M. Srinivasa Rao vs The Assistant Commissioner of Income Tax

A. Kulasekaran, J.—The petitioner has filed the above writ petition praying for a Writ of Certiorarified Mandamus to call for the records of

the respondent in PAN:AAQ PsS9354S/AY 88-89 & 89-90/B.R. XIV dated 23.07.2007 and quash the notice dated 23.07.2007 and direct the

respondent to grant the refund claimed by the Petitioner with interest for the assessment year 1989-1990.

The petitioner is an assessee under the Income Tax Act. The original assessment for the assessment year 1989-1990 was made on 28.02.1992

on a total income of Rs.4,20,170/-, which was accepted except for the addition of Rs.3,96,000/-, which was alleged as unexplained amount under

the head other sources, in which the respondent department has claimed that a search was conducted in 1988, based on seizure of a receipt of a

demand draft for Rs.3,96,000/- obtained from Vijaya Bank, Triplicane Branch, Chennai on 25.04.1988 in favour of M/s. S.M.S. Gardens,

Coimbatore, the petitioner has explained that the said amount represented the sale proceeds of materials like furniture, fixtures, kitchen utensils

etc., of Woodlands Hotel, Coimbatore along with the sale of the hotel itself for and on behalf of S.M.S. Gardens. In the original assessment made

on 28.02.1992, the respondent disbelieved the explanation offered by the petitioner and made an addition of Rs.3,96,000/- as unexplained income

and assessed the same under the head other sources. The said addition was confirmed by the Commissioner of Income Tax (Appeals). Further

appeal in I.T.A. No. 646/MDS 1993 filed by the petitioner before Income Tax Appellate Tribunal was allowed by an order dated 09.07.2001,

however, the Tribunal remanded it to the Assessing Officer for fresh consideration, after holding an enquiry regarding the entry in the trial balance

of S.M.S. Garden receiving Rs. 3,96,000/- from one Periyaswamy towards sale of old furniture and fixtures at Rs.3,96,000/- and whether this

amount was really given by the petitioner or Periyasamy. It is the further case of the petitioner that after the order of the Tribunal, the respondent

has not taken any action for holding an enquiry for passing fresh assessment order with regard to addition of Rs.3,96,000/-. The petitioner''s bank

account was attached, he requested the respondent by letters dated 24.12.2001 and 27.06.2003 for lifting the attachment of bank accounts which

was made prior to the order dated 09.07.2001 of the Tribunal, but the respondent has not responded to the same. Again, the petitioner has sent a

representation dated 20.07.2004 calling upon the respondent to refund the amount of Rs.1,88,284.06 relating to the assessment year 1989-1990

with interest, for which also there was no reply from the respondent. The petitioner in his representation has mentioned that he is a senior citizen

and inspite of his repeated representation, he has not received any reply or refund of the amount.

While things are such, the respondent sent the impugned communication dated 23.07.2007 alleging that the Tribunal did not set aside or cancel

the original assessment and therefore the time limit prescribed u/s 153(2A) of the Income Tax Act is not applicable for passing a fresh assessment

order and called upon the petitioner to furnish certain details and documents, which according to them they are empowered u/s 153(3) of the

Income Tax Act, 1961.

The learned Counsel appearing for the petitioner submitted that even assuming Sub-clause 3 of Section 153 of the Income Tax Act is applicable

to the facts of the case on hand though no time limit is prescribed, if at all, such proceedings could be initiated within a reasonable time, whereas, in

this case, the impugned communication was issued after a lapse of six years, hence, the same is liable to be quashed.

The learned Additional Government Pleader appearing for the respondent submitted that the proceedings are initiated pursuant to the direction

or finding of the Tribunal, hence, Sub-clause 3 of Section 153 of the Income Tax Act alone is applicable and in such event, no time limit is

contemplated, hence, the impugned communication is sustainable in law and prayed for dismissal of the writ petition.

This Court carefully considered the arguments made by the counsel on either side and perused the material records placed. Considering the

facts and circumstance of the case, this Court is of the view that Section 153(3) of the Act is applicable to the issue involved in this case.

