Gopalakrishnan Rajkumar & Anr v. The Principal Commissioner of Income-tax, Chennai-8 & others

Case snapshot

Sections / provisions: 263

Questions before the Court / Tribunal

• The intention of the parliament enacting the DTVSVS being to bring a closure of disputes in respect of tax arrears the PCIT is wrong in initiating proceedings under Section 263 after the assessee filed Form-4. It would be a different situation if the assessee had not accepted with the issue of Form
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

W.P.Nos.6367 & 6374 of 2021 3. The Designated Authority under VSVS The Principal Commissioner of Income-tax, Chennai-8, Income Tax Office, BSNL Tower, 16, Greams Road, Chennai 600 006. .. Respondents in both W.Ps. Prayer in W.P.No.6367 of 2021 Petition filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorari, calling for the records in DIN & Notice No.ITBA/REV/F/REV1/2020-21/1030851642(1) dated 22.02.2021 on the file of the 1st respondent relating to the Assessment Year 2011-2012 and quash the same. Prayer in W.P.No.6374 of 2021 Petition filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorari, calling for the records in DIN & Notice No.ITBA/REV/F/REV1/2020-21/1030852445(1) dated 22.02.2021 on the file of the 1st respondent relating to the Assessment Year 2011-2012 and quash the same. Both the cases: For Petitioners : Mr.G.Baskar For Respondents : Mrs.Prabhu Mukunth Arunkumar Junior Standing Counsel. 2/28

W.P.Nos.6367 & 6374 of 2021 C O M M O N O R D E R The respective petitioners have challenged the respective impugned notices dated 22.02.2021 issued by the first respondent under Section 263 of the Income Tax Act, 1961. 2. The facts on record indicate that the petitioners, children of late K.S.Gopalakrishnan along with two other brothers/siblings namely G.Vijayakumar and G.Chinnadurai sold a property during the Financial Year 2010-2011 (Assessment Year 2011-2012) vide Sale Deed dated 29.10.2010. The sale was for a total consideration for approximately 30 Crores out of which the petitioners received a sum of Rs.3,12,50,000/- each. All the four brothers filed their returns under Section 139 of the Income Tax Act, and thereafter the assessment were sought to be reopened for each of the four brothers. 3. As far as one of the brothers namely G.Chinnadurai, a notice issued under Section 148 of the Income Tax Act, was quashed by this Court in W.P.No.28409 of 2015 vide order dated 29.08.2016 in the case of G.Chinnadurai Vs. Income Tax Officer, Income-Tax Department 3/28

W.P.Nos.6367 & 6374 of 2021 Non-Corporate Ward 13(2), Chennai reported in [2016] 74 taxmann.com 227. 4. Further the appeal before the Division Bench by the Income Tax Department was also dismissed vide order dated 04.04.2017 in W.A.No.1570 of 2016. As far as the other three brothers which include, the two petitioners herein, notice under Section 148 was issued to them which culminated in separate Assessment Orders dated 27.12.2018. Aggrieved by the Assessment Order, each of the three brothers (other than G.Chinnadurai), preferred Appeal before the CIT Appeals under Section 246A of the Income Tax Act, 1961. 5. During the pendency of the appeal one of the petitioners' brother G.Vijaykumar, received a similar notice under Section 263 of the Income Tax Act, 1961. An order was passed by the jurisdictional Commissioner of Income Tax. By the aforesaid order dated 05.07.2021, the proceeding initiated against the said brother came to be dropped by the jurisdictional Commissioner of Income Tax. 4/28

W.P.Nos.6367 & 6374 of 2021 6. As far as the petitioners are concerned, though the petitioners have challenged the impugned notices issued to the petitioners on 22.02.2021, the petitioners were directed to approach the jurisdictional Principal Commissioner of Income Tax/1st respondent vide order dated 09.09.2021 of this High Court in these writ petitions. Pursuant to which, now the impugned orders have been passed by the 1st respondent in respective writ petitions where by a different views has taken by the Principal Commissioner in the case of the petitioners other brother namely G.Vijaykumar vide order dated 05.07.2021. 7. The challenge to the impugned notices issued under Section 263 of the Income Tax Act, 1961 by the petitioner is primarily on the ground that these notices are without jurisdiction in the light of the fact that the petitioners opted to settle their cases under the direct tax/Vivad Se Vishwas Scheme under the Direct Tax Vivad Se Vishwas Act, 2020 read with Vivad Se Vishwas Rule 2020. 8. It is submitted that during the pendency of the appeals before the Commissioner (Appeals) against the orders passed on 27.12.2018. The 5/28

