Approval By Additional Commissioner Valid As “Joint Commissioner” Under Income Tax Act: Kerala High Court

The Kerala High Court, on 8 April, held that approval granted by an Additional Commissioner of Income Tax satisfies the statutory requirement under Section 274(2) of the Income Tax Act for imposing penalties. It clarified that the term “Joint Commissioner” includes an Additional Commissioner under Section 2(28C) of the Act.

Justice Ziyad Rahman A.A. dismissed a batch of writ petitions filed by Service Cooperative Bank Limited, holding that the challenge failed on the limited question of the validity of approval, without expressing any opinion on the merits of the penalty proceedings, and left the petitioner free to pursue statutory remedies.

The Court observed:

“the crucial aspect to be noticed is that, merely because of the reason that the aforesaid provisions specifically refer to the authorities by naming the “Joint Commissioner or the Additional Commissioner”, it cannot be concluded that the definition of the expression “Joint Commissioner” as made in Section 2(28C) would be applicable only in cases covered by the aforesaid provisions.”

The petitioner challenged penalty proceedings under Sections 271D and 271E for alleged violations of Sections 269SS and 269T relating to acceptance and repayment of loans and deposits. The dispute arose from search proceedings under Section 132, after which the Department completed assessments under Section 153A.

While appeals against the assessment orders remained pending, the Department initiated penalty proceedings and imposed penalties after obtaining approval from the Additional Commissioner of Income Tax.

The petitioner argued that Section 274(2) requires prior approval of the “Joint Commissioner” where penalties exceed prescribed limits. It contended that approval by an Additional Commissioner does not satisfy this requirement, as the statute distinguishes between the two authorities.

The Revenue relied on Section 2(28C), which defines “Joint Commissioner” to include an Additional Commissioner, and argued that this inclusive definition applies throughout the Act unless expressly excluded.

The High Court accepted the Revenue's stand and applied the principle of harmonious construction, holding that the Act must be read as a whole so that no provision becomes redundant. It noted that courts must avoid an interpretation that renders statutory definitions ineffective or unnecessary.

The Court also relied on Supreme Court precedents, including Sonia Bhatia v. State of U.P., Visitor, AMU v. K.S. Misra, CIT v. Hindustan Bulk Carriers, and Anwar Hasan Khan v. Mohd. Shafi, to reinforce that every statutory word must be given meaning and that provisions must be interpreted to make the statute workable.

It further noted that Section 274(2) does not exclude the Additional Commissioner and that, in light of Section 2(28C), the authority can exercise powers of the Joint Commissioner. It also referred to the statutory monetary thresholds under Section 274(2), namely penalties exceeding Rs. 10,000 (Income-tax Officer) and Rs. 20,000 (Assistant/Deputy Commissioner), for which approval is required.

The Court additionally noted the legislative framework introduced through the provisos to Sections 271D and 271E, under which penalties imposed on or after 1 April 2025 are to be imposed by the Assessing Officer, subject to Section 274(2) approval requirements.

Based on this interpretation, the Bench upheld the validity of penalty orders passed after approval by the Additional Commissioner and rejected the challenge on jurisdictional grounds.

Accordingly, the High Court dismissed the petitions.

For Petitioner: Advocates, Aravind Sreekumar, Saritha K.S., Aravind Rajagopalan Menon, Alex T. Thevarcad and Anil D. Nair

For Respondent: Jose Joseph, SC