No doubt, u/s 153(3) of the Act, time limit is not prescribed, but the same cannot be presumed that the respondent is empowered to initiate

action even after lapse of several years. Admittedly, in this case, after the Tribunal''s order, the petitioner has made several representations in

respect of refund of amount on various occasions as mentioned above, but the respondent has not given any reply. The petitioner has also

approached the Income Tax Ombudsman, Chennai by a petition dated 22.03.2007 for redressing his grievance of non-payment of refund. After

the intervention of the Ombudsman, the said request of the petitioner was met by the respondent. The respondent not even mentioned in their

counter affidavit on what date the order of the Tribunal was received by them. It is alleged by the respondent that due to restructuring of

jurisdiction and frequent change of incumbents, enquiry was not commenced immediately in this case. Except the said bald averment, hardly any

explanation, which is worth of consideration furnished by the respondent to explain the delay of six years. No doubt recovery of tax is essential to

raise revenue and bring about certain economic and social results. But for the same, that alone cannot be the reason for allowing the delay in

initiating proceedings against the petitioner. Hence, this Court is of the considered view that though no time limit is prescribed for exercise of power

under a statute, it should be exercised within a reasonable time as held by the Honourable Supreme Court in the below mentioned decisions:

i) Mohamad Kavi Mohamad Amin Vs. Fatmabai Ibrahim, wherein in Para 2, it was held thus:

...In this connection, on behalf of the appellant reliance was placed on a judgment of Justice S.B. Majmudar (as he then was in the High Court

of Gujarat) in State of Gujarat v. Jethmal Bhagwandas Shah disposed of on 1-3-1990, where in connection with Section 84-C itself it was said

that the power under the aforesaid section should be exercised within a reasonable time. This Court in connection with other statutory provisions,

in the case of State of Gujarat v. Patil Raghav Natha and in the case of Ram Chand v. Union of India has impressed that where no time-limit is

prescribed for exercise of a power under a statute it does not mean that it can be exercised at any time; such power has to be exercised within a

reasonable time. We are satisfied that in the facts and circumstances of the present case, the suo motu power u/s 84-C of the Act was not

exercised by the Mamlatdar within a reasonable time. Accordingly, the appeal is allowed. The impugned orders are set aside. No costs.

ii) Ram Chand and Others Vs. Union of India (UOI) and Others, wherein in Para No. 14, it was held thus:

...It is settled that in a statute where for exercise of power no time-limit is fixed, it has to be exercised within a time which can be held to be

reasonable. This aspect of the matter can be examined in the light of second proviso to Article 31-A of the Constitution, which in clear and

unambiguous terms prohibits making of any law which does not contain a provision for payment of compensation at a rate, which shall not be less

than the market value thereof. The Act is consistent with the second proviso to Article 31-A, because it provides for payment of compensation at

the market value of the land acquired. But, whether the constitutional and statutory requirement of the payment of the market value to the persons,

whose lands have been compulsorily acquired, is not being circumvented and violated by keeping the land acquisition proceedings pending for

more than a decade and half, without making the awards and paying the compensation, which has been pegged to the dates of notifications under

Sub-section (1) of Section 4 of the Act, which in the present cases had been issued 14 to 21 years before the making of the awards. If a person is

paid compensation in the year 1980/1981 at the market rate, prevailing twenty years before, will that be compliance of the constitutional and

statutory mandate? Ignoring the escalation of the market value of the lands, especially near the urban agglomeration or metropolitan cities, will

amount to ignoring an earthquake and courts can certainly take judicial notice of the said fact. The interest and the solatium, which have to be paid

under the provisions of the Act, are linked with the market value of the land with reference to the date of the notification under Sub-section (1) of

Section 4 of the Act. If a decision had been taken as early as in the year 1966, by issuance of declarations u/s 6, that the lands belonging to the

different cultivators, who held those lands within the ceiling limit for cultivation, were needed for public purpose, respondents should have taken

steps for completion of the acquisition proceedings and payment of compensation at an early date. In the present cases, unless a justification is

furnished on behalf of the respondents, can it be said that the statutory power of making an award u/s 11 has been exercised within a reasonable

time from the date of the declaration u/s 6? Due to escalation in prices of land, more so in this area, during the preceding two decades, in reality,

the market rate, on the date of the notification u/s 4(1) is a mere fraction, of the rate prevailing at the time of its determination in the Award.

When we look into the facts of the case in one other angle, whether on the part of the respondents there was a due diligence exercised in order

to avail benefit. In this case, the petitioner has made several representations to the respondent for refund of the amount, inspite of those

representations, the respondent has not taken any efforts to proceed u/s 153(3) of the Act.

A person who is not vigilant about his right must explain every day delay. As mentioned above, the respondent has not explained the delay

satisfactorily and the delay of six years is inordinate and unexplained. Hence, this Court is of the considered view that though time limit is not

prescribed u/s 153(3) of the Act, the impugned proceedings initiated by the respondent after a lapse of six years cannot be allowed to continue,

hence, the impugned order is quashed. The writ petition is allowed. No costs. Consequently, connected miscellaneous petition is closed.