AI Structured Summary
Not yet generated for this judgment
Judgment
Antony Dominic, J.—Heard the learned counsel for the petitioner Society and the learned Government Pleader appearing for the respondents. Petitioner has filed this writ petition in his capacity as Caretaker of St. Vincent''s Industrials Charitable Institutions, Convent Road, Calicut, a Charitable Society registered under the Societies Registration Act (Act XXI of 1860) established in the year 1925. It appears that the Society was a dealer under the KGST Act and had committed default in paying Rs. 6,50,833/-, being the tax due for the assessment year 1997-98. On account of the default, revenue recovery proceedings were initiated and by Ext. P4 order, 6 cents of the land belonging to the Society was attached by the respondents. Finally, the property was notified for sale by Ext. P5 sale notice. The sale was scheduled on 22/4/2003 and for want of bidders, it was adjourned to 8/5/03, when also the sale was adjourned to 28/5/03 for want of bidders. On 28/5/03 also, there was no bidders and therefore the State took over the land as bought in land for Rs. 1/-.
In the meanwhile, the appeal filed by the Society against the assessment order for the year 1997-98 was pending before the statutory appellate authority and the appellate authority by its order dated 18/8/04 allowed the appeal and directed the assessing officer to issue modified assessment order. Accordingly, the assessing officer issued Ext. P8 revised assessment order in December, 2004. In Ext. P8, the liability of the Society was reduced to Rs. 2,27,518/-. Subsequently, the respondents introduced an Amnesty Scheme and the Society submitted Ext. P13 application dated 29/6/09 for the benefit of the Amnesty Scheme. That request of the Society was rejected by Ext. P14 order stating that since the property of the Society has already been taken over as bought in land, the scheme is not applicable to the Society. It was thereupon the petitioner filed this writ petition.
The main contention raised by the learned counsel for the petitioner is that when the appeal filed by the Society against the assessment order was allowed by order dated 18/8/04, the assessment order on the basis of which recovery proceedings were initiated, resulting in the revenue recovery action, got cancelled. Therefore, according to them, the sale of the property and the order taking over the land as bought in land are illegal. Petitioner Society says that they are willing to remit the entire amount due under Ext. P8 together with the statutory interest that is payable and the respondents should be directed to re-convey the property to the Society.
On behalf of the respondents, a counter affidavit has been filed where the claim of the petitioner Society is contradicted. Admittedly, the revenue recovery proceedings resulting in the take over of 6 cents of land of the Society as bought in land were pursuant to the assessment order passed against the Society for the assessment year 1997-98, in terms of which the tax liability of the Society was Rs. 6,50,833/-. This order of assessment was set aside by the appellate authority by its order dated 18/8/2004 and the assessing officer was directed to issue a revised assessment order. It was accordingly that Ext. P8 revised assessment order was issued in December 2004 and the tax liability of the petitioner got reduced to Rs. 2,27,518/-.
In this factual background, the question that arises for consideration is what is the effect of the appellate order on the original assessment order. This issue has been considered by the Apex Court and in the judgment in Income Tax Officer, Kolar and Another Vs. Seghu Buchiah Setty, , the Apex Court has held thus:
That leaves only the case of an appellate order reducing the amount. It seems to me that it would be somewhat curious if in all other cases excepting the case of a confirmation, the appellate order destroys the original order it does not do so in the case of a reduction. An order confirming may be different, for it confirms and, therefore, does not destroy. It has, however, been said that
if subsequently the demand is modified on appeal and the amount of the tax payable is reduced, all that happens is that the liability sought to be imposed by the notice of demand, in respect of the amount by which the assessment is reduced is found to have never been a liability at all but the liability in respect of the remainder which stands unaffected by the appellate order remains" and also that "where a notice of the demand has, in fact, been issued in respect of a larger amount as determined by the assessment order, it has been issued even in respect of the smaller amount which is ultimately found to be the tax properly payable. That being so, the assessee was under an obligation to pay it by the date fixed and if he did not pay it by that date, he became a defaulter": see Ladhuram Taparia Vs. D.K. Ghose and Others, : ( Ladhuram Taparia Vs. D.K. Ghose and Others, ). With great respect I am unable to accede to this proposition and the conclusion based thereon that the default and its consequences continue even after the appellate order reducing the original assessment. How does the assessee know before the appellate order the smaller amount which he might ultimately be liable to pay? It would be curious if he did not know what he had to pay and could still have defaulted in paying it.
The order of reduction must, in my opinion, necessarily have the effect of setting aside the original order as a whole. It does not simply strike out a few of the figures appearing in the original order. That would really be a case of rectification for which provision is made in S. 35 of the Act. What an appellate order does in a case of reduction is, as in the present case, to go into all the figures and arrive afresh at the assessable income which replaces the amount of the income arrived at by the income tax Officer. Therefore it seems to me that in all cases of an appellate order reducing the assessment the original order goes and if it goes, of course the notice of demand also falls to the ground and the default based thereupon also ceases to be default anymore. Suppose the appellate order itself stated that a smaller amount of tax was payable after it had reduced the figure of the assessable income at which the income tax Officer had arrived. Indeed I cannot imagine how else it can be expressed. After such an order the original order must go for the debt being one the two cannot exist together. If that order goes, all default arising out of it must also go.
Therefore I think that on the income tax Officer''s order being revised in appeal, the default based on it and all consequential proceedings must be taken to have been superseded and fresh proceedings have to be started to realise the dues as found by revised order.
A reading of the judgment therefore shows that once the appellate order has been issued reducing the assessment, the original order goes, and if it goes, the notice of demand on the basis of which recovery proceedings were initiated also disappears. Therefore, the Society was not a defaulter, and if so, recovery proceedings and everything that was done in pursuance thereof also cannot be sustained.
This judgment of the Apex Court was followed by this Court in the judgment in WP(C) No. 10214/06. In such circumstances, the petitioner Society is entitled to succeed and the land is liable to be re-conveyed to them. However, fact remains that the Society has not so far paid the tax due under Ext. P8 revised assessment order. In such circumstances, the writ petition is disposed of with the following directions:
(1) The Society shall pay the tax due under Ext. P8 together with the statutory interest that is payable. Along with such payment, other tax liability, if any, shall also be paid by the Society.
(2) Payment shall be made before 15/3/2013.
(3) If payment is made as above, the 6 cents of land comprised in Sy. No. 11-1-52/2B of Nagaram Village shall be re-conveyed to the Society.
(4) The incidental expenses, if any, will also be borne by the Society.
(5) The process of re-conveyance shall be completed, at any rate, within 4 weeks of remittance of the tax as ordered above.