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2022 Supreme(Online)(MAD) 17593
IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved on:11.08.2022 Pronounced on: 01.09.2022 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH W.P.Nos.12692, 14810, 14829, 14833, 15384, 19632, 19634, 19637, 14515, 14592, 14897, 14979, 14993, 15082, 15084, 15268, 15276, 15281, 15289, 15304, 15317, 15365, 15386, 15388, 15448, 15452, 15455, 15458, 15721 &
15079, 15995 of 2022 and WMP.Nos.14469, 14470, 14472, 14545, 14596, 14597, 14598, 18952, 18955, 18957, 14035, 14036, 14038, 14040, 14042, 14104, 14106, 14108, 14200, 14203, 14205, 14215, 14216, 14217, 14295, 14296, 14298, 14299, 14300, 14301, 14433, 14436, 14437, 14450, 14451, 14452, 14455, 14456, 14457, 14462, 14465, 14466, 14482, 14483, 14484, 14516, 14517, 14518, 14536, 14537, 14538, 14539, 14540, 14541, 14543, 14544, 14601, 14602, 14603, 14606, 14608, 14609, 14612, 14613, 14614, 12143, 14978, 14980, 15315, 15318, 15320, 18956, 18942, 18944, 18946, 18948, 18949, 19568, 14007, 14008, 14033, 12146, 12147, 13716, 13717, 13718, 13788, 13789, 13790, 14289, 14290, 14006 & 14976 of 2022 WP.No.12692 of 2022:
Dr.Mathew Cherian, C-5, Parsn’s Royal Bungalow, Sesh Nestle, Nanjundapuram, Coimbatore – 641 036. ... Petitioner Vs The Assistant Commissioner of Income Tax, Non Corporate Circle-4, Main Building, 63, Race Course Road, Coimbatore – 641 018. ... Respondent PRAYER: Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorari, to call for the records of the Respondent in PAN: AAMPC8266C and quash the impugned Order under section 148A(d) of the Income Tax Act, 1961, dated 12.04.2022 in DIN & Notice No:ITBA/AST/F/148A/2022-23/1042709932(1), and the consequential notice u/s.148 of the Act dated 12.04.2022 in DIN & Notice No:ITBA/AST/S/148_1/2022-23/1-1042714624(1) for the Assessment year
2018-19.
(In all WPs)
For Petitioners : Mr.AL.Somayaji, Senior Counsel for Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan (In all WPs except WP.No.15995 of 2022)
For Respondents : Mr.A.P.Srinivas, Senior Standing Counsel and Mr.ANR.Jayaprathap, Junior Standing Counsel (In WP.No.15995 of 2022)
For Respondent : Mrs.HemaMuralikrishnan, Senior Standing Counsel
C O M M O N O R D E R
This batch of Writ Petitions has been filed at the instance of several doctors specializing in different areas of medicine, who challenge proceedings for re-assessment in terms of Section 147 and 148 of the Income Tax Act, 1961 (in short ‘Act’).
2. There was a survey in Kovai Medical Centre and Hospital (in short KMCH or hospital) by the officials of the Income Tax Department, on 22.11.2021. In the course of the survey, various documents were found and seized that, according to the respondents, are incriminating as they point to the existence of an employer –employee relationship inter se the parties.
3. The documents include ‘employee confidentiality agreement’, ‘revised guidelines for practice of medicine at KMCH’ and joining reports, all of which lead the officers to suspect that the doctors were employed with the hospital and were not visiting consultants.
4. On the basis of the above documents and consequent inferences, the authorities have come to a conclusion that (i) employer-employee relationship is established (ii) petitioners are to be construed as employees and not full time/visiting consultants and (iii) the income returned by them has to be assessed under the head ‘salary’ and not ‘professional income’.
5. The impugned orders relate to assessment year (in short ‘AY’) 2018-
19. A show cause notice was issued on various dates under clause (b) of Section 148A of the Income Tax Act, 1961. The notice was accompanied by an annexure setting out the reasons on the basis of which the Department was proposing to initiate the proceedings.
6. For purposes of this batch, the facts and averments in W.P.No.14515 of 2022 are taken to be representative of all matters in the batch. The reasons set out in the annexure to notice dated 23.03.2022 read as follows:
‘A survey u/s 133A (2A) of the Income-Tax Act, 1961 was conducted in the case of M/s. Kovai Medical Centre & Hospital on 22.11.2021. During the course of survey conducted in the premises of M/s.KMCH, incriminating documents indicating employer-employee relationship between you and M/s.KMCH found were analysed. Since the employer-employee relationship between you and M/s. KMCH was established, the income received ought to have been treated as "salary income instead of "Professional income".
However, it was ascertained from your ITR filed for the AY 2018-19 that the amount received from M/s. KMCH was treated as "professional income" and reduced various expenditures therefrom. Your Form No. 26AS relevant to the AY 2018-19 indicated that the tax was deducted at source on the income received from M/s. KMCH u/s 194J of the Act, treating the income as "fees for professional or technical services". In view of the above facts, the income received from M/s.
KMCH admitted as "professional income is not acceptable. You are therefore requested to state as to why the income received from M/s. KMCH should not be treated as "salary income".’
7. The noticee was called upon to file a reply on or before 08.04.2022. A corrigendum was issued on the heels of the aforesaid notice, intimating the assessee that reply was to be received on or before 29.03.2022 and not 08.04.2022. A reply came to be filed by the petitioners within the time stipulated, objecting to the proposal to treat the income returned under the head ‘salary’ and not ‘professional income’.
8. The objections are two-fold, on the ground of technical reasons as well as on the merits of the proposal. In respect of the former, the petitioners questioned the time granted for reply, as also the basis for the issuance of notice. Section 148 requires, as a pre-condition to its issuance, that the Assessing Officer possesses ‘information’, that would justify the initiation of proceedings for re-assessment. An objection was taken on the ground that the ingredients of ‘information’ as set out in Explanation (1) to Section 148 that defines the term, have not been satisfied in the instant cases.
9. On merits, the petitioners submitted t
