IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 15TH DECEMBER 2009 / 24TH AGRAHAYANA 1931 WP(C).No. 19823 of 2006(I) -------------------------- PETITIONER(S): --------------- SRI.VARKEY JACOB, LEGAL HEIR OF LATE SMT. LUCY KOCHUVAREED, THATTIL HOUSE, LATIN CHURCH ROAD, TRICHUR-680 001. BY ADV. SRI.V.RAMACHANDRAN, SENIOR ADVOCATE SRI.ABEESH JOSE RESPONDENT(S): --------------- 1. DEPUTY COMMISSIONER OF INCOME-TAX(ASST.) CIRCLE II (1), RANGE II, SAKTHAN THAMPURAN NAGAR, TRICHUR-680 001. 2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II (1), RANGE II, SAKTHAN THAMPURAN NAGAR, TRICHUR- 680 001. ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) FOR R SRI.JOSE JOSEPH, SC, FOR INCOME TAX FOR R THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15/12/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 19823/2006 APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 : COPY OF CHALLAN DATED 30.03.1989 EXHIBIT P2 : COPY OF ORDER DATED 31.12.1990 EXHIBIT P3 : COPY OF ORDER DATED 31.12.1990 EXHIBIT P4 : COPIES OF THE LETTERS DATED 20.02.1990 EXHIBIT P5 : COPIES OF ORDER DATED 31.12.1990 EXHIBIT P6 : COPY OF ORDER IN APPEAL DATED 21.11.2005 EXHIBIT P7 : COPY OF ORDER DATED 25.05.2006 /TRUE COPY/ P.A.TO JUDGE CR P.R. RAMACHANDRA MENON, J. ----------------------------------------------- W.P.(C). No. 19823 of 2006 --------------------------------------------- Dated, this the 15th day of December, 2009 J U D G M E N T Whether the 'self-assessed tax' paid by the assessee on 30.03.1989 in respect of the assessment years 1979-80 to 1984-85, on the basis of the returns filed later on 11.10.1989, (i.e., before the issuance of notice under Section 148 of the Income Tax Act, but sought to be treated as valid returns filed in response to the above notice) has to be refunded to the assessee, on setting aside the assessment order passed by the assessing authority under Section 143 (3) of the Act, is the issue involved herein. 2. The sequence of events reveals that the predecessor-in- interest of the petitioner, late Lucy Kochuvareed was a co-owner of the “Vellanikkara and Thattil Rubber Estate”, which was acquired by the Government of Kerala on 15.03.1974. Challenging the inadequacy of compensation awarded, the matter was taken up before the Reference Court and also before this Court, whereby the compensation was enhanced, granting interest at the rates stipulated under the amended Land Acquisition Act. The said proceedings became final as per the WP(C) No. 19823 of 2006 2 judgment delivered by this Court on 28.08.1987 in the concerned Land Acquisition Appeal. Total amount awarded by this Court towards interest on the enhanced compensation, for the period from 01.05.1973 to 28.08.1987, was Rs.96,56,593/-, out of which, the deceased Lucy Kochuvareed obtained 2/3 share, i.e., Rs.64,37,728/-; which was disbursed to her in three instalments during the year ended on 31.03.1988, 31.03.1989 and 31.03.1990 respectively. 3. On 30.03.1989, the assessee (Lucy Kochuvareed) remitted a sum of Rs.26,58,000/- as borne by Ext.P1 challan receipt, wherein the assessment year was mentioned as '1989-90'. Subsequently on 07.10.1989, the assessee wrote a letter to the concerned Income Tax Officer, stating that the assessment year shown as '1989-90' was only a mistake, instead of remitting the amounts by separate challans for '11' years and requested the department to give credit to the '11' years commencing from the assessment year 1979-80 to 1989-90, showing the total tax liability as Rs.26,10,814/- and seeking to refund the balance sum of Rs.47,186/-. The assessee also requested the department not to charge any interest, since there was total uncertainty regarding the quantum of enhanced compensation payable and also as to the rate of interest (which became final only on passing the final verdict by this Court in 1987) and further since bulk of the amount towards interest was WP(C) No. 19823 of 2006 3 received only during the previous year ended on 31.03.1989. Immediately thereafter, the deceased assessee filed a series of returns of income for all the '11' assessment years as stated above. 4. The returns so filed on 11.10.1989 in respect of the years 1988-89 and 1989-90 were subsequently amended by filing 'revised' returns on 03.01.1990 and returns on 23.03.1990. Exts.P2 and P3 assessment orders were passed in respect of the said assessment years under Section 143 (3) by the first respondent, fixing the tax liability, interest payable under the different provisions, the amount of tax already paid from the total amount of Rs.26,58,000/- effected on 30.03.1989 and the balance payable. Even though the first respondent accepted the returns filed on 11.10.1989 in respect of the assessment years 1985-86 onwards, the returns filed in respect of the assessment years 1979-80 to 1984-85 were not accepted as beyond the specified time