Case Law Details
Lavia Infra Ltd Vs Central Board of Direct Taxes (Kerala High Court)
In a notable judgment, the Kerala High Court has accorded Lavia Infra Ltd an additional opportunity to explain its unexplained income under Section 69 of the Income Tax Act. This decision comes in the wake of recognizing the mental illness of the company’s Managing Director, showcasing a blend of compassion and adherence to legal standards.
Case Background: Lavia Infra Ltd, a company engaged in the trade of construction materials and hardware goods, encountered financial management issues leading to legal action by the Bank of India under the SARFAESI Act. The company’s failure to file the income tax return for the assessment year 2019-2020 further complicated its situation, prompting the Income Tax Department to issue notices under various sections of the Income Tax Act, 1961.
Judicial Compassion Meets Legal Rigor: Upon receiving a show-cause notice for an unexplained income amounting to Rs. 4,33,57,333/-, Lavia Infra Ltd appealed to the Kerala High Court citing the mental illness of its Managing Director as a reason for non-compliance. The court, considering the unique circumstances, granted the company an additional six weeks to comply with the tax requirements, emphasizing the judiciary’s capacity for empathy within the legal framework.
Implications of the Judgment: This judgment highlights the court’s recognition of mental health issues in the legal process, providing a precedent for future cases where health challenges impact legal compliance. It underscores the necessity for businesses to maintain diligent financial and tax records, while also recognizing that extenuating circumstances can influence judicial decisions.
Conclusion: The Kerala High Court’s decision to extend the deadline for Lavia Infra Ltd signifies a pivotal moment in the intersection of law, business, and health. It reinforces the importance of compliance with tax laws, while also acknowledging the human elements that may affect such compliance. This case serves as a reminder for companies to ensure robust financial management practices, and for the legal system to continue balancing legal standards with compassion and understanding.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner company got incorporated under the provisions of the Companies Act, 2013. The petitioner company is engaged in trading of construction materials and hardware goods. It appears that the petitioner company had a run with bad financial management, and therefore, the Bank of India has proceeded against the company under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. An application had been filed by the Bank of Baroda for recovery of 20.13 crores.
2. The petitioner did not file the return of his income for the assessment year 2019-2020. The petitioner was issued with notice under Section 148 of the SARFAESI Act, however, no reply was filed, and thereafter, an order under Section 148(b) came to be passed, as evident in P8.
3. The petitioner, thereafter, was issued with a notice under Section 148 for filing the return, and the petitioner did not file the return nor complied with the notices issued under Section 142(1) of the Income Tax Act,1961.
4. A show cause notice under Section 144 of the Income Tax Act has been issued on 26.12.2023 to the petitioner giving him an opportunity to show, why the assessment should not be completed under Section 144 of the Income Tax Act and an amount of Rs. 4,33,57,333/- should not be treated as an unexplained income under Section 69A of the Income Tax Act. Petitioner has filed a reply to the said notice on 05.01.2024. Thereafter, notice dated 09.01.2024 has been issued for adding the variation as pointed out ie, Rs.4,33,57,333/-. The petitioner has not filed any reply to the said show cause notice, and the petitioner has sought time till 20.01.2024.
5. I have heard Dr. K.P Pradeep, learned counsel for the petitioner and the Adv. Ajith Kumar, the learned Standing counsel for the respondents.
6. Dr. K.P Pradeep, learned counsel for the petitioner submits that the Managing Director of the company is suffering with certain kind of mental illness and for that reason the relevant documents could not be submitted by the petitioner’s company before the Income Tax Department. The petitioner company maybe granted a further time of six weeks for producing the relevant documents, as a last chance. Considering the illness of the Managing Director.
7. Adv. Ajith Kumar, the learned Standing counsel for the respondents submits, that for the past one year the petitioner has been seeking time and has not complied with the notices issued to him. The petitioner has not filed its return. There is an unexplained income of the petitioner of Rs.4,33,57,333/-. He however submits that he would leave it to the discretion of this court to grant reasonable time to the petitioner, as a last chance to submit the requisite documents in support of its case.
Considering the aforesaid submission, the present writ petition is disposed of, with liberty to the petitioner to file return and submit all the requisite documents in response to the notice dated 09.01.2024, within a period of six weeks from today (16.02.2024), failing which, the revenue will proceed to finalize the assessment under Section 144 of the Income Tax Act.
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