected the petition to condone the delay in filing the return and to grant refund to the respondent-employee.

(iv) Challenging the same, the respondent-employee filed W.P. No. 4292 of 2010 before this court and the learned single judge, following the decision of the Karnataka High Court dated August 6, 2009, in W.P. No. 11044 of 2009 (since reported in S. Thigarajan Vs. The Asst. Commissioner of Income Tax, Circle 14(1), The Chief Commissioner of Income Tax and The Central Board of Direct Taxes Department of Revenue Ministry of Finance Government of India, quashed the order passed by the first respondent and directed the first respondent to refund the amount with interest payable as per the provisions of the Act and allowed the writ petition as per order dated March 22, 2010. Similarly, the other two writ petitions were also allowed. Challenging the said orders, the present writ appeals have been filed by the Department.

Heard the learned counsel appearing for both sides and perused the materials available on record.

Learned counsel for the appellants in the writ appeals has contended that the Department had raised a demand u/s 201 and for interest u/s 201 (1A) of the income tax Act against the employer for the failure to deduct tax at source in respect of perquisite value of stock option adopted by the employees covered under the Employees Stock Option Scheme (ESO Scheme) and against such demand the employer had not preferred any appeal and, in such circumstances, the learned single judge ought not to have directed the Revenue to refund the amount to the employee, against whom admittedly there was no demand, with interest. According to him, the decision of the Karnataka High Court in S. Thigarajan Vs. The Asst. Commissioner of Income Tax, Circle 14(1), The Chief Commissioner of Income Tax and The Central Board of Direct Taxes Department of Revenue Ministry of Finance Government of India, is not applicable to the facts of the case and in that case section 240 was dealt with, whereas the present case is covered by the provisions of section 239 of the Act. He further added that the Chief Commissioner of income tax has no power to condone the delay and he should have directed the assessee to approach the Board.

The writ petitions were filed by the employees seeking refund of the TDS amount with admissible interest by quashing the order passed by the authorities in the application filed by them for condonation of delay in seeking refund. The writ petitioners seek refund by placing reliance on the decision of the Karnataka High Court in S. Thigarajan Vs. The Asst. Commissioner of Income Tax, Circle 14(1), The Chief Commissioner of Income Tax and The Central Board of Direct Taxes Department of Revenue Ministry of Finance Government of India, and the decision of this court, which is in challenge in the writ appeals.

The learned single judge has allowed the writ petitions by following the order of the Karnataka High Court in S. Thigarajan Vs. The Asst. Commissioner of Income Tax, Circle 14(1), The Chief Commissioner of Income Tax and The Central Board of Direct Taxes Department of Revenue Ministry of Finance Government of India, . Though the learned standing counsel for the Revenue contends that the said decision is not applicable to the facts of the present case, we are not able to take a contra view. In the said case, the Karnataka High Court has categorically held that it is an obligation cast on the Revenue to effect the refund, without calling upon the assessees to apply for refund the claim. The learned standing counsel is not in a position to state as to whether the order of the Karnataka High Court has been reversed by the Division Bench or the hon''ble Supreme Court and, moreover, he is not in a position to place his hands on any other decision to take a contra view. Moreover, the contention of the learned standing counsel that the Chief Commissioner has no power to condone the delay and the assessees should have approached the Board cannot be sustained in view of the decision of the hon''ble Supreme Court in the earlier round of litigation. In such view of the matter, we do not see any reason to interfere with the order of the learned single judge and accordingly the order dated March 22, 2010, April 7, 2010, and March 12, 2010, passed by the learned single judge of this court in W.P. Nos. 4292, 6027 and 2504 of 2010 respectively stands confirmed and the writ appeals are dismissed. In view of the order passed in the writ appeal, the writ petitions are allowed. In view of the order passed in W.A. Nos. 1542 and 2161 of 2010 and 89 of 2011 confirming the order passed by the learned single judge, the writ petitions in W.P. Nos. 16375 and 25031 of 2010 and 217, 279 and 347 of 2011 are allowed. Consequently, the appellants in the writ appeals and the respondents in the writ petitions are directed to refund the amount to the assessees concerned with interest payable as per the provisions of the Act within a period of four weeks from the date of receipt of a copy of this order. No costs. Consequently, the miscellaneous petitions are closed.