provided under Section 139 of the Income Tax Act. 5. It is the admitted case of the petitioner that the deceased assessee could not file the returns in respect of the assessment years 1979-80 to 1984-85 within the time as specified under Section 139. It is stated that the assessing authority had issued notice under Section 148 of the Income Tax Act on 04.07.1980; despite which no return was filed, since she believed that she had no taxable income. Thereafter on WP(C) No. 19823 of 2006 4 15.07.1983, the assessing authority issued notice under Section 142 (1) for commencing an enquiry for making assessment which was replied by the petitioner as per letter dated 28.07.1983 stating that, her main source of income was interest receivable on the additional compensation, if any, that was to be allowed by the High Court of Kerala (where the matter was pending consideration) and hence that she was not in a position to file the returns till the proceedings before the High Court were got finalized. Accordingly, time was sought for, to file the returns, on different occasions (according to the petitioner she was granted time till 24.10.1989 as stated in paragraph 5 of the Writ Petition). It was after finalisation of the proceedings before this Court in the Land Acquisition Appeal, that she chose to file the returns on 11.101989 for the '11' assessment years 1979-80 to 1989-90, though the returns in respect of the assessment years 1979-80 to 1984-85 were belated. 6. The assessing authority who did not accept the returns in respect of the assessment years 1979-80 to 1984-85 being time barred, issued fresh notice under Section 148 of the Income Tax Act on 18.01.1990. Instead of filing fresh returns, the deceased assessee, as per Ext.P4 series letters dated 20.02.1990, requested the assessing authority to treat the returns already filed by her on 11.10.1989 as valid returns in response to the notice issued under Section 148 of the Income WP(C) No. 19823 of 2006 5 Tax Act. Finally, the first respondent passed the final orders under Section 143 (3) on 31.12.1990 for the assessment years 1979-80 to 1984- 85 as borne by Ext.P5 series, whereby, the first respondent held that interest was liable to be paid under different heads and after giving credit to the amount of tax already paid on 30.03.1989, the balance amount was demanded, which was challenged by filing different Writ Petitions before this Court. Pursuant to the direction given by this Court to pursue the statutory remedy, the assessee preferred appeals before the Commissioner of Income Tax. After considering the facts and figures, the appellate authority, also placing reliance on the dictum laid down by the Division Bench of this Court in Writ Appeal No. 1648/2002; held that the assessment orders passed under Section 143 (3), read with Section 147 for the assessment years 1979-80 to 1984-85, were not correct or sustainable; the liability having been extinguished by way of limitation which hence could not be reopened, invoking the extended limitation contained in the amended provisions. Accordingly, Ext.P5 series orders, refixing the tax liability, also by way of adding interest under different heads, were annulled. 7. Pursuant to Ext.P6 appellate order, the second respondent passed Ext.P7 series orders giving effect to the appellate order and cancelling Ext.P5 series orders, declaring that the 'returns' already filed by WP(C) No. 19823 of 2006 6 the assessee on 11.10.1989 would stand unchanged; thus showing the balance of tax payable as 'nil'. The petitioner has approached this Court challenging Ext.P7 to the extent the departmental authorities have not chosen to refund the amount of tax paid by the deceased assessee on 30.03.1989. It is contended that the course followed is not correct in the absence of any 'valid return' as on the date of filing the same on 11.10.1989; that no tax was paid along with the return filed on 11.10.1989; that no valid proceedings could have been taken against the assessee in respect of the belated period, when Ext.P5 series orders passed by the assessing authority were annulled by the appellate authority vide Ext.P6 and hence that the department could not have validly levied, imposed or collected any tax, thus seeking to refund the sum of Rs.17,23,123/- with interest as prescribed. 