Case Law Details
HSBC Holding PLC Vs DCIT (Telangana High Court)
Telangana High Court held that writ jurisdiction under Article 226 of the Constitution of India not invocable as adequate and effective alternative remedy under Section 144C of the Act by way of filing objections before the Dispute Resolution panel available to the petitioner.
Facts- By filing this petition under Article 226 of the Constitution of India, petitioner has prayed for quashing of Notice issued by the Additional Deputy Commissioner of Income Tax (International Taxation) – I, Hyderabad u/s. 148 of the Income Tax Act, 1961; notice issued by the Deputy Commissioner of Income Tax-I, International Taxation, Hyderabad u/s. 142(1) of the Act; and order passed by the Deputy Commissioner of Income Tax-I, International Taxation, Hyderabad.
Conclusion- Section 144C was inserted in the Act by the Finance (No.2) Act, 2009 with retrospective effect from 01.04.2009. It provides for and deals with reference to Dispute Resolution Panel. Petitioner has an adequate and effective alternative remedy under Section 144C of the Act by way of filing objections before the Dispute Resolution panel.
Held that the present is not a fit case for invoking the writ jurisdiction under Article 226 of the Constitution of India and interdict the reassessment proceedings without allowing it to be proceeded as per procedure laid down under the law. However, since we have refused to entertain the writ petition on the point of statutory remedy available to the petitioner, we refrain from expressing any opinion on merit. Therefore, any observations made while coming to the aforesaid conclusion are only in the context of the present decision. Accordingly, all contentions are kept open.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Heard Mr. Niraj Seth, learned counsel for the petitioner and Ms. K.Mamata Choudary, learned Senior Standing Counsel, Income Tax Department for the respondents.
2. By filing this petition under Article 226 of the Constitution of India, petitioner has prayed for quashing of the following:
(1) Notice dated 27.03.2018 issued by the Additional Deputy Commissioner of Income Tax (International Taxation) – I, Hyderabad under Section 148 of the Income Tax Act, 1961 (briefly, ‘the Act’ hereinafter) for the assessment year 2011-12 (Annexure P-17);
(2) Notice dated 24.10.2018 issued by the Deputy Commissioner of Income Tax-I, International Taxation, Hyderabad under Section 142(1) of the Act (Annexure P-21); and
(3) Order dated 17.11.2018 passed by the Deputy Commissioner of Income Tax-I, International Taxation, Hyderabad (Annexure P-23).
3. By the first impugned notice dated 27.03.2018, Additional Deputy Commissioner of Income Tax (International Taxation) informed the petitioner that he had reasons to believe that its income chargeable to tax for the assessment year 2011-12 has escaped assessment within the meaning of Section 147 of the Act and therefore, he proposed to assess/reassess the income of the petitioner for the said assessment year. For this purpose, petitioner was called upon to file a return of income in the prescribed form for the said assessment year. It was mentioned in the said notice issued under Section 148 of the Act that the same was being issued after obtaining necessary satisfaction of the Commissioner of Income Tax (International Taxation and Transfer Pricing), Hyderabad.
4. The second impugned notice dated 24.10.2018 has been issued by the Deputy Commissioner of Income Tax–I, International Taxation, i.e., first respondent under Section 142(1) of the Act, whereby petitioner has been called upon to furnish the information/details as well as documents in connection with the assessment proceedings for the assessment year 2011-12.
5. In response to the impugned notice dated 27.03.2018 issued under Section 148 of the Act, petitioner had filed return of income on 17.04.2018 and vide its letter dated 18.04.2018 requested first respondent to provide the reasons recorded for reopening the assessment proceeding which were provided to the petitioner on 26.04.2018 following the guidelines laid down by the Supreme Court in GKN Drive Shafts (India) Limited v. ITO1. Thereafter petitioner filed objections on 02.08.2018 and 05.11.2018. By the impugned order dated 17.11.2018, first respondent rejected the objections raised by the petitioner.
6. The aforesaid challenge has been made on the following factual matrix. Petitioner, which is represented by its authorised power of attorney holder, is a company incorporated in the United Kingdom (UK) and is a resident of UK for the purpose of India UK Double Tax Avoidance Agreement. It is a non-resident under the Act.
7. Pursuant to notice dated 21.11.2012 issued by the first respondent, petitioner filed return of income for the assessment year 2011-12 on 28.03.2013 declaring income of Rs.36.35 crores (approximately) and claimed refund of Rs.4.05 crores (approximately) pursuant to deduction of tax at source of Rs.9.51 crores.
