2020 (11) TMI 275 - HC - Income Tax

Refund the tax paid on admitted income - writ petitioner filed admitting the income towards capital gains - ITAT quashed the addition u/s 45(5)(b) and held that the transfer, as contemplated in Section 2(47) had happened in the year 1993-1994 and not in Assessment years 2000-2001 or 2002-2003 - as argued capital gains were assessable only in the relevant year 1993-1994 and not in 2001-2002 or 2002-2003 and hence, voluntary admission made by the assessee on wrong advice, shall be ignored - Miscellaneous Petition for clarification with regard to the retention of the capital gains wrongly admitted by the petitioner on the ground that voluntary admission is no ground to assess the same, as there is no estoppel in law HELD THAT - Assessee paid the tax which is admittedly payable. Even the assessment order is set aside, it will not have any impact on the self assessment made by the assessee. The Income Tax Appellate Tribunal has considered the addition of income under Section 45(5)(b) of the Act as incorrect and nullified it. But, the assessment order on the admitted income was not nullified. Only because, there is an observation that the relevant year of assessment is 1993-1994 in view of Section 53-A of Transfer of Property Act, it will not confer any legal right on the assessee to claim refund. Admittedly, the income is assessable to tax and it was not assessed due to the statement made by the assessee that the transfer was not complete in terms of the sale agreement. The assessee cannot blow hot and cold or approbate and reprobate that what is not paid on due date cannot be assessed at all. It is true to state that there is no estoppel against law. The chargeability is dependent on the charging section. It is not in dispute that the income of the petitioner is chargeable to tax. In other words, the assessment authority has not assessed the income which is not assessable to tax. Hence, the claim for refund of tax paid on admitted income is not sustainable. When the assessment order, which accepts the tax liability as proposed by the assessee, is intact, the consequential order refusing to rectify the defects in filing the returns on wrong advice cannot be sustained. As mandated by law, the assessee filed a self assessment and paid the tax on income assessable to tax along with interest for delayed payment, which is in conformity with the legal provision of Income Tax Act, 1961. If at all, the petitioner is aggrieved, she should have filed an appeal against the assessment order dated 25.02.2011. Apart from this, the order impugned has been passed in terms of the Office Memorandum issued in cases of claim for refund and following the ratio laid down by the Hon'ble Supreme Court in Shelly Products case 2003 (5) TMI 4 - SUPREME COURT This Court is of the opinion that tax avoidance of the income chargeable to tax is not permissible under law

Issues Involved:
1. Refusal to refund tax paid on admitted income.
2. Validity of self-assessment and voluntary admission of income.
3. Jurisdiction and maintainability of the writ petition.
4. Application of estoppel in tax law.
5. Tax avoidance vs. tax planning.
6. Impact of annulment of assessment order on self-assessment.

Issue-wise Detailed Analysis:

1. Refusal to refund tax paid on admitted income:
The petitioner sought a refund of tax paid on admitted income, arguing that the income was not assessable in the relevant year. The court noted that the petitioner had filed returns for the year ended 31st March 2002, admitting income towards capital gains and interest based on the advice of an auditor. The Assessing Officer added the sale consideration of ?4.30 Crores in addition to ?62,00,000/- received by the petitioner and passed an assessment order on 31.10.2006. The Income Tax Appellate Tribunal quashed the addition under Section 45(5)(b) of the Income Tax Act, 1961, holding that the transfer occurred in the year ended 31.03.1993, relevant to the assessment year 1993-1994. The petitioner argued that since no tax was payable in 2002-2003, the amount remitted should be refunded.

2. Validity of self-assessment and voluntary admission of income:
The court emphasized that the petitioner had voluntarily admitted the income and paid the tax with interest. According to the Income Tax Act, payment of tax, even if belated, attracts interest. The court cited the Supreme Court's observation in Commissioner of Income Tax, Bhopal Vs. Shelly Products, stating that the liability to pay income tax does not depend on the assessment being made by the Income-tax Officer but arises as soon as the rates are prescribed by legislation. The court held that the self-assessment made by the petitioner remains valid and legal, and the tax paid on admitted income cannot be refunded.

3. Jurisdiction and maintainability of the writ petition:
The respondent argued that the main order of assessment had become final as there was no challenge to it, making the writ petition challenging the consequential order not maintainable. The court agreed, stating that the petitioner, having submitted to the jurisdiction of the assessing authority, could not later claim the order was without jurisdiction. The court held that since an appeal remedy was available, the writ petition was not maintainable.

4. Application of estoppel in tax law:
The petitioner contended that there is no estoppel against law and that voluntary admission of income on wrong advice should be ignored. The court referred to the judgment in Sail DSP Vr Employees Association Vs. Union Of India, which held that what is not otherwise taxable cannot become taxable because of admission by the assessee. However, the court noted that the income in question was chargeable to tax and that the assessment authority had not assessed income that was not assessable to tax.

5. Tax avoidance vs. tax planning:
The court distinguished between tax planning and tax avoidance, citing the Supreme Court's judgment in M/s.McDowell and Company Limited Vs. Commercial Tax Officer. It held that while taxpayers are entitled to plan to pay lesser tax or no tax where the law permits, evading tax under pretexts is illegal. The court emphasized that the income admitted by the petitioner was assessable to tax and that the petitioner could not avoid tax by claiming it was wrongly admitted.

6. Impact of annulment of assessment order on self-assessment:
The court observed that the annulment of the assessment order by the Income Tax Appellate Tribunal did not impact the self-assessment made by the petitioner. The Tribunal had nullified the addition of income under Section 45(5)(b) of the Act but did not nullify the assessment order on the admitted income. The court held that the petitioner could not claim a refund based on the observation that the relevant year of assessment was 1993-1994, as the income was chargeable to tax.

Conclusion:
The court dismissed the writ petition, holding that tax avoidance of income chargeable to tax is not permissible under law. The court concluded that the case was covered by the Supreme Court's judgment in Shelly Products, and the petitioner was not entitled to the refund sought.

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