Srirama Pankajam Vs Union of India (Andhra Pradesh High Court)
The Andhra Pradesh High Court considered a writ petition filed by a taxpayer who had inherited a 1/3rd share in an undivided property along with a building in Visakhapatnam after the death of her husband. The petitioner, along with her son and daughter, entered into a Development Agreement-cum-General Power of Attorney dated 24.02.2011 with a developer for construction of flats. Treating the transaction as giving rise to capital gains in the financial year 2012-2013 corresponding to Assessment Year (AY) 2013-2014, the petitioner offered the capital gains to tax and paid ₹11,08,486 towards capital gains tax for AY 2013-2014.
Subsequently, the Income Tax Department initiated assessment proceedings for the financial year 2010-2011 corresponding to AY 2011-2012, contending that the capital gains had arisen in that year. The assessment proceedings culminated in an assessment order dated 13.12.2018. The petitioner challenged the assessment by filing an appeal before the Commissioner of Income Tax (Appeals)-1, Visakhapatnam.
While the appeal was pending, the petitioner opted for the Vivad Se Vishwas Scheme and, on 22.02.2021, paid ₹9,55,706 towards full and final settlement of the dues arising from the assessment proceedings.
After making the payment under the scheme, the petitioner applied to the Chief Commissioner of Income Tax under Section 119(2)(b) of the Income Tax Act, 1961, seeking refund of the ₹11,08,486 paid for AY 2013-2014. The petitioner relied upon Section 119(2)(b), which empowers the Board to authorise admission of applications or claims for exemption, deduction, refund or other relief after expiry of the prescribed period where genuine hardship exists.
The application was rejected by the Chief Commissioner on the ground that refund was not a subject matter falling within Section 119(2)(b), stating that the issue was a legal one beyond the provision’s scope.
Before the High Court, the petitioner contended that she had been compelled to pay tax twice on the same capital gains transaction, resulting in genuine hardship. It was further submitted that such double taxation would violate Article 265 of the Constitution of India and that the rejection order contained no relevant reasons for rejecting the claim.
The Income Tax Department relied upon CBDT Circular No. 9/2015 dated 09.06.2015. Referring to paragraph 3 of the Circular, it argued that applications under Section 119(2)(b) could not be entertained beyond six years from the relevant assessment year. According to the Department, the claim related to AY 2013-2014, for which the six-year period expired on 31.03.2020, whereas the petitioner’s application dated 18.03.2021 was beyond the prescribed period. The Department also submitted that the six-year limit corresponded with the record retention period maintained by the Department.
The High Court rejected these submissions on two grounds. First, it found that there was no dispute that the petitioner had paid tax on the same transaction for both AY 2011-2012 and AY 2013-2014. Consequently, the availability or absence of records was immaterial.
Secondly, while observing that CBDT circulars are binding on departmental authorities, the Court held that such circulars are not binding on the High Court while exercising jurisdiction under Article 226 of the Constitution. The Court further observed that Section 119(2)(b) itself does not prescribe any limitation period. It noted that the provision is intended to permit consideration of claims that otherwise cannot be made because of expiry of time, and that fixing an outer time limit through a circular could be contrary to the spirit of Section 119(2)(b).
The Court found that the petitioner had undisputedly suffered double taxation on the same transaction, constituting genuine hardship requiring consideration by the Department. It observed that the Chief Commissioner had rejected the application on grounds entirely extraneous to the issue instead of addressing the genuine hardship.
Accordingly, the High Court allowed the writ petition, set aside the order dated 14.03.2024 passed by the Chief Commissioner of Income Tax, and directed the respondents to refund ₹11,08,486 collected from the petitioner for AY 2013-2014. The Court further directed that, as the petitioner became liable to pay tax for AY 2011-2012 only in 2021, no interest would be payable until that date. However, the Department was directed to pay interest on ₹11,08,486 from the date of the petitioner’s application under Section 119(2)(b) until the date of payment. There was no order as to costs, and pending miscellaneous applications, if any, were directed to stand closed.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
The petitioner herein had inherited a 1/3rd share from the undivided property, along with a building bearing D.No.10-4-18/B, in layout No.218/61 of town survey No.1041 of Waltair ward within the limits of Greater Visakhapatnam Municipal Corporation. This property had devolved on her, along with her son and daughter, on account of the demise of her husband, who was the owner of this property.
2. The petitioner along with her son and daughter, had given the said land for development, by way of construction of flats to M/s. Sri Lakshmi Vallabha Constructions, Visakhapatnam vide Development Agreement cum GPA, dated 24.02.2011. The petitioner had thereafter, claimed that, capital gains, on account of this transaction, would arise in the financial year, 2012-2013, corresponding to assessment year, 2013-2014. On that basis, the petitioner offered and paid an amount of Rs.11,08,486/- as capital gains of tax arising out of this transaction, in relation to assessment year, 2013-2014.
