T.L. Ouseph vs Asstt. Commissioner of Income Tax and Another

P.R. Ramachandra Menon, J.—The Petitioner in Writ Petn. (C) No. 12494 of 2004 is the partner of different establishments being run under the name and style M/s Lavish Electricals and Sanitaries--who has filed Writ Petn. (C) No. 12610 of 2004 and of another establishment under the name and style M/s Link-line Enterprises--who has filed Writ Petn. (C) No. 12653 of 2004. The issue projected in all these writ petitions is mainly with regard to the sustainability of the power invoked by the 2nd Respondent u/s 154 of the Income Tax Act seeking to rectify the mistake allegedly apparent on the face of the records and passing Ext. P10 order, virtually reversing the effect of Ext. P8 order passed by the very same officer who had passed the said order granting benefits to the Petitioner concerned, earlier.

With regard to the facts in detail, the learned Counsel for the Petitioners submits that the Assessee was a non-resident Indian for nearly 4 decades, who came back to the State of Kerala and got himself engaged in different trades and was submitting returns, paying the tax before the IT authorities in accordance with the relevant provisions of law. However, there was a search on the premises of the Petitioner u/s 132 of the Income Tax Act on 20-7-1994. For the purpose of convenience, since there is no factual controversy with regard to the issue projected in the different writ petitions, reference is made mainly to Writ Petn. (C) No. 12653 of 2004, taking the same as the leading case.

The learned Counsel for the Petitioner in Writ Petn. (C) No. 12653 of 2004 submits that Exts. PI to P7 assessment orders were passed u/s 143(3) of the Income Tax Act, whereby the liability of the Petitioner to satisfy the tax dues was finalised, also fixing the interest payable under the different provisions of Section 234A, 234B and 234C which pertain to imposition of liability to pay interest, when no return is filed; or if default in payment of the advance tax/short payment is there, or in respect of the failure to pay the tax before the cut off date, respectively. The case of the Petitioner is that pursuant to the assessment made as per Exts. PI to P7 orders, full tax liability was cleared by the Petitioner and thereafter an application dated 6th March, 1997 was preferred before the 2nd Respondent seeking for the benefit of waiver of interest under all the above three heads. The learned Counsel for the Petitioner submits that such an application was preferred seeking for the benefit of the Circular/Notification F. No. 400/234/1995-IT(B) (as given at the bottom, though omitted to be given at the top) dated 23-5-1996. The learned Counsel submits that by virtue of the mandate under Clause 2(e) of the said circular/scheme, the Petitioner is entitled to get the benefit of waiver and after considering the applications interest payable in respect of three different heads u/s 234A, 234B and 234C of the Income Tax Act was waived by the 2nd Respondent in respect of all the relevant assessment orders, except 1988-89, vide Ext. P8 order passed on 26th Nov., 1999. However, nearly 4 years after passing of Ext. P8 order, another officer assumed charge of the office of the 2nd Respondent, who issued Ext. P9 notice to the Petitioner on 26th Dec, 2003 proposing to reconsider the matter, allegedly because of some errors apparent on the face of records, invoking the power of rectification. On receipt of Ext. P9 notice, the Petitioner sought to explain the position by filing a detailed statement of objections. However, the objection was not properly considered and Ext. P10 order was passed by the 2nd Respondent on 25-2-2004, which is under challenge in this writ petition.

The learned Counsel for the Petitioner submits that the course pursued by the 2nd Respondent in passing Ext. P10 order is not correct or sustainable, mainly on two different grounds. The reason stated by the concerned authority for passing Ext. P10 order is mainly that the returns filed by the Petitioner were much after the search and seizure conducted on 20th July, 1994 and this being the position, the benefit of the circular/scheme was not liable to be extended to the Petitioner under any circumstances. The learned Counsel submits that, as discernible from the very opening sentence in the assessment orders, it has been clearly stated that the assessment of the Petitioner had been finalised earlier, also giving the relevant dates, which clearly show that returns were filed by the Petitioner much prior to the search conducted on 20-7-1994. This being the position, the contention/stand taken by the concerned Respondent, stating that the Petitioner is not eligible to have the benefit of the scheme/circular is quite wrong and misconceived. There is another contention that, insofar as Clause 2(e) of the circular is concerned, the authority was very much at liberty to have had the benefit extended to the Petitioner as borne by Ext. P8, since the stipulation in the said clause clearly takes care of the Petitioner as well, if the Assessee was prevented to have filed the return due to unavoidable circumstances.

Referring to the contents of Ext. P8, the learned Counsel for the Petitioner submits that the circumstances under which the Petitioner was prevented from filing the return has been explained, the Petitioner being an NRI, that the management was being done by the concerned persons in an improper manner and such other particulars which have been taken note of in para 3 and it was accordingly, that the benefit of waiver was extended invoking the powers under Clause 2(e) of the concerned circular, in respect of the assessment years 1989-90 to 1995-96 waving the interest under all the three heads of Sections 234A, 234B and 234C in full. With regard to the assessment year 1988-89, as observed in para 5 of Ext. P8, it was outside the purview of the circular and as such, the benefit was not extended to the Petitioner. The action pursued by the officer who assumed charge of the 2nd Respondent subsequently, issuing Ext. P9 notice seeking to rectify the alleged error u/s 154 of the Income Tax Act, 1961 nearly after 4 years, culminating in Ext. P10 order, cancelling the waiver and restoring the liability as per Exts. PI to P7 assessment orders is sought to be interfered by this Court. Reliance is also placed on the decision rendered by the Honble Supreme Court as reported in T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , explaining the scope of interference u/s 154 stating that it is not intended or to be pursued in the course by a long drawn process and that the power is exercisable only in respect of such errors which are apparent on the face of the records and nothing beyond.