7.1 First respondent issued notice dated 21.03.2014 calling upon the petitioner to show cause why penalty under Sections 276CC and/or 276C(2) of the Act should not be levied on the petitioner for failure to file return for the said assessment year.
8. Responding to the said notice, petitioner explained to the first respondent vide letter dated 04.04.2014 that the only income earned by the petitioner was from its group companies, namely HSBC Electronic Data Processing (India) Private Limited and HSBC Software Development (India) Private Limited in the form of fees for technical services under agreements with the said two companies. The tax deducted at source from the said two companies from the payments made to the petitioner was much more than what was required to be paid under the Act.
9. According to the petitioner, no further proceedings took place thereafter i.e., after the petitioner’s response dated 04.04.2014 which led the petitioner to believe that its contentions were accepted by the first respondent.
10. However, petitioner was served with a notice dated 12.11.2014 issued by the first respondent under Section 148 of the Act, in response to which, petitioner informed the first respondent on 11.12.2014 that its return filed on 28.03.2013 may be treated as the return filed pursuant to the notice under Section 148 of the Act. Petitioner also sought for a copy of reasons recorded for initiating reassessment proceedings.
11. Petitioner was thereafter served with a notice dated 20.08.2015 under Section 142(1) of the Act seeking certain details from it. Petitioner vide letter dated 09.09.2015 once again requested first respondent for furnishing it the reasons recorded for the reassessment proceeding. In response thereto, first respondent vide letter dated 27.11.2015 furnished the petitioner the reasons recorded.
12. Petitioner submitted a detailed response to the notice under Section 142(1) of the Act on 17.12.2015 whereafter it was called for a hearing on 20.02.2016. By its letter dated 26.02.2016 petitioner explained the nature of software club charges as being allocation of costs and therefore claimed it as not chargeable to tax. After hearing the petitioner and considering its response, first respondent passed an order under Section 143(3) read with Section 147 of the Act on 31.03.2016 accepting the submissions of the petitioner.
12.1. However, because of certain mistakes which occurred in the order dated 31.03.2016 petitioner filed an application for rectification under Section 154 of the Act on 27.04.2016. First respondent thereafter issued a rectification order on 13.04.2017 carrying out the corrections pointed out by the petitioner.
13. It is stated that assessment proceedings of the petitioner for the assessment year 2013-14 were under process, at the same time when reassessment proceedings were being conducted for the assessment year 2011-12. In the course of the assessment proceedings for the assessment year 2013-14, first respondent vide his notice dated 26.11.2015 called upon the petitioner to furnish copies of the contracts/ agreements entered into between it and the said two companies. On 22.12.2015 petitioner submitted the IT Domains Cost Sharing Agreement to the first respondent. According to the petitioner, the assessing officer for the assessment year 2013-14 was the same officer who had concluded the reassessment proceedings for the assessment year 2011-12.
14. In the course of the assessment proceedings for the assessment year 2014-15, the first respondent had issued notice dated 15.06.2017 pursuant to which petitioner furnished the agreements between it and the two companies vide the letter dated 03.07.2017.
14.1 Thereafter on 27.03.2018 the impugned notice under Section 148 of the Act was issued to the petitioner seeking reopening of the assessment for the assessment year 2011-12. In compliance to the aforesaid notice, petitioner filed at Mumbai return of its income on 17.04.2018 and sought for the reasons recorded for issuing the notice under Section 148 of the Act. First respondent by letter dated 26.04.2018 supplied a copy of the reasons recorded to the petitioner, whereafter petitioner filed objections on 02.08.2018. Pending disposal of the objections, first respondent issued the impugned notice under Section 142(1) of the Act on 24.10.2018. Ultimately, by the impugned order dated 17.11.2018, first respondent disposed of the objections of the petitioner by rejecting the same.
15. Aggrieved thereby, petitioner had filed a writ petition in the High Court of Judicature at Bombay being W.P.No.3624 of 2018 as according to the petitioner, a part of the cause of action had taken place in Mumbai. Initially an interim order was passed restraining the respondents from proceeding further with the assessment. However, on 01.07.2019 Bombay High Court passed an order observing that issue of the High Court where the assessee was served with a notice of reopening of assessment getting territorial jurisdiction to entertain a writ petition challenging such notice is not free from doubt. Therefore, Bombay High Court refused to exercise jurisdiction and instead granted liberty to the petitioner to file appropriate petition before the High Court having jurisdiction over the assessing officer at Hyderabad. Interim order granted earlier was extended for a period of two weeks. It was thereafter that the present writ petition came to be filed before this Court seeking the reliefs as indicated above.
