Kerala State Financial Enterprises Limited v Union of India and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE C.S.DIAS TUESDAY, THE 23[RD] DAY OF MAY 2023 / 2ND JYAISHTA, 1945** **WP(C) NO. 16121 OF 2023** ## **PETITIONER/S:** KERALA STATE FINANCIAL ENTERPRISES LIMITED BHADRATHA MUSEUM ROAD, CHEMBUKKAVU, THRISSUR, KERALA, INDIA, REPRESENTED BY ITS SENIOR MANAGER/ LIAISON OFFICER (LEGAL) - MR. UNNIKRISHANAN M., PIN - 682020 BY ADVS. RAJA KANNAN M.GOPIKRISHNAN NAMBIAR K.JOHN MATHAI JOSON MANAVALAN KURYAN THOMAS PAULOSE C. ABRAHAM ## **RESPONDENT/S:** 1 UNION OF INDIA REPRESENTED BY ITS REVENUE SECRETARY, MINISTRY OF FINANCE, NEW DELHI, PIN - 110004 2 THE COMMISSIONER OF INCOME TAX (APPEALS) UNIT-3, 5TH FLOOR, INCOME TAX BUILDING,63, RACE COURSE ROAD,COIMBATORE, PIN - 641018 3 ASSESSMENT UNIT, NEAC MAYUR BHAWAN, CONNAUGHT LANE, BARAKHAMBA, NEW DELHI, DELHI., PIN - 110001 4 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) & TPS,AAYAKAR BHAVAN, INCOME TAX OFFICE,SHAKTANTAMPURAN NAGAR, THRISSUR, KERALA, PIN - 680001 THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23.05.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 16121 OF 2023 2 ## **JUDGMENT** The writ petition is filed, inter-alia, to quash Ext.P11 order passed by the 2[nd] respondent directing the petitioner to deposit 50% of the demand amount to consider Ext.P3 appeal filed by the petitioner. 2. The brief relevant facts are that, aggrieved by Ext.P1 assessment order and Ext.P2 demand notice issued by the 3[rd] respondent, the petitioner has preferred Ext.P3 appeal under Section 250 of the Income Tax Act, 1961 before the 2[nd] respondent. Along with the appeal, the petitioner has also filed Ext.P8 stay petition to stay the operation of Exts.P1 and P2. However, the 2[nd] respondent, by the impugned Ext.P11 order, has directed the petitioner to deposit 50% of the assessed amount as a pre-condition to entertain the appeal. Ext.P11 is patently wrong and passed in gross violation of the settled law, especially the precedent of this Court in **Archana Agencies vs. Commercial Tax Officer** [2014 (2) KLT 715]. Hence, the writ petition. WP(C) NO. 16121 OF 2023 3 3. Heard; Sri.Raja Kannan, the learned Counsel appearing for the petitioner and Sri.Jose Joseph, the learned Standing Counsel appearing for the respondents. 4. This Court in **Archana** (supra) while considering a challenge under the Value Added Tax Act, 2003 (Kerala) has held as follows: _"3. On a perusal of the stay order, it is seen that while the Appellate Authority admits that there is a prima facie case established for the grant of a conditional stay, the order does not disclose the basis for insisting on the payment of even 30% of the dues conferred against the petitioner. In my opinion, a quasi judicial authority considering a stay application of an assessee under a taxation statute has to give reasons to support the order directing payment of any amount towards tax/interest pending disposal of the appeal. He has to bear in mind the Constitutional Mandate under Article 265 of the Constitution that there shall be no levy or collection of tax except by the authority of law. In taxation matters therefore, more than in any other matter, reasons must support not only the decision to waive payment of amounts due but also the decision that directs an assessee to make some payments pending consideration of the appeal. No doubt, this would require the adjudicating authority to look into the merits of the matter for the purposes of deciding the extent of waiver from payment that he can grant to an assessee while deciding the conditions for the grant of stay. This, however is a legal requirement that must be read into the exercise of the statutory discretion by the said authority._ WP(C) NO. 16121 OF 2023 4 _4. The requirement of giving reasons, albeit minimal in stay orders, especially in matters of taxation cannot be understated. The duty to give reasons for a decision is one that is conducive to fairness in judicial/quasi judicial/administrative action. Reasons for a decision are required to address the primary concern of an assessee in knowing what weighed with the authority in question while deciding the issue against him. The practice accords with the concept