W.P.Nos.6367 & 6374 of 2021 petitioners filed Form 1 and Form 2 as per the aforesaid scheme pursuant to which the 3rd respondent who is also the 1st respondent, but acting in the capacity of the Designated Authority also issued Form 3 to the respective petitioners on 10.12.2020 whereby it was quantified that the petitioners are entitled for a refund of the amount after adjusting the amount already paid by the petitioner during the course of the Assessment proceedings. 9. As far as the petitioner in W.P.No.6367 of 2021 is concerned, Form 3 was issued by the 1st respondent in the capacity as the Designated Authority under the Vivad Se Vishwas Scheme wherein it has been stated that the petitioner is entitled for a refund of sum of Rs.2,04,761/- whereas in the case of writ petitioner in W.P.No.6374 of 2021, petitioner is entitled for refund of Rs.2,04,768/-. 10. The learned counsel for the petitioners submits that in the light of the subsequent developments the petitioners rights under the appeal as also the case for being settled under the Vivad Se Vishwas Scheme under the Vivad Se Vishwas Act, 2020 cannot be compromised. 6/28

Appellant / petitioner / assessee submissions

W.P.Nos.6367 & 6374 of 2021 11. The learned counsel for the petitioners has relied on few decisions of the Hon'ble Supreme Court and that of the Hon'ble Gujarat High Court in the following cases:- “1.Radha Krishnan Industries Vs. State of Himachal Pradesh and Others [2021] SCC Online SC 334; 2.Pannalal Binjraj Vs. Union of India [1957] 31 ITR 565 (SC) and 3.Taiyabji Lukmanji Vs. Commissioner of Income Tax [1981] 131 ITR 643 (Guj).” 12. It is submitted that the Hon'ble Supreme Court in the case of Radhakrishnan Industries Vs. State of Himachal Pradesh and others has observed that the rule of law in a constitutional frame work is fulfilled when law is substantively fair, procedurally fair and applied in a fair manner. Each of these three components will need to be addressed in the course of interpreting the tax statute in the aforesaid case. 13. The learned counsel for the petitioners has drawn attention in another passage from the decision of the Hon'ble Supreme Court in Pannalal Binjraj Vs. Union of India referred to supra wherein the Hon'ble Supreme Court has observed as follows: - 7/28

14. Finally, the learned counsel for the petitioners referred to a passage from the decision of the Hon'ble Gujarat High Court and sought to persuade this court that principles of promissory estoppel also will apply. Relevant passage of the Hon'ble Division Bench of the Gujarat High Court is reproduced below:- ''Whether or not it amounted to promissory estoppel and created a legal right apart, the question was required to be examined from the standpoint of the credibility of the department. Would it not cause greated harm to the department itself if assessees who respond to its appeal and desire to cleanse themselves of the past sins are deterred from doing so?

W.P.Nos.6367 & 6374 of 2021 or special leave petition against such order has not expired as on that date, the amount of tax payable by the appellant after giving effect to the order so passed”. 23. It is submitted that the assessment which is sought to be revised under Section 263 of the Income Tax Act, 1961 was made by the Assessing Officer without making proper enquiries or verifications. It is submitted that it should have been treated under the head “income from other sources”. The respondents have considered the Assessment Order dated 27.12.2018 to be prejudicial to the interest of the revenue and therefore notice issued under Section 263 was within the jurisdiction under the Income Tax Act, 1961. 24. The learned Junior Standing Counsel for the respondents has further submitted that both under Sections 148 and 263 of the Income Tax Act, 1961 an issue which is not the subject matter of such proceeding cannot be settled under the Direct Tax Vivad Se Vishwas Act, 2020. 25. By way of rejoinder, the learned counsel for the petitioners submits that the exercise undertaken by the first respondent vide order 13/28