16. The challenge has been made on the ground that petitioner had disclosed fully and truly all material facts necessary for completion of assessment. Therfore, the assessing officer could not have assumed jurisdiction to reopen a concluded assessment and reassessment. The impugned notices and order have also been assailed on the ground that those are based on change of opinion of the same assessing officer. Contention of the petitioner is that reopening has taken place because of the view taken or the opinion formed by the assessing officer in the assessment proceedings of the petitioner for subsequent assessment year, namely, assessment year 2014-15. In addition to the above, the reopening has been questioned on various other grounds.
17. This Court, by order dated 20.08.2019 had issued notice and granted interim stay as prayed for by the petitioner which order has since been continued.
18. Counter affidavit has been filed by the first respondent. At the outset, a preliminary objection has been raised as to the maintainability of the writ petition. It is stated that the first respondent had passed a draft assessment order dated 06.08.2019 under Section 144 read with Section 147 of the Act which was served upon the petitioner on 07.08.2019. Against the draft assessment order, petitioner has an effective alternative remedy under Section 144C of the Act by way of filing objections before the Dispute Resolution Panel. If the petitioner remains aggrieved by any decision of the Dispute Resolution Panel, it may prefer further appeal before the Income Tax Appellate Tribunal under Section 253 of the Act.
18.1 On merit, it is contended that impugned notice dated 27.03.2018 was issued under Section 148 of the Act in compliance to the provisions of the Act. Even thereafter all the procedures have been followed, such as, furnishing of reasons to the petitioner and considering the objections made by the petitioner.
18.2 Insofar the hearing held on 20.02.2016 is concerned, it is stated that authorised representative of the petitioner as well as the chartered accountant had appeared before the first respondent. They were called upon to reconcile the differences between Form 26AS and the return of income filed for the assessment year 2011-12 along with supporting documents as this was the reason for reopening the assessment. No discussions were held regarding software club charges. However, vide letter dated 26.02.2016 petitioner had furnished a reconciliation statement and on its own volition annexed a note on software club charges claimed as reimbursements. However, with the limited information on the software club charges, first respondent could not have known or suspected that such charges were in fact in the nature of royalty payments. It was only during assessment proceedings for assessment years 2013-14 and 2014-15 that the first respondent had examined the transactions and found them to be colourable devices used to evade tax. It is further contended that order dated 31.03.2016 was passed on the basis of information made available and being an order passed pursuant to initial assessment proceedings it would be an assessment order and not a reassessment order.
18.3 First respondent has initiated proceedings under Section 147 of the Act only after recording reasons to believe that there is escapement of income and after having obtained approval from the second respondent. All procedural requirements have been duly complied with.
18.4 It is further submitted that petitioner being a nonresident foreign company had declared income of Rs.32,35,27,521.00 earned in India during assessment year 2011-12 claiming refund of Rs.4,05,88,568.00 only upon being called to file return of income vide notice dated 21.11.2012. The return was processed under Section 143(1) of the Act and was not selected for scrutiny. Subsequently, it was found that there were discrepancies in the receipts reflected as per Form 26AS and the return of income. Assessment proceedings under Section 147 of the Act were initiated. Petitioner was required to reconcile the differences. In its letter dated 26.02.2016, petitioner had claimed that amounts shown as software club charges were reimbursement of expenses. The proceedings were completed under Section 143(3) read with Section 147 of the Act vide the order dated 31.03.2016.
18.5 In its return of income for the assessment year 2011-12, petitioner did not explain the software club charges in a manner that reflected the true nature of such transactions. Petitioner’s submissions and documents furnished pursuant to notice dated 21.11.2012 were coloured in such a way that the true nature of the receipts in the hands of the petitioner was concealed and misrepresented. Petitioner sought to evade payment of tax by making royalty received to appear as reimbursement of expenditure. For the assessment year 2011-12, petitioner ought to have furnished documents, like, IT Domains Cost Sharing Agreement, Group Systems Development Agreements, OPSCO Development Agreement, Group Services Agreement etc. However, existence of such agreements came to the knowledge of the first respondent only during the assessment proceedings for the assessment year 2014-15. Upon perusing various agreements entered into by the petitioner with its associate enterprises, it was discovered that the reimbursements claimed were in fact royalty. In the absence of the requisite documents, first respondent could not have discovered such suppression despite exercising due diligence. Even though petitioner had produced the Profit and Loss Account and Balance Sheet with certain invoices for assessment proceedings for the assessment year 2011-12, those would not amount to full disclosure within the meaning of Explanation-I to Section 147 of the Act. It is also stated that sanction order was obtained from the second respondent under Section 151 of the Act upon full disclosure of petitioner’s case.
