Case Law Details
Covenant Stones Private Limited Vs CIT (Kerala High Court)
Introduction: The Kerala High Court recently delivered a judgment in the case of Covenant Stones Private Limited versus the Commissioner of Income Tax (CIT). The writ petition, challenging the conditional stay order issued by the 2nd respondent, was dismissed. This article provides an in-depth analysis of the case, focusing on the examination of undisclosed income in relation to the returned income in the assessment order.
Detailed Analysis: The crux of the matter revolves around Ext.P5, the order passed by the 2nd respondent. This order granted a conditional stay, directing the petitioner to pay 20% of the total tax demand raised for the assessment years 2014-2015 to 2019-2020. The petitioner was also allowed to pay this amount in seven equal installments, with the first installment due on or before 25.09.2023.
The petitioner, instead of complying with the conditional stay order, approached the court, questioning its validity. The primary argument raised by the petitioner was that the 2nd respondent did not consider the merit of the case and merely followed a circular in passing the order.
Upon examination, the court found that the assessment orders, based on a survey under Section 133A of the Income Tax Act, were not solely reliant on the statements of the Director and Managing Director, who had later retracted their statements. The court noted that incriminating materials, including excel sheets and digital data from computers and laptops, were considered before adding undisclosed income to the returned income.
The court, therefore, dismissed the writ petition, stating that the merit of the assessment orders had been duly considered in the impugned Ext.P5 order. The petitioner was granted an extension for the first installment payment until 30.12.2023, and the final installment was to be paid on or before 30.06.2024. The judgment emphasized that this dismissal should not prejudice the appellate authority’s consideration of the petitioner’s case on merit.
Conclusion: In conclusion, the Kerala High Court’s decision in Covenant Stones vs CIT reaffirms the importance of thorough consideration of evidence in matters of undisclosed income assessment. The dismissal of the writ petition underscores the court’s satisfaction with the 2nd respondent’s evaluation of the case’s merit. The extension granted for installment payments allows the petitioner an extended timeline for compliance while preserving the right to appeal on merit.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The present writ petition has been filed impugning Ext.P5 order passed by the 2nd respondent. The 2nd respondent has given a conditional stay order in Ext.P5 after considering the facts and circumstances of the case and taking into account the online submissions advanced on behalf of the petitioner.
2 .The petitioner has been directed to pay of 20% of the total tax demand raised vide the assessment orders for the assessment years 2014-2015, 2015-2016, 2016-2017, 2017-2018 and 2019-2020. Not only the conditional stay on payment of 20% has been granted but the petitioner has also been given facility of payment of 20% in seven equal installments. The said 20% amount is directed to be paid on or before 25.03.2024. The first installment has been directed to be paid on or before 25.09.2023. The petitioner instead of complying the said conditional stay order has approached this court, impugning the very same conditional stay order in Ext.P5.
3.Learned counsel for the petitioner submits that the 2nd respondent has not considered the merit of the case and following the circular, has passed the order.
4.This court therefore asked the learned counsel for the petitioner to make submissions on the merit of the case.
5.The learned counsel for the petitioner has submitted that the assessment orders after survey under Section 133A of the Income Tax Act had been finalized merely on the basis of the statements of the Director and Managing Director who had retracted later on. This submission does not appear to be correct. The assessment order would disclose that not only the statements of the Director and Managing Director were taken into consideration but the other incriminating material including the excel sheets and digital datas maintained in the computers and laptops had also been examined before adding the undisclosed income to the returned income of the petitioner. Therefore, I do not find much substance in the present writ petition that the merit of the assessment orders have not been considered while passing the impugned Ext.P5 order granting conditional stay.
In that view of the matter, the present writ petition is dismissed. The petitioner was granted time to pay the first instalment on or before 25.09.2023, the said time is extended to 30.12.2023 and the last and final installment has to be paid on or before 30.06.2024. Needless to say that the observation made herein will not prejudice the appellate authority to consider the case of the petitioner on merit.
The writ petition is dismissed accordingly.
