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Ravjibhai k. Sutaria Huf Versus Principal Commissioner of Income Tax-1 & 1

2017 (9) TMI 741 - GUJARAT HIGH COURT

Tax amnesty schemes - Whether the appeal before CIT(A) would be terms as pending where the higher appellate authority set aside the order and restore the same before CIT(A) - Applications for settlement under the Direct Tax Dispute Resolution Scheme 2016 rejected - Held that:- As noticed that the Scheme was promulgated with effect from 1.6.2016. The appellate Commissioner disposed of the appeal on 2.6.2016. There is of course, no bar in the appellate Commissioner proceeding ahead with the pendin .....

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g it back before the Commissioner for fresh disposal after giving an opportunity of hearing to the assessee, the resultant effect unintended or indirectly is that the petitioner's declaration of the Scheme becomes valid, so be it. The tax amnesty schemes are neither unknown nor uncommon. The legislation often times comes up with Schemes to reduce tax litigations offering reduced tax or immunity from penalty or prosecution, the prime purpose being reduction of pending taxation related litigation. .....

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ent years 2007-2008 and 2011-2012 are revived and placed back before the appellate Commissioner Resultantly, the impugned orders at AnnexureA in both the petitions by which the designated authority had rejected the petitioner's declaration under the Scheme are also set aside. The designated authority shall take into account the changed circumstances arising out of this judgment and proceed as if on the date of the declaration for the assessment years 2007-2008 and 2011-2012, the appeals of the p .....

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1.2017 passed by the Principal Commissioner of Incometax, Surat, rejecting the petitioner's applications for settlement under the Direct Tax Dispute Resolution Scheme 2016 ( the Scheme for short) as also order dated 2.6.2016 passed by the Commissioner (Appeals) rejecting the petitioner's appeal against the order of penalty passed by the Assessing Officer. 3. The petitioner's challenges arise in following factual background. The petitioner is a Hindu Undivided Family. For the assessme .....

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d. In response to the notice, the petitioner filed the return of income on 23.2.2015 declaring the total income of ₹ 1.40 crores (rounded off). The Assessing Officer passed the order of assessment under section 143(3) of the Act read with section 147 of the Act on 31.3.2015. He also initiated penalty proceedings under section 271(1)(c) of the Act against the petitioner for furnishing inaccurate particulars of his income. The Assessing Officer passed the order of penalty on 28.9.2015 levyin .....

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nditions. We will take note of the relevant provisions of the Scheme later. Suffice it to note that the Scheme was notified on 26.5.2016 and was brought into force with effect from 1.6.2016. The assessees interested in availing the benefit of the Scheme would have to make a declaration on or before 31.12.2016 which date was later extended upto 31.1.2017. 5. It has come on record that the petitioner's appeal against the order of penalty came to be dismissed by the appellate Commissioner by an .....

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uthority on 21.12.2016 seeking the benefit of the Scheme. The petitioner also deposited 25% of the disputed amount as per the terms of the Scheme. This application came to be dismissed by the designated authority by impugned order AnnexureA on the ground that the petitioner's appeal was already decided by the Commissioner (Appeals) in the month of June 2016. The petitioner has also challenged the order of the Commissioner (Appeals) rejecting the appeal without proper notice to the petitioner .....

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otices dated 22.3.2016 and 23.5.2016 referred to in the impugned order which were issued by the department were never served on the petitioner. The appellate Commissioner therefore, could not have disposed of the appeal without hearing the petitioner. In this context, the counsel took us through section 250 of the Act pertaining to the procedure in appeals before the appellate Commissioner to contend that the true meaning of the expression shall give notice of the same to the appellant must mean .....

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had used expressions issue , give and serve at different places. Counsel submitted that different expressions used in different situations must carry different connotations. In the context of requiring participation of the appellant before the appellate Commissioner the expression to give notice must carry the meaning to serve notice . Counsel also criticised the action of the appellate Commissioner to dispose of the appeal on 2.6.2016 when the Scheme of amnesty was brought into effect from 1.6 .....

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of the Act requires the appellate Commissioner to give notice to the assessee which cannot be equated with the requirement of actual service of notice. Whenever service of notice was found necessary the legislature has used such expression. The department had dispatched two notices at the address supplied by the petitioner through Speed Post. The order of rejection of the appeals was also sent on the same address. Proof of dispatch of these communications is produced on record. The department ha .....

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the benefit under the Scheme. 9. Section 201 of the Finance At, 2016 containing Chapter X is a definition clause. Clause(g) of subsection( 1) thereof defines the term 'specified tax' and includes a tax dispute in respect of which appeal is pending as on 29.2.2016. The term 'tax arrear' is defined as to mean the amount of tax, interest or penalty determined under the Incometax Act or the Wealth Tax Act, in respect of which appeal is pending before the Commissioner of Incometax (Ap .....