8. The respondents have filed a counter affidavit rebutting the various averments and allegations raised by the petitioner, also pointing out that, though notice under Section 148 and other relevant provisions of law were admittedly issued on 04.07.1980 and 15.07.1983, no return was filed but for sending a reply dated 28.07.1983 stating that the matter could not be finalized because of the proceedings pending before the High Court of Kerala and thus seeking for further time as conceded in paragraph 7 of the Writ Petition. It is also conceded in the very same WP(C) No. 19823 of 2006 7 paragraph that, in response to the subsequent notice dated 18.01.1990 issued by the department under Section 148 of the Income Tax Act, the assessee, vide Ext.P4 series letters dated 20.02.1990, had requested the Income Tax Officer to treat the returns already filed on 11.10.1989 as the 'valid returns' in response to the notice. The contention of the petitioner that the remittance made on 30.03.1989 vide Ext.P1 challan was only in respect of the year '1989-90' that too by mistake, has been sought to be rebutted by producing Ext.R1(a) letter dated 07.10.1989 written by the assessee, seeking to have the amount credited towards the tax liability for '11' years commencing from 1979-80 to 1989-90 as stated therein. The petitioner has reiterated the contentions by filing the reply affidavit; in response to which, the department has filed a statement dated 11.06.2009 and an additional statement dated 24.06.2009 through the Standing Counsel (along with petitions seeking to accept the same) asserting that the course pursued by the department in issuing Ext.P7 is very much correct and proper and that the assessee who had remitted the tax voluntarily and filed the returns is estopped from contending that the filing of the returns and remittance of the tax was not valid or proper. 9. Mr. V. Ramachandran, learned Senior Counsel appearing for the petitioner submits that the returns filed on 11.10.1989 in respect of the assessment years 1979-80 to 1984-85 were admittedly beyond the time WP(C) No. 19823 of 2006 8 as stipulated under Section 139 of the Income Tax Act; that no tax was paid on the date of filing the returns; that on the date of effecting the Ext.P1 payment, no return was in existence and further since no return was filed simultaneously remitting the tax, there was no valid return and as such, the department could not have imposed, levied or collected any tax under any circumstance. Ext.P5 series orders passed by the assessing authority having been rightly set aside by the appellate authority, as per Ext.P6 order, the amount already remitted on 30.03.1989, to the extent is has been appropriated vide Ext.P7, is liable to be refunded to the petitioner, submits the learned Senior Counsel. 10. Mr.P.K.Ravindranadha Menon, the learned Senior Counsel appearing for the respondents seeks to sustain Ext.P7 series orders based on the contents of the counter affidavit and the statements filed subsequently, stating that the relevant provisions of law and the judicial precedents do not support the case of the petitioner and that neither Ext.P6 appellate order setting aside Ext.P5 assessment orders and refixing the tax liability charging interest under different heads, nor the decision rendered by the Division Bench of this Court in Writ Appeal No. 1668/2002 does come to the petitioner's rescue and hence that the tax paid by the deceased assessee, as assessed and shown in the returns filed by her, is not liable to be refunded. Reference is also made to the WP(C) No. 19823 of 2006 9 proviso (b) to Section 240 of the Income Tax Act (which however was brought into force only from 01.04.1989) in support of the said contention, pointing out that the Ext.P6 appellate order was passed only on 21.11.2005. 11. It is conceded by both the sides that interest payable on the compensation pursuant to the Land Acquisition proceedings taken by the Government of Kerala was got quantified and became final only on passing the judgment by this Court in the concerned Land Acquisition Appeal in the year 1987 and the said amounts were disbursed to the assessee in three instalments, during the year ending on 31.03.1988, 31.03.1989 and 31.03.1990. It is beyond doubt that the said amounts, though disbursed in a particular year/years is liable to be distributed for the different years concerned, in view of the declaration of law in this regard by a Full Bench of this Court in Peter John Vs. Commissioner of Income Tax [157 ITR 711] and by the Apex Court in Sankari Manickyamma Vs. Commissioner of Income Tax, Andhrapradesh [181 ITR 400]. The case of the petitioner is that the assessee, despite the receipt of Section 148 notice dated 04.07.1980 and Section 142 (1) notice dated 15.07.1983, could not file any return, as the main source of the income was from the 'interest' to be obtained on enhancement of the compensation; for which, proceedings were pending consideration before WP(C) No. 19823 of 2006 10 this Court, as explained in the reply dated 28.07.1983 submitted before the department. 