2018 (9) TMI 1412 - HC - Income Tax

PIL - Vide present petition which is filed in public interest, the petitioner seeks direction for an enquiry to be caused by the Enforcement Directorate and the Central Bureau of Investigation in respect of alleged undeclared income - offence under the prevention of corruption act against respondent - Held that - Since income, said to be the unaccounted by the present petitioner, has been subjected to judicial review and there are orders in favour of the assessee, we fail to appreciate the contention raised by the petitioner of its being earned through corrupt practice. The petitioner besides being a practicing lawyer of the court is an ex-MLA, and on enquiry he reveals of belonging to a national political party which does not rule out the fact that it is to gain political mileage which is implicit, rather any public interest. The present Public Interest Litigation is not a genuine Public Interest Litigation, but a politically motivated litigation, which deserves to be dismissed with exemplary cost, we intend to impose rupees one lakh cost so that the petitioner is deterred from filing such frivolous litigation. However, we are assured by the petitioner that in future he will be careful in not indulging in frivolous litigation.

Issues Involved:
1. Direction for an enquiry by the Enforcement Directorate and the Central Bureau of Investigation regarding alleged undeclared income.
2. Registration of an offence under the Prevention of Corruption Act against specific respondents.
3. Validity of the assessment order and additions made by the Income Tax Department.
4. Jurisdiction and exercise of powers under Section 263 of the Income Tax Act by the Commissioner.
5. Distinction between "unaccounted income" and "unaccounted investment".
6. Legitimacy of the Public Interest Litigation (PIL).

Detailed Analysis:

1. Direction for an enquiry by the Enforcement Directorate and the Central Bureau of Investigation regarding alleged undeclared income:
The petitioner, a practicing lawyer and social worker, sought an enquiry by the Enforcement Directorate and the Central Bureau of Investigation into an alleged undeclared income of ?158,157,040 discovered by the Income Tax Department for the assessment year 2008. The genesis of this issue lies in the assessment order dated 30.12.2011, passed under Section 143(3) of the Income Tax Act, 1961, which added significant amounts to the income of the assessee based on various pieces of evidence.

2. Registration of an offence under the Prevention of Corruption Act against specific respondents:
The petitioner also sought directions for the registration of an offence under the Prevention of Corruption Act against respondents No. 6 to 9. However, the court noted that the income alleged to be "unaccounted" had already been subjected to judicial review, with orders favoring the assessee. The court failed to appreciate the petitioner's contention of the income being earned through corrupt practices.

3. Validity of the assessment order and additions made by the Income Tax Department:
The assessment order dated 30.12.2011 included additions based on proceeds received from Nagarjuna Construction Company and Simplex Infrastructure Limited. These additions were initially set aside by the Commissioner of Income Tax (Appeal) on 12.12.2012. The Commissioner, however, exercised revisional powers under Section 263 of the Income Tax Act, holding the assessment order as erroneous and prejudicial to the interest of revenue, and directed a reassessment.

4. Jurisdiction and exercise of powers under Section 263 of the Income Tax Act by the Commissioner:
The Commissioner of Income Tax invoked Section 263, arguing that the assessment order failed to account for unaccounted illegal gratification received from Nagarjuna Construction Company Ltd. and Simplex Infrastructure Ltd. The Income Tax Appellate Tribunal (ITAT) later set aside this order, stating that the Commissioner’s suggestion constituted a change of opinion, which was beyond the purview of Section 263. The Tribunal upheld the Assessing Officer's approach as reasonable and practical.

5. Distinction between "unaccounted income" and "unaccounted investment":
The court examined whether there was a perceptible distinction between "unaccounted income" and "unaccounted investment". The Tribunal concluded that the Assessing Officer had appropriately taxed the unaccounted income as unaccounted investment. The Division Bench upheld the Tribunal's verdict, stating that merely because different opinions could be formed, interference under Section 263 was not warranted unless the opinion was perverse or based on no evidence.

6. Legitimacy of the Public Interest Litigation (PIL):
The court scrutinized the legitimacy of the PIL filed by the petitioner. Citing precedents, the court emphasized that PILs should not be used for personal gain, private profit, or political motives. The court found the present PIL to be politically motivated and not a genuine public interest litigation. Consequently, the petition was dismissed, with the court refraining from imposing exemplary costs based on the petitioner's assurance of not indulging in frivolous litigation in the future.

Conclusion:
The court dismissed the petition, highlighting that the issues raised had already been adjudicated, and the PIL was deemed politically motivated rather than genuinely in the public interest. The exercise of power under Section 263 by the Commissioner was found unsustainable, and the Tribunal's decision was upheld.

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