of fairness in action and recognises the dignity of the individual whose rights are affected by the decision in question. The obligation to provide reasons for a decision will also ensure that the decision maker acts within the limits of his discretion and takes into account only those factors as are relevant to the decision making process. No doubt it could be argued that the imposition of a duty to provide reasons for every decision might lead to stifling or unduly burdening the administration but this is an aspect that has to be weighed against the rights of the person affected. In taxation matters where the Constitution of India itself gives ample indication that the rights of a citizen against arbitrary taxation are zealously guarded, I would think that the requirement of giving reasons to support even a conditional order of stay would not tantamount to unduly burdening the administration. The law has necessarily to strike a balance between the necessity to govern and the rights of those governed"._ 5. On an analysis of the ratio decidendi in **Archana Agencies** (supra), I am of the definite view that the very same principles are squarely applicable to the matters falling under the Income Tax Act, also. 6. A reading of Ext.P11 order undoubtedly demonstrates that the 2[nd] respondent has not stated any WP(C) NO. 16121 OF 2023 5 reason in arriving at a conclusion that the petitioner has to deposit 50% of the amount. Thus, I hold that Ext.P11 order is passed without application of mind and in violation of the settled principles of law, particularly while dealing with a taxation statute. Hence, I am constrained to interfere with Ext.P11 order which is untenable in law. Resultantly, I allow the writ petition as follows: - (i) Ext.P11 order is set aside. - (ii) The 2[nd] respondent is directed to reconsider Ext.P8 stay petition after adverting to the law laid down in **Archana Agencies vs. Commercial Tax Officer** and other decisions on the point, after affording the petitioner an opportunity of being heard. - (iii) The 2[nd] respondent shall issue notice to the petitioner fixing the date of hearing. - (iv) Needless to mention, until a decision is taken on Ext.P8 application all further coercive proceedings WP(C) NO. 16121 OF 2023 6 as against the petitioner pursuant to Exts.P1 and P2 shall be kept in abeyance. sd/- **C.S.DIAS, JUDGE** rkc/23.05.23 WP(C) NO. 16121 OF 2023 7 ## **APPENDIX OF WP(C) 16121/2023** PETITIONER EXHIBITS |Exhibit P1|A TRUE COPY OF THE ASSESSMENT ORDER| |---|---| ||PASSED BY THE 3RD RESPONDENT UNDER| ||SECTION 143(3) READ WITH SECTION 144B OF| ||THE ACT ON 05.09.2022 FOR THE A.Y. 2020-| ||21| |Exhibit P2|A TRUE COPY OF THE DEMAND NOTICE DATED| ||05.09.2022 ISSUED BY 3RD RESPONDENT UNDER| ||SECTION 156 OF THE ACT| |Exhibit P3|A TRUE COPY OF THE APPEAL MEMORANDUM| ||(WITHOUT ANNEXURES) DATED 03.10.2022| ||FILED BY THE ASSESSE IN FORM 35| |Exhibit P4|A TRUE COPY OF THE ACKNOWLEDGEMENT| ||RECEIPT DATED NIL, GENERATED IN THE| ||PORTAL OF THE INCOME TAX DEPARTMENT, WHEN| ||THE APPEAL WAS FILED ONLINE| |Exhibit P5|A TRUE COPY OF THE LETTER DATED| ||10.02.2023 ISSUED BY THE 4TH RESPONDENT| |Exhibit P6|THE TRUE COPY OF THE ORDER DATED| ||15.03.2023 PASSED BY THIS HON'BLE COURT| ||IN W.P.(C) NO. 8930 OF 2023| |Exhibit P7|THE TRUE COPY OF THE COVERING LETTER| ||DATED 18.03.2023 (WITHOUT ANNEXURES)| ||ADDRESSED TO THE 4TH RESPONDENT| |Exhibit P8|THE TRUE COPY OF THE STAY PETITION| ||(WITHOUT ANNEXURES) DATED 17.03.2023| ||ADDRESSED TO THE NFAC| |Exhibit P9|THE<br>TRUE<br>COPY<br>OF<br>THE<br>ONLINE| ||ACKNOWLEDGEMENT NO. 985468621180323 DATED| ||NIL EVIDENCING THE UPLOADING OF APPEAL| ||MEMORANDUM, EXT. P6 ORDER, COPY OF W.P.| ||(C). NO. 8930 OF 2023 AND EXT. P8 STAY| ||PETITION IN THE PORTAL OF INCOME TAX| ||DEPARTMENT| WP(C) NO. 16121 OF 2023 8 Exhibit P10 THE TRUE COPY OF THE JUDGMENT DATED 23.03.2023 PASSED BY THIS HON'BLE COURT IN W.P.(C). NO. 8930 OF 2023 Exhibit11 THE TRUE COPY OF THE LETTER DATED 02.05.2023 ISSUED BY THE 2ND RESPONDENT Exhibit P12 THE TRUE COPY OF THE TRACKING REPORT DATED NIL OBTAINED FROM THE WEBSITE OF INDIA POST, EVIDENCING THE DATE OF RECEIPT OF EXT. P11 LETTER Exhibit P13 THE TRUE COPY OF THE LETTER DATED 17.05.2023 ISSUED BY THE 4TH RESPONDENT