18.6. First respondent has stated that Bombay High Court had dismissed the writ petition being W.P.No.3624 of 2018 vide the order dated 01.07.2019 but allowed the interim order to continue for a further period of two weeks thereafter i.e., till 14.07.2019. After expiry of the said period and as there was no response from the petitioner to the notice under Section 142(1) of the Act dated 24.10.2018, petitioner was called upon to show cause as to why assessment should not be completed under Section 144 of the Act. In response, petitioner submitted letterdated 19.07.2019 stating that it had filed a writ petition before the High Court of Telangana. Since no order of the High Court was placed before the first respondent and as the first respondent was mandated to pass the draft assessment order under Section 153 of the Act within sixty days from the date of expiry of the interim stay, the same was passed on 06.08.2019. At the time of passing the draft assessment order, there was no stay on the proceeding.
18.7 Contending that impugned notices and order are perfectly within jurisdiction and valid, answering respondent seeks dismissal of the writ petition.
19. In its rejoinder affidavit, petitioner has reiterated the contentions made in the writ affidavit. It is stated that it was only when the first respondent had called upon the petitioner to explain the nature of software club charges, that the same were furnished by the petitioner. Details of amounts received on account of software club charges and the reasons as to why such receipts could not be charged to tax were furnished by the petitioner to the first respondent. Petitioner would not have had any occasion to furnish the details if the same were not called for by the first respondent. First respondent had specifically asked the petitioner to reconcile the receipts as per Form 26AS from which taxes were deducted at source and the income tax return wherein such receipts were not offered to tax. Complete information was made available to the first respondent as regards nature of software club charges on the basis of which the first respondent had formed an opinion that the amounts were not taxable in India and therefore, the reassessment proceedings are based on a change of opinion.
19.1 Petitioner has stated that the first respondent had time till 14.09.2019 to complete the assessment. Therefore, the draft assessment order was passed on 06.08.2019 in undue haste despite knowing the fact that the present writ petition was filed before this Court. Petitioner has asserted that the impugned notices and order are clearly without jurisdiction and therefore should be set aside and quashed.
20. We may mention that petitioner had filed additional affidavit bringing on record additional grounds and materials and also relevant case laws.
21. Seth, learned counsel for the petitioner, submits that the reassessment proceedings initiated by the impugned notice dated 27.03.2018 is wholly without jurisdiction and thus invalid. The earlier assessment having been completed under Section 143(3) read with Section 147 of the Act on 31.03.2016, in terms of the first proviso to Section 147 of the Act notice under Section 148 of the Act cannot be issued unless income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. He submits that in the present case, there was no such failure on the part of the petitioner. Not only detailed explanations were furnished to the first respondent as to why the receipts from the two companies were claimed as exempt from income tax, first respondent had accepted the submissions of the petitioner and thereafter passed the assessment order accepting that such receipts were not chargeable to tax.
21.1 Insofar the allegation regarding non-submission of IT Domains Cost Sharing Agreement and other agreements in the proceedings for the assessment year 2011-12 is concerned, he submits that there was no obligation on the part of the petitioner to furnish the agreements in question. Obligation of the petitioner was limited to furnish the primary facts only. According to him, the primary facts included receipts, details of the payers, exemption claimed on the same and the reason why the same was claimed as being exempt from tax were all furnished by the petitioner. In fact, it was the burden of the assessing officer to have called for the agreements which he did not do. In any event, the IT Domains Cost Sharing Agreement as well as the other agreements were furnished by the petitioner in the course of the assessment proceedings for the assessment year 2013-14 on 22.12.2015 in response to a specific requisition by the first respondent. Therefore, it would be incorrect to say that the said agreements were not furnished or that those were not available with the first respondent. The assessing officer for the two assessment years i.e., 2011-12 and 2013-14 being the same he could have very well used the agreements submitted in one proceedings in the other proceedings. In these circumstances, Mr. Seth submits that the jurisdictional condition in the first proviso to Section 147 of the Act, namely that there should be a failure to disclose fully and truly all material facts is not fulfilled in the present case.
21.2 On the question as to whether the agreements furnished during assessment proceedings for the assessment year 2013-14 would constitute a sufficient disclosure, Mr. Seth has placed reliance on the decision of the Supreme Court in the case of NDTV v. DCIT2 wherein it has been held that availability of the relevant documents before the assessing officer albeit in different proceedings would nevertheless be sufficient disclosure. He has also placed reliance on the earlier decision of the Supreme Court in CIT v. Bhanji Lavji3 as well as on the decision of the Bombay High Court in the case of Rajbhushan Omprakash Dixit v. DCIT (W.P.No.3546 of 2018).
21.3 In the circumstances, Mr. Seth submits that impugned reassessment proceedings initiated by the first respondent against the petitioner is wholly without jurisdiction and therefore, the same is liable to be appropriately interfered with by the writ court.
22. Ms. K.Mamata Choudary, learned Senior Standing Counsel, Income Tax Department, at the outset has raised a preliminary objection as to maintainability of the writ petition. She submits that the first respondent has initiated reassessment proceedings under Section 147 of the Act only after recording reasons to believe and the impugned notice dated 27.03.2018 was issued after having obtained approval from the second respondent. When petitioner requested, the recorded reasons to believe were furnished to him. She therefore submits that the first respondent has followed the due procedure and no procedural infirmity can be pointed out. She further submits that before the present writ petition could be moved before this Court, first respondent had passed the draft assessment order dated 06.08.2019 under Section 144 read with Section 147 of the Act. Petitioner has an adequate and effective alternative remedy under Section 144C of the Act by way of filing objections before the Dispute Resolution panel. She submits that in the event petitioner continues to remain aggrieved thereafter, it still has the option of preferring appeal before the Commissioner of Income Tax (Appeals) and thereafter before the Income Tax Appellate Tribunal.
22.1 On merits, she submits that in the hearing held on 20.02.2016 at the time of the assessment proceedings for the assessment year 2011-12, petitioner was called upon to reconcile the differences between Form 26AS and the return of income filed for assessment year 2011-12 along with supporting documents. In its explanation dated 26.02.2016, petitioner furnished a reconciliation statement on its own volition and annexed a note on software club charges claimed as reimbursement of expenditure. Assessing Officer believing the petitioner accepted the explanation of the petitioner and passed the assessment order dated 31.03.2016. She submits that the software club charges were incorrectly projected, as the true nature of the royalty income in the hands of the petitioner was concealed and misrepresented as reimbursement of expenditure. According to her, there was no reference or disclosure whatsoever in the petitioner’s explanation dated 26.02.2016 that such payments were made pursuant to any agreement(s). On the limited information on software club charges made available by the petitioner claiming those to be reimbursements, first respondent could not have known or suspected that such charges were in fact in the nature of royalty payments. Existence of the agreements was suppressed during the assessment proceedings for the assessment year 2011-12. Even the petitioner admits that there was no disclosure of the agreements in the assessment proceedings for the assessment year 2011-12 but relies upon tendering of such documents in a different assessment proceeding. She submits that each assessment year is a separate and distinct proceeding. Information obtained incidentally during a subsequent assessment year cannot be deemed to mean that the first respondent was in knowledge of such information for the purpose of earlier assessment years. Once there is reason to believe that there is escapement of income, first respondent is under an obligation to issue notice under Section 148 of the Act for the relevant assessment year. In this connection, learned Standing Counsel has placed reliance on a decision of the Supreme Court in Phool Chand v. ITO4.
22.2 Thus, learned Senior Standing Counsel submits that petitioner had failed to disclose fully and truly all material facts pertaining to the claim of software club charges and that the assessing officer had cogent reasons based on information to believe that there was escapement of income. Therefore, the impugned proceedings are valid and should be upheld by dismissing the writ petition.
23. In his reply submissions, Mr. Seth contended that petitioner had filed a writ petition initially before the Bombay High Court which was disposed of on 01.07.2019 giving liberty to the petitioner to approach this Court and granting stay for a period of two weeks. Petitioner filed the present writ petition on 12.07.2019 and informed this fact to the first respondent on 19.07.2019 and 25.07.2019. However, the draft assessment order came to be passed on 06.08.2019. This Court vide order dated 20.08.2019 was pleased to grant stay. Placing reliance on the decision of the Supreme Court in Calcutta Discount Company Limited v. ITO5, learned counsel submits that merely because there is an alternative remedy would not always be a sufficient ground for refusing relief by the constitutional court more so when an authority is acting without jurisdiction