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ess the same and determine the sum payable under the Scheme. If the application is granted, he may also grant immunity from prosecution and penalty as may be applicable. We are not concerned with the finer aspects of the Scheme. Only point to be noted is that the declaration with respect to any disputed tax can be made only concerning the tax arrears in respect of which appeal is pending before the Commissioner. 10. Concededly, the petitioner's appeal against the order of penalty came to be .....

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of the declarant was still alive, atleast on the date when such declaration was made. When the Principal Commissioner of Incometax found from the record that the appeal was already dismissed on 2.6.2016 by the appellate Commissioner, he was perfectly justified in conveying to the petitioner that the petitioner cannot avail the benefit of the Scheme as this was the only course open to the authority. On the other hand, if we come to the conclusion that the Commissioner(Appeals) was not justified .....

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the petitioner would be entitled to the benefit of the Scheme. 11. The entire issue thus hinges on the question whether the order dated 2.6.2016 passed by the appellate Commissioner should be confirmed or reversed. In this context, before adverting to the relevant provisions, we may take note of the facts presented by both the sides. The appellate order itself records that two notices were issued to the petitioner dated 22.3.2016 and 23.5.2016. Though the order records that as many as three oppo .....

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ad he received the order dismissing the appeal. Non service of the notice had thus deprived him of any effective hearing before the appellate authority. 12. The department has filed an affidavit in reply dated 4.7.2017 mainly contending that the rejection of the petitioner's declaration by the designated authority was valid since on the date of the filing of the declaration, the appeal was already disposed of by the Commissioner. Affidavit dated 3.7.2017 came to be filed on behalf of the res .....

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tter dated 31.1.2017 also by the same mode of communication at the same address which was duly received by the petitioner. 13. Section 246A of the Act provides for orders which are appealable before the Commissioner(Appeals). Section 249 provides for the form of appeal and limitation for filing the appeal. Section 250 of the Act lays down the procedure in appeal and reads as under : Procedure in appeal. 250. (1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal a .....

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ing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner(Appeals). (5) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. (6) The order of the Com .....

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ssed by him to the assessee and to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. 14. Section 251 provides for the powers of the appellate Commissioner and reads as under : Powers of the Commissioner (Appeals). 251. In disposing of an appeal, the Commissioner (Appeals) shall have the following powers (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment (aa) in an appeal against the order of ass .....

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alty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. ExplanationIn disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter a .....

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orised representative and the Assessing Officer or his representative would have a right to be heard at the hearing of the appeal. Under subsection( 4) of section 250, the Commissioner(Appeals) is empowered to make such further inquiry as he thinks fit or to direct the Assessing Officer to make further inquiry. Under subsection( 5) of section 250 the Commissioner may allow raising of additional grounds not specified in the grounds of appeal. Subsection( 6) of section 250 requires that the order .....

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as the Revenue. The requirement of hearing which would even otherwise be inbuilt in exercise of any similar quasi judicial functions, has been further amplified in different provisions contained in section 250. For example subsection( 1) of section 250, as noted, requires the Commissioner to fix a day and place for the hearing of the appeal and to give notice thereof to the assessee as well as the Assessing Officer. The assessee as well as the Assessing Officer or their representatives would ha .....

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lminate into a reasoned order that the Commissioner may pass deciding all points of determination which may have arisen. This requirement of hearing of the assessee would be further amplified when we consider the nature of powers exercised by the Commissioner as specified in section 251 of the Act. Subsection( 1) of Section 251 vests wide powers in the Commissioner while disposing of the appeal. He may confirm, reduce, enhance or annul the assessment. Thus in the process of deciding the appeal, .....

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hus not a mere formality. Despite such statutory scheme of things, subsection( 1) of section 250 uses the expression shall give notice and falls short of using the otherwise oft repeated expression of serve notice used at many other places in the Act. Can the expression in be context of which it has been used be equated with service of notice, is undoubtedly an interesting question which in the present case we are not inclined to answer conclusively. This is so because of the following reasons. .....

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as produced documents showing that the notices were dispatched through Speed Post at the address given by the assessee and which averment we have no reason to doubt, is not in a position to show the proof of actual service of the notices. Under normal circumstances, we would have readily accepted the assessee's request for remand of the proceedings to enable the assessee to make full participation in the appeal before the Commissioner so that the assessee may be heard by the Commissioner bef .....

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se, no bar in the appellate Commissioner proceeding ahead with the pending appeals merely because the Scheme was promulgated nor we see any lack of bona fide on his part in doing so. However merely because by reviving the appeals before the Commissioner, the petitioner may get benefit of the Scheme on the ground that the appeal would now be deemed to be pending on the date of declaration, should not persuade us to take a view any different from what we normally would have in such set of facts an .....

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