12. It is also an admitted fact that the proceedings became final only pursuant to the verdict passed by this Court in the Land Acquisition Appeal in 1987 and it was accordingly, that the deceased assessee, who got the interest disbursed by way of three instalments in the year ending on 31.03.1988, 31.03.1989 and 31.03.1990 chose to pay a sum of Rs.26,58,000/- as per Ext.P1 challan; followed by filing the returns for the different assessment years from 1979-80 to 1989-90 on 11.10.1989. There was absolutely no case for the deceased assessee (after the judgment and decree obtained from this Court in the Land Acquisition Appeal), that she was not liable to file any return or to pay any tax. The dispute arose only when the returns in respect of the assessment years 1979-80 to 1984-85 were not accepted, leading to Ext.P5 series orders passed under Section 143 (3), casting huge liability upon the assessee under different heads; which in turn were subjected to challenge in appeal leading to Ext.P6 order annulling the assessement orders (placing reliance on the dictum in Varkey Jospeh’s case in Writ Appeal No. 1668/2002). It was in the said circumstance, that the petitioner put up a 'new case' that the tax remitted under Ext.P1 challan, to the extent as now claimed in the Writ Petition, is liable to be refunded; contending that the WP(C) No. 19823 of 2006 11 returns submitted by the deceased assessee on 11.10.1989 were 'not valid returns' and hence no tax could have been levied, imposed or collected by the department in any manner. 13. The sum and substance of the pleadings and materials on record is that the proceedings originally taken by the department to have the assessment effected by issuing the statutory notices on 04.07.1980 and 15.07.1983 were got stalled by the assessee, by filing petitions for extension of time, referring to pendency of the land acquisition proceedings before this Court, contending that the main income was by way of 'interest' obtainable on enhancement of the compensation by the High Court in the said proceedings. Admittedly, the proceedings became final only in the year 1987; whereby a sum of Rs.64,37,728/-, being the share of the deceased assessee, was disbursed to her by way of three instalments in the years ended on 31.03.1988, 31.03.1989 and 31.03.1990. It was only on finalization of the the quantum as above, that the deceased assessee volunteered to pay the sum of Rs.26,58,000/- towards the tax liability on 30.03.1989 as borne by Ext.P1. Though the assessment year was shown in Ext.P1 challan as '1989-90', it was subsequently sought to be corrected vide Ext.R1(A) dated 07.10.1989, to have it apportioned in respect of the '11' different assessment years from 1979-80; followed by the returns filed on 11.10.1989. It was without WP(C) No. 19823 of 2006 12 mentioning anything about Ext.R1(A) letter written by the deceased assessee, that the petitioner chose to mould the Writ Petition, wrongly stating that Ext.P1 payment was only in respect of the assessment year '1989-90'. The course and conduct pursued by the petitioner in filing the Writ Petition, without disclosing the entire facts, cannot but be deprecated. 14. Incidentally, it is to be noted that the appellant/petitioner in Writ Appeal No. 1668/2002 (referred to by the petitioner and relied on by the appellate authority in Ext.P6 order) was a 'lessee' of the very same Rubber estate 'Vellanikara Estate' acquired by the Government for establishing the Agricultural University, as involved herein. The compensation awarded to the said lessee was finally enhanced in Land Acquisition Appeal No. 247/1980 preferred before this Court, as per judgment dated 28.01.1987. On receipt of the award amount including interest, the said lessee filed returns on 03.01.1990. The department accepted the returns for the period from 1985-86 and in respect of the returns for the assessment years 1979-80 to 1984-85, notice was issued under Section 148 of the Income Tax Act, to reopen the assessment and orders were passed under Section 143 (3), also charging Interest under Section 139 (8) and 217 of the Income Tax Act. The case put forth by the lessee before this Court was that, there was no justification for reopening WP(C) No. 19823 of 2006 13 the assessment invoking the 'amended' provisions of law and that the assessment could have been only under Section 147 (b) of the Act. There was no case for the said lessee that the amount paid by him as tax as per the returns ought to have been refunded. After discussing the relevant provisions of law and the binding judicial precedents, it was held by a Division Bench of this Court that, the assessment orders issued, where the liability already stood extinguished, could not be reopened, invoking the extended limitation period in the amended provisions. The said decision does never say that the amount paid by the petitioner by way of tax in respect of the income returned is liable to be refunded. 