3. The 4th respondent, however, initiated assessment proceedings for the financial year, 2010-2011, corresponding to assessment year, 2011-2012, contending that, the capital gains arise, out of the aforesaid transaction, in the financial year, 2010-2011, and as such, capital gains should have been paid in that year. These assessment proceedings culminated, in an Order, dated 13.12.2018, passed by the 5th
4. The petitioner being aggrieved by this Order, had filed an Appeal, before the Commissioner of Income Tax (Appeals) — 1, Visakhapatnam. While the said Appeal was pending, the petitioner taking an advantage of the scheme Vivad Se Viswas Scheme’, introduced by the 1st respondent, has paid a sum of Rs.9,55,706/- as tax towards full and final settlement of all dues arising against the petitioner, on 22.02.2021.
5. The petitioner, after making such payment, had then approached the 3rd respondent — Chief Commissioner of Income Tax, for refund of the tax paid, for the assessment year, 2013-2014. This application was made under Section 119(2)(b) of the Income Tax Act, 1961, which reads as follows:
“119. Instructions to subordinate authorities:- (1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:
Provided that no such orders, instructions or directions shall be issued –
a. so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or
b. so as to interfere with the discretion of [the Joint Commissioner (Appeals) or the Commissioner (Appeals)] in the exercise of his appellate functions.
(2). Without prejudice to the generality of the foregoing power, – (a)
(b). the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize [any income-tax authority, not being [a Joint Commissioner (Appeals) Commissioner (Appeals)]] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;”
6. This application came to be rejected by the 3rd respondent with the following endorsement:
“3. The submissions made by the assessee have been carefully examined. The issue with regard to issue of refund is not a subject matter of section 119(2)(b) of the IT Act, 1961, which is a legal issue and does not come under the purview of section 119(2)(b). Hence, the application made u/s 119(2)(b) is rejected.”
7. Aggrieved by this order of rejection, the petitioner has approached this Court, by way of the present Writ Petition.
8. Jyothi Ratna Anumolu, learned counsel for the petitioner, would contend that, this is a case of genuine hardship in as much as the petitioner is being forced to pay tax on capital gains, twice, on the same transaction and the same would be violative of Article 265 of the Constitution of India, which requires any tax would have to be on the basis of a Law, which is reasonable and fair. The learned counsel would also contend that, the rejection of the application of the petitioner is without giving any reasons in as much as the reason given has no relevance to the claim raised by the petitioner.
9. Sri Anup Koushik Karavadi, the learned Standing Counsel for Income Tax, appearing for the respondents, relies upon a Circular of the Central Board of Direct Taxes, issued on 09.06.2015. The learned Standing Counsel would draw the attention of this Court to paragraph — 3 of the said Circular bearing No.9/2015. In this paragraph, the Authorities were directed not to entertain any claim, under Section 119(2)(b) of the Income Tax Act, if it is beyond the period of six (06) years from the assessment year for which the claim is made. He would submit that, in the present case, the assessment order, in which the payments have been made, was for the assessment year 2013-2014, and the limitation, would end on, 31.03.2020, whereas the claim under Section 119(2)(b) had been made by the petitioner, on 18.03.2021, which is beyond the period of six (06) years.
10. The learned Standing Counsel would further elaborate that, the period of six (06) years was stipulated, under this clause because the Department requires to maintain the records of the assessee for a period of six (06) years and it would be difficult for the Department to ascertain the actual facts beyond the period of six (06) years.
11. The aforesaid contention of the learned Standing Counsel would have to be rejected, on two (02) grounds. Firstly, there is no dispute as to the fact that the petitioner had paid the tax, on the same transaction, for the assessment year, 2013-2014 as well as for the assessment year, 2011-2012. In such circumstances, the availability or absence of records would make no difference.
12. It is settled law that the Circulars issued by the Central Board of Direct Taxes would be binding on the Authorities. However, such guidelines or circulars would not be binding on this Court, especially when this Court is exercising jurisdiction under Article 226 of the Constitution of India. Apart from this, the fact remains that there is no time period stipulated under Section 119(2)(b). A look at Section 119(2)(b) would also show that claims, which cannot be made, on account of expiry of time for making such claims are still be considered under Section 119(2)(b). In such circumstances, fixing an outer time limit in relation to such claims can be counterproductive. This would also be contrary to the spirit of Section 119(2)(b).
13. The undisputed fact is that the petitioner has suffered double taxation on the very same transaction. In such circumstances, there is a genuine hardship, which requires to be dealt with by the Department. However, the 3rd respondent refused to deal with this issue and sought to reject the claim of the petitioner, on grounds, which are entirely extraneous to the issue.
14. In these circumstances, we are of the opinion that there is a genuine hardship suffered by the petitioner, which requires to be rectified by this Court.
15. Accordingly, this Writ Petition is allowed, setting aside the order of the 3rd respondent, dated 14.03.2024, with a further direction to the respondents to refund the tax of Rs.11,08,486/- collected from the petitioner, for the assessment year, 2013-2014. Further, since the petitioner had to pay tax, for the assessment year, 2011-2012 only, in 2021, there shall be no requirement to pay interest till that date. However, interest shall be paid by the Department, on the amount of Rs.11,08,486/- from the date on which the petitioner had filed the application under Section 119(2)(b) till date of payment.
There shall be no order as to costs.
As a sequel, pending miscellaneous applications, if any, shall stand closed.