W.P.Nos.6367 & 6374 of 2021 dated 25.09.2011, in the case of the respective petitioners was at the instance of this Court and not a voluntary act of the respondents. 26. The learned counsel for the petitioners further submits that once Form-3 was issued by the Designating Authority, the third respondent had no role as the Principal Commissioner to issue notice under Section 263 of the Income Tax Act, 1961 to the petitioners. It was without jurisdiction. It is further submitted that the intention of the Act, is evident from the Finance Minister speech of First February, 2020 wherein in para 126 it has been stated as follows:- “126. No Dispute but Trust Scheme – Vivad Se Vishwas Scheme Sir, in the past our Government has taken several measures to reduce tax litigations. In the last budget, Sabaka Vishwas Scheme was brought into reduce litigation in indirect taxes. It resulted in settling over 1,89,000 cases. Currently, there are 4,83,000 direct tax cases (Appeals), ITAT, High Court and Supreme Court. This year, I propose to bring a scheme similar to the indirect tax Sabka Vishwas for reducing litigations even in the direct taxes. Under the proposed Vivad Se Vishwas' Scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by 31st March, 14/28

Revenue / respondent submissions

W.P.Nos.6367 & 6374 of 2021 returns filed by the petitioner under Section 139 of the Income Tax, Act, 1961 was incorrect there is no question of the petitioners or their brothers claiming legitimately the benefit of Section 54F of the Income Tax Act, 1961 and therefore the respondents were well within their rights to invoke the jurisdiction under Section 263 of the Income Tax Act as the Assessment orders passed. As far as the petitioners and also their brothers on 27.02.2018 were erroneous and prejudicial to the interest of the Revenue. 17. It is submitted that the petitioners cannot have the case either settled under the Vivad Se Vishwas Scheme or can scuttle the proceedings initiated under impugned notices under Section 263 of the Income Tax Act. 18. On behalf of the respondents, the learned Junior Standing Counsel for the respondents submits that though the petitioners had attempted to settle the case under Vivad Se Viswas Act, 2020, notice was issued under Section 263 of the Income Tax Act, 1961 cannot be said to be without jurisdiction inasmuch as the scope of appeal that was pending before the Appellate Commissioner was limited. Thereafter, the 10/28

W.P.Nos.6367 & 6374 of 2021 2020. Those who avail this scheme after 31st March, 2020 will have to pay some additional amount. The scheme will remain open till 30th June, 2020. * Taxpayers in whose cases appeals are pending at any level can benefit from this scheme. * I hope that taxpayers will make use of this opportunity to get relief from vexatious litigation process.” 27. I have considered the arguments advanced by the learned counsel for the petitioners and the learned Junior Standing Counsel for the respondents. 28. The petitioners herein have challenged the Impugned Order dated 22.02.2021 passed by the first respondent under Section 263 of the Income Tax Act, 1961. The petitioners have received proceeds of sale of land of a partnership firm of which the petitioners' father one late K.S.Gopalakrishnan was a partner. 29. The petitioners have each received approximately a sum of Rs.3.12 crores as their share. Under these circumstances, the petitioners have filed returns under Section 139 of the Income Tax Act, 1961 and 15/28

Court / Tribunal analysis and reasoning

W.P.Nos.6367 & 6374 of 2021 addressing themselves to it and answering the same in the manner considered right by them on policy and principle. We are, therefore, not inclined to answer the question referred to us. In our opinion, the proper course to adopt is to remit the matter to the Tribunal for deciding the question of levying penalty afresh in the light of the dimension regarding the instructions contained in the advertisement issued by the Board referred to above''. 15. Opposing the prayer in these writ petitions, the learned Junioir Standing Counsel for the respondents submits that the petitioners have filed the writ petitions against the notices issued under Section 263 of the Income Tax Act, 1961 and therefore these writ petitions are devoid of merits and are liable to be dismissed. 16. The learned Junior Standing Counsel for the respondents further submits that the petitioners were not the partners in the firm named M/s.Karpagam Studios. The petitioners father and few others were the partners. It is therefore submitted that the proceeds from the sale were distributed among the 4 brothers. It is submitted that income from the sale cannot be treated as a long term capital gain and ought to have been assessed as income from other sources. It is therefore submitted that the 9/28