15. As observed hereinbefore, the amount remitted as per Ext.P1 challan, mentioning the year of assessment as '1989-90', was later sought to be distributed in respect of '11' assessment years from 1979-80 to 1989-90 as stated in Ext.R1(A) letter dated 07.10.1989 written by the deceased assessee; simultaneously requesting that no 'interest' might be levied, in view of the nature and pendency of the proceedings which became final only on quantification of the amount payable including the 'rate' of Interest as per the judgment and decree passed by the High Court of Kerala in the year 1987. After getting the proceedings initiated by the department stalled, refering to the pendency of the proceedings before this Court and after remitting the tax voluntairily on finalization of the said WP(C) No. 19823 of 2006 14 proceedings (on the basis of the exact income obtained by way of interest), followed by filing of the necessary returns and also after requesting the department vide Ext.P4 series letters dated 20.02.1990 to treat the returns already filed on 11.10.1989 as valid returns in response to the notice dated 18.01.1990 issued by the department under Section 148 of the Income Tax Act, the petitioner is estopped from contending that the payment effected by the assessee was not voluntary and that no amount could have been appropriated by the department in respect of the tax admitted and shown as due for the different assessment years as requested by the assessee herself in Ext.R1(A) letter dated 07.10.1989 and as shown in the returns filed on 11.10.1989. The petitioner cannot be permitted to blow hot and cold simultaneously and the contention raised to the contrary does not appear to be palatable to this Court. 16. Some what a similar situation as to the sustainability of the course pursued by the department arose for consideration of the Division Bench of the Calcutta High Court in Iqbal Singh Atwal Vs. Commissioner of Income Tax [(1984) 147 ITR 599] where the assessee failed to file returns within the time provided under Section 139 (4), when notice was issued under Section 148. In response to the said notice, the assessee requested that the return already filed might be treated as the return filed in pursuance to the notice under Section 148. The department WP(C) No. 19823 of 2006 15 accordingly effected the assessment on the basis of such returns filed earlier. The proceedings taken in this regard were declared as valid and very much sustainable. Obviously, the said decision was rendered, following the verdict in similar lines passed by a Division Bench of the Madras High Court in K.S.Ratna Swami Vs. Additional Income Tax Officer reported in [(1963) 48 ITR 568]. Then the remaining question is only regarding the scope of Ext.P6 appellate order setting aside Ext.P5 series assessment orders. As observed hereinbefore, Ext.P6 has only set aside the assessment made by the Department and not the returns filed by the assessee. The tax suffered by the assessee on the income returned voluntarily, by way of self-assessment has not been ordered or intended to be refunded vide Ext.P6 appellate order. More so, in view of the specific stipulation provided as per 'proviso (b)' to Section 240 of the Income Tax Act. True the said provision was brought into force only with effect from 01.04.1989. But, the returns were admittedly filed subsequently on 11.10.1989; which were requested to be treated as valid returns in response to the notice issued under Section 148 (1) as per Ext.P4 series letters dated 20.02.1990. In other words, the said 'proviso' had taken its breath and was very much live even on the date of filing the returns and very much on the date of passing Ext.P6 appellate order. This Court had an occasion to consider whether refund of the tax paid on 'self WP(C) No. 19823 of 2006 16 assessment' could be ordered to be refunded. After discussing the relevant provisions of law, it was held by this Court in E. Philip Joseph Vs. Income Tax Officer [234 ITR 846] that no such refund of tax paid on 'self assessment' could be ordered under any circumstance. The legal position has become crystal-clear by virtue of the decision rendered by the Apex Court in Commissioner of Income Tax Vs. Shelly Products and another [261 ITR 367] holding that the assessee is not entitled to have refund of tax paid on self-assessment. 17. Admittedly, the deceased assessee made a 'self assessment' of tax and remitted the same as per Ext.P1 challan; which was later sought to be distributed in respect of the different assessment years as stated in Ext.R1(A) letter dated 07.10.1989. This is in conformity with the figures given in the returns filed by her voluntarily on 11.10.1989. Filing of return itself is a mode of 'assessment' of tax, though by way of self- assessment. The deceased assessee admittedly having effected 'self assessment' and paid the tax amount, it is no more open to contend that the said amount paid voluntarily by the deceased assessee, is to be refunded to the petitioner; merely since the subsequent proceedings taken by the Department also charging interest for the delay under different