The learned standing counsel appearing for the Respondents submits that there is absolutely no merit or bona fides in the writ petition and that the Petitioner was allowed to enjoy some benefits by virtue of Ext. P8 order passed by the then officer without due regard to the contents of the relevant circular and when the concerned officer who assumed charge, as a prudent officer, he perused the relevant records and found that the course perused by the earlier officer was not in conformity with the contents of the circular. Accordingly Ext. P9 notice was issued and it was after considering the objections, that Ext. P10 order was passed, which is perfectly within the four walls of the law and is not assailable under any circumstances. The learned standing counsel also submits that the contention of the Petitioner that the returns filed by the Petitioner earlier as stated in Exts. PI to P4 (however, without any dispute with regard to the late filing of the returns after the search, as shown in Exts. P5 to P7) were not voluntary in view of the fact that the search conducted on 20th July, 1994 and the subsequent issuance of notice u/s 148 are not disputed. It was pursuant to the notice issued u/s 148 of the Income Tax Act, that the Petitioner chose to file fresh returns and it was on the basis of the proceedings as above, that Exts. PI to P7 assessment orders were passed. This being the position, the course pursued by the Petitioner can never be considered as a case of voluntary filing of returns and the Petitioner is not entitled to get the benefit of the scheme which has been notified by the CBDT only to deal with genuine cases and to help persons who are having genuine reasons. The learned standing counsel also submits that the exercise of the power u/s 154 is really intended to remedy such a situation and if any particular provision has been omitted to be taken note of by the concerned authority or wrongly referred to while passing the order, it is very much open to invoke the power of rectification, as made clear by a Division Bench of this Court in Commissioner of Income Tax Vs. Quilon Marine Produce Company, . It is also asserted that none of the requirements as specified in the relevant paras or clause of the concerned circular/scheme has been adverted to by the concerned officer who passed Ext. P8 order before he extended the benefits to the Petitioner in respect of the concerned assessment years and this being the position, the issuance of Ext. P9 notice leading to Ext. P10 order, with specific reference to the scheme/circular, is not liable to be interfered by this Court.

Since there is no much controversy with regard to the factual situation, the crucial question is whether the returns filed by the Petitioner are liable to be accepted as voluntary returns. As mentioned hereinbefore, there is also no dispute with regard to the fact that there was a search in the premises on 20-7-1994 and Petitioner was confronted with Section 148 notice and it was pursuant to the said notice that the Petitioner chose to file the relevant returns, which were acted upon, leading to Exts. PI to P7 assessment orders. In other words, but for the issuance of notice u/s 148, there was no chance to have filed the relevant returns and to have suffered the assessment as per Exts. PI to P7.

With regard to the contents of the concerned circular, as mentioned in els. (a), (b), (c) and (d) of para 2, they deal with different circumstances, to make the Assessee eligible for the benefit of waiver of interest under sections. 234A, 234B and 234C. The learned Counsel for the Petitioner fairly conceded that the said circumstances are not attracted to the case in hand and reliance is sought to be placed only with regard to the contents of Clause (e) of para 2. Paragraph 2(e) reads as follows:

Where the return of income could not be filed by the Assessee due to unavoidable circumstances and such return of income is filed voluntarily by the Assessee or his legal heirs without detection by the assessing officer.

Going by the admitted/undisputed facts and figures it is evident that there was a search followed by notice issued u/s 148; pursuant to which the Petitioner filed the relevant returns, in supersession of the returns filed earlier and tax was paid based on the assessment made as per Exts. PI to P7 orders. In the said circumstances, it is not liable to be held that the filing of the returns by the Assessee, leading to the passing of Exts. PI to P7 assessment orders, pursuant to the notice u/s 148 is voluntary. So also, since it was pursuant to the search conducted by the departmental authorities, the second limb of cl. 2(e) i.e., "without detection by the assessing officer" is also not satisfied. In short, the case of the Petitioner does not come within the purview of cl. 2(e)of the circular.

It is very much relevant to note that no specific reference has been made by the concerned officer in Ext.. P8, as to any of the different circumstances mentioned under the circular and even the circular/scheme is not referred to. Presuming that Ext. P8 order was passed based on the said circular/scheme, it has definitely to satisfy the requirements specified in the circular/scheme. When the claim is for the benefit of a scheme, there is no power for the court to widen the terms of the scheme or to waive the stipulations, in view of the law declared by the apex court in Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, .

As mentioned hereinbefore, different circumstances are contemplated to invoke the relevant clauses as provided under els. (a) to (d) of para 2 of the circular while the stipulation under para 2(e) is only a residual provision, which however does not come to the rescue of the Petitioner. When there is no dispute that the case of the Petitioner does not come within the purview of the above clauses, nothing remains further to be considered, but for holding that the Petitioner is not entitled to get the benefits under the scheme. The action pursued by the Respondents in passing Ext. P10 order, after issuing notice u/s 154 and thus complying with the statutory formalities, does not call for any interference by this Court.

There is no merit. in the writ petitions and they are dismissed accordingly.