W.P.Nos.6367 & 6374 of 2021 Thereafter, the Impugned Notice for revising the assessment orders dated 27.12.2018 have been issued to the respective petitioners. 36. In the aforesaid notice, it has been stated that the amounts received cannot be treated as a capital gains, on account of transfer of long term capital asset which was in the name of M/s.Karpagam Studios. The notice indicates that the petitioners could not have claimed deduction under Section 54(F) of the Act. It has also stated that the date of completion as per the completion certificate of CMDA falls after three years specified under Section 54(F) of the Act. 37. Therefore, under Section 54(F) was to be withdrawn and the gross receipt was to be treated as an income from other source. 38. The respective petitioners have also replied to the same to their Chartered Accountant on 26.02.2021 stating that the Impugned Notice under Section 263 of the Income Tax Act, 1961 was without jurisdiction inasmuch as the petitioners have settled the case under the Direct Tax Vivad Se Vishwas Act, 2020. 20/28

W.P.Nos.6367 & 6374 of 2021 39. The question therefore that arises for consideration is whether the impugned proceedings initiated after the petitioners opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020 are sustainable or not? 40. The expression disputed tax has been denied in Section 27 of the Direct Tax Vivad Se Vishwas Act, 2020 reads as under: ( j) “disputed tax”, in relation to an assessment year or financial year, as the case may be, means the income-tax, including surcharge and cess (hereafter in this clause referred to as the amount of tax) payable by the appellant under the provisions of the Income-tax Act, 1961, as computed hereunder:— (A) in a case where any appeal, writ petition or special leave petition is pending before the appellate forum as on the specified date, the amount of tax that is payable by the appellant if such appeal or writ petition or special leave petition was to be decided against him; (B) in a case where an order in an appeal or in writ petition has been passed by the appellate forum on or before the specified date, and the time for filing appeal or special leave petition against such order has not expired as on that date, the amount of tax payable by the appellant after giving effect to the order so passed; 21/28

W.P.Nos.6367 & 6374 of 2021 The Government intended to reduce the litigation, so that the taxpayers can buy peace with the department. The aforesaid scheme was to be implemented on 30.06.2020. 48. The taxpayers whose appeals were pending at any level were entitled to avail benefit of the scheme. Therefore, there is no justification in proceeding further with the impugned proceedings initiated by the first respondent under Section 263 of the Income Tax Act, 1961. 49. Therefore, I am inclined to allow these writ petitions. Accordingly these writ petitions are allowed. No costs. Consequently, connected miscellaneous petitions are closed. 22.04.2022 Index : Yes/No Internet : Yes/No rgm/kkd 26/28

Operative decision and relief

The operative relief must be read from the final paragraphs of the complete packaged judgment.

Ratio and legal principle

The narrow proposition associated with Gopalakrishnan Rajkumar & Anr v. The Principal Commissioner of Income-tax, Chennai-8 & others concerns the intention of the parliament enacting the dtvsvs being to bring a closure of disputes in respect of tax arrears the pcit is wrong in initiating proceedings under section 263 after the assessee filed form-4. it would be a different situation if the assessee had not accepted with the issue of form The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in W.P.Nos.6367 & 6374 of 2021.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Disposed / relief as recorded” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: The intention of the parliament enacting the DTVSVS being to bring a closure of disputes in respect of tax arrears the PCIT is wrong in initiating proceedings under Section 263 after the assessee filed Form-4. It would be a different situation if the assessee had not accepted with the issue of Form Its practical value lies in the way the Madras High Court connected the governing provisions—263—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 263 and the decision date 2022-04-22; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Gopalakrishnan Rajkumar & Anr v. The Principal Commissioner of Income-tax, Chennai-8 & others, the proceeding is W.P.Nos.6367 & 6374 of 2021, and the decision is dated 2022-04-22. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as Hon'ble Mr. Justice C. Saravanan. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 263. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Disposed / relief as recorded. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 263 — apply the exact version considered in the judgment.

Case network

• Shri Lawrence Rebello v. ITO — Indore · Disposed / relief as recorded
• Chennai Port Authority v. NFAC — Madras High Court · Quashed / set aside
• Dadha Pharma LLP v. DCIT — Madras High Court · Quashed / set aside
• Mark Studio India Pvt. Ltd. v. ITO — Madras High Court · Operative order controls

Related Finin2min resources

• Case Law Hub
• Search all 592 judgments
• Explore General Tax & Legal Principles

Full judgment and source control

Read / download packaged judgment record

Source class: OFFICIAL_PRIMARY_SEARCH_PENDING · Repository status: PUBLISH_READY