2025 (2) TMI 195 - HC - Income Tax

Circular sought to withhold refunds due to taxpayer - applicability and interpretation of Section 139AA - HELD THAT -Considering that the vires of Section 139AA of the said Act is already upheld and the impugned Circular only seeks to implement Section 139AA we decline any interim relief as prayed for by the Petitioner. Petitioner had instituted a petition under Article 32 of the Constitution of India before the Hon ble Supreme Court raising issues identical to those raised in the present petition. The Hon ble Supreme Court dismissed this petition by order dated 10 November 2023. The order does not grant the Petitioner any liberty to file a fresh petition. Petitioner based on instructions from the Petitioner who is present in Court states that the Rule may be disposed of regarding the Securities Exchange Board of India (Respondent No. 2) and Wellworth Share Stock Broking Ltd. (Respondent No. 5) as the Petitioner s demat account has been defrozen. The Petitioner is now permitted to operate it. Accordingly at the request of the learned counsel for the Petitioner we dispose of the Rule qua Respondent Nos. 2 and 5.

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether the Circular dated 30 March 2022, which sought to withhold refunds due to taxpayers like the Petitioner, was illegal, arbitrary, and unconstitutional. Additionally, the Court considered the applicability and interpretation of Section 139AA of the Income Tax Act, 1961, in relation to the Circular. The Court also evaluated whether the Petitioner was entitled to interim relief against the enforcement of the Circular.

ISSUE-WISE DETAILED ANALYSIS

1. Legality and Constitutionality of the Circular Dated 30 March 2022

- Relevant Legal Framework and Precedents: The Circular in question was issued based on Section 139AA of the Income Tax Act, 1961. The constitutional validity of Section 139AA had been previously upheld by the Supreme Court in the cases of Binoy Viswam vs. Union of India & Ors. and K. S. Puttaswamy (Aadhaar-5J) vs. Union of India.

- Court's Interpretation and Reasoning: The Court noted that the Petitioner had not challenged the constitutional validity of Section 139AA itself but rather the Circular implementing it. The Court observed that the Supreme Court had already upheld the constitutional validity of both Section 139AA and the Aadhaar scheme.

- Key Evidence and Findings: The Court found that the Circular was a mere implementation of Section 139AA, which had already been upheld as constitutional. The attempt to distinguish the present case from the precedent set in Shreya Sen vs. Union of India was not accepted by the Court.

- Application of Law to Facts: The Court applied the precedent from Binoy Viswam and K. S. Puttaswamy to conclude that the Circular was not unconstitutional, as it was based on a provision already deemed valid.

- Treatment of Competing Arguments: The Petitioner argued that the facts of the present case were distinguishable because the Petitioner had not obtained an Aadhaar card, unlike in Shreya Sen. The Court rejected this distinction, emphasizing the consistent application of Section 139AA.

- Conclusions: The Court declined to grant interim relief to the Petitioner, as the Circular was a valid implementation of Section 139AA.

2. Maintainability and Procedural Aspects

- Relevant Legal Framework: The Petitioner had previously filed a petition under Article 32 of the Constitution before the Supreme Court, which was dismissed without granting liberty to file a fresh petition.

- Court's Interpretation and Reasoning: The Court noted the dismissal of the previous petition by the Supreme Court and acknowledged that the current petition raised identical issues.

- Conclusions: The Court kept the issue of maintainability open, indicating that it might be addressed in further proceedings.

SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: "Considering that the vires of Section 139AA of the said Act is already upheld and the impugned Circular only seeks to implement Section 139AA, we decline any interim relief as prayed for by the Petitioner."

- Core Principles Established: The Court reaffirmed the principle that a statutory provision upheld as constitutional by the Supreme Court cannot be indirectly challenged by contesting its implementing Circular.

- Final Determinations on Each Issue: The Court denied interim relief regarding the Circular and disposed of the Rule concerning Respondent Nos. 2 and 5, as the Petitioner's demat account had been defrozen. The question of maintainability remains open for future consideration.

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