A. KULASEKARANW.P. No. 26376 of 2007andM.P. No. 1 of 2007-o-M. Srinivasa Rao v. The Assistant Commissioner of Income TaxCircle XIV

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 24-09-2007CORAM :THE HONOURABLE MR.JUSTICE A. KULASEKARANW.P. No. 26376 of 2007andM.P. No. 1 of 2007-o-M. Srinivasa Rao.. Petitioner VersusThe Assistant Commissioner of Income TaxCircle XIV, 6th Floor, New BlockNo.121, Mahatma Gandhi RoadChennai – 600 034.. RespondentPetition filed under Article 226 of The Constitution of Indiapraying for a Writ of Certiorarified Mandamus as stated therein.For Petitioner :Mr. C.V. RajanFor Respondent:Mr. N. MuralikumaranSenior Standing Counsel for Income TaxORDERThe petitioner has filed the above writ petition praying for aWrit of Certiorarified Mandamus to call for the records of therespondent in PAN:AAQ PsS9354S/AY 88-89 & 89-90/B.R. XIV dated23.07.2007 and quash the notice dated 23.07.2007 and direct therespondent to grant the refund claimed by the Petitioner withinterest for the assessment year 1989-1990. 2.The petitioner is an assessee under the Income Tax Act.The original assessment for the assessment year 1989-1990 was madeon 28.02.1992 on a total income of Rs.4,20,170/-, which was acceptedexcept for the addition of Rs.3,96,000/-, which was alleged asunexplained amount under the head other sources, in which therespondent department has claimed that a search was conducted in1988, based on seizure of a receipt of a demand draft forRs.3,96,000/- obtained from Vijaya Bank, Triplicane Branch, Chennaion 25.04.1988 in favour of M/s. S.M.S. Gardens, Coimbatore, thepetitioner has explained that the said amount represented the saleproceeds of materials like furniture, fixtures, kitchen utensilsetc., of Woodlands Hotel, Coimbatore along with the sale of thehotel itself for and on behalf of S.M.S. Gardens. In the originalassessment made on 28.02.1992, the respondent disbelieved the https://hcservices.ecourts.gov.in/hcservices/ explanation offered by the petitioner and made an addition ofRs.3,96,000/- as unexplained income and assessed the same under thehead other sources. The said addition was confirmed by theCommissioner of Income Tax (Appeals). Further appeal in I.T.A. No.646/MDS 1993 filed by the petitioner before Income Tax AppellateTribunal was allowed by an order dated 09.07.2001, however, theTribunal remanded it to the Assessing Officer for freshconsideration, after holding an enquiry regarding the entry in thetrial balance of S.M.S. Garden receiving Rs.3,96,000/- from onePeriyaswamy towards sale of old furniture and fixtures atRs.3,96,000/- and whether this amount was really given by thepetitioner or Periyasamy. It is the further case of the petitionerthat after the order of the Tribunal, the respondent has not takenany action for holding an enquiry for passing fresh assessment orderwith regard to addition of Rs.3,96,000/-. The petitioner's bankaccount was attached, he requested the respondent by letters dated24.12.2001 and 27.06.2003 for lifting the attachment of bankaccounts which was made prior to the order dated 09.07.2001 of theTribunal, but the respondent has not responded to the same. Again,the petitioner has sent a representation dated 20.07.2004 callingupon the respondent to refund the amount of Rs.1,88,284.06 relatingto the assessment year 1989-1990 with interest, for which also therewas no reply from the respondent. The petitioner in hisrepresentation has mentioned that he is a senior citizen and inspiteof his repeated representation, he has not received any reply orrefund of the amount. 3.While things are such, the respondent sent the impugnedcommunication dated 23.07.2007 alleging that the Tribunal did notset aside or cancel the original assessment and therefore the timelimit prescribed under Section 153 (2A) of the Income Tax Act is notapplicable for passing a fresh assessment order and called upon thepetitioner to furnish certain details and documents, which accordingto them they are empowered under Section 153 (3) of the Income TaxAct, 1961.4.The learned counsel appearing for the petitioner submittedthat even assuming sub-clause 3 of Section 153 of the Income Tax Actis applicable to the facts of the case on hand though no time limitis prescribed, if at all, such proceedings could be initiated withina reasonable time, whereas, in this case, the impugned communicationwas issued after a lapse of six years, hence, the same is liable tobe quashed.5.The learned Additional Government Pleader appearing for therespondent submitted that the proceedings are initiated pursuant tothe direction or finding of the Tribunal, hence, sub-clause 3 ofSection 153 of the Income Tax Act alone is applicable and in suchevent, no time limit is contemplated, hence, the impugnedcommunication is sustainable in law and prayed for dismissal of thewrit petition.6.This Court carefully considered the arguments made by thecounsel on either side and perused the material records placed. https://hcservices.ecourts.gov.in/hcservices/ Considering the facts and circumstance of the case, this Court is ofthe view that Section 153 (3) of the Act is applicable to the issueinvolved in this case. 7.No doubt, under Section 153 (3) of the Act, time limit isnot prescribed, but the same cannot be presumed that the respondentis empowered to initiate action even after lapse of several years.Admittedly, in this case, after the Tribunal's order, the petitionerhas made several representations in respect of refund of amount onvarious occasions as mentioned above, but the respondent has notgiven any reply. The petitioner has also approached the Income TaxOmbudsman, Chennai by a petition dated 22.03.2007 for redressing hisgrievance of non-payment of refund. After the intervention of theOmbudsman, the said request of the petitioner was met by therespondent. The respondent not even mentioned in their counteraffidavit on what date the order of the Tribunal was received bythem. It is alleged by the respondent that due to restructuring ofjurisdiction and frequent change of incumbents, enquiry was notcommenced immediately in this case. Except the said bald averment,hardly any explanation, which is worth of consideration furnished bythe respondent to explain the delay of six years. No doubt recoveryof tax is essential to raise revenue and bring about certaineconomic and social results. But for the same, that alone cannot bethe reason for allowing the delay in initiating proceedings againstthe petitioner. Hence, this Court is of the considered view thatthough no time limit is prescribed for exercise of power under astatute, it should be exercised within a reasonable time as held bythe Honourable Supreme Court in the below mentioned decisions:- i)(Mohamad Kavi Mohamad Amin vs. Fatmabai Ibrahim) (1997) 6Supreme Court Cases 71 wherein in Para 2, it was held thus:- 2.......In this connection, on behalf ofthe appellant reliance was placed on a judgmentof Justice S.B. Majmudar (as he then was in theHigh 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 itwas said that the power under the aforesaidsection should be exercised within a reasonabletime. This Court in connection with otherstatutory provisions, in the case of State ofGujarat v. Patil Raghav Natha and in the case ofRam Chand v. Union of India has impressed thatwhere no time-limit is prescribed for exercise ofa power under a statute it does not mean that itcan be exercised at any time; such power has tobe exercised within a reasonable time. We aresatisfied that in the facts and circumstances ofthe present case, the suo motu power underSection 84-C of the Act was not exercised by theMamlatdar within a reasonable time. Accordingly,the appeal is allowed. The impugned orders areset aside. No costs." https://hcservices.ecourts.gov.in/hcservices/ ii)(Ram Chand v. Union of India, (1994) 1 SCC 44 wherein inPara No.14, it was held thus:- 14.......It is settled that in a statutewhere for exercise of power no time-limit isfixed, it has to be exercised within a time whichcan be held to be reasonable. This aspect of thematter can be examined in the light of secondproviso to Article 31-A of the Constitution,which in clear and unambiguous terms prohibitsmaking of any law which does not contain aprovision for payment of compensation at a rate,which shall not be less than the market valuethereof. The Act is consistent with the secondproviso to Article 31-A, because it provides forpayment of compensation at the market value ofthe land acquired. But, whether theconstitutional and statutory requirement of thepayment of the market value to the persons, whoselands have been compulsorily acquired, is notbeing circumvented and violated by keeping theland acquisition proceedings pending for morethan a decade and half, without making the awardsand paying the compensation, which has beenpegged to the dates of notifications under sub-section (1) of Section 4 of the Act, which in thepresent cases had been issued 14 to 21 yearsbefore the making of the awards. If a person ispaid compensation in the year 1980/1981 at themarket rate, prevailing twenty years before, willthat be compliance of the constitutional andstatutory mandate? Ignoring the escalation of themarket value of the lands, especially near theurban agglomeration or metropolitan cities, willamount to ignoring an earthquake and courts cancertainly take judicial notice of the said fact.The interest and the solatium, which have to bepaid under the provisions of the Act, are linkedwith the market value of the land with referenceto the date of the notification under sub-section(1) of Section 4 of the Act. If a decision hadbeen taken as early as in the year 1966, byissuance of declarations under Section 6, thatthe lands belonging to the different cultivators,who held those lands within the ceiling limit forcultivation, were needed for public purpose,respondents should have taken steps forcompletion of the acquisition proceedings andpayment of compensation at an early date. In thepresent cases, unless a justification isfurnished on behalf of the respondents, can it besaid that the statutory power of making an awardunder Section 11 has been exercised within a https://hcservices.ecourts.gov.in/hcservices/ reasonable time from the date of the declarationunder Section 6? Due to escalation in prices ofland, more so in this area, during the precedingtwo decades, in reality, the market rate, on thedate of the notification under Section 4(1) is amere fraction, of the rate prevailing at the timeof its determination in the Award."8.When we look into the facts of the case in one other angle,whether on the part of the respondents there was a due diligenceexercised in order to avail benefit. In this case, the petitionerhas made several representations to the respondent for refund of theamount, inspite of those representations, the respondent has nottaken any efforts to proceed under Section 153 (3) of the Act. 9.A person who is not vigilant about his right must explainevery day delay. As mentioned above, the respondent has notexplained the delay satisfactorily and the delay of six years isinordinate and unexplained. Hence, this Court is of the consideredview that though time limit is not prescribed under Section 153 (3)of the Act, the impugned proceedings initiated by the respondentafter a lapse of six years cannot be allowed to continue, hence, theimpugned order is quashed. The writ petition is allowed. No costs.Consequently, connected miscellaneous petition is closed.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarrshToThe Assistant Commissioner of Income TaxCircle XIV, 6th Floor, New BlockNo.121, Mahatma Gandhi RoadChennai – 600 034+1cc to Mr.N.Muralikumaran,Advocate Sr 59505+1cc to Mr.C.V.Rajan, Advocate Sr 59288GGK (CO)km/4.10.WP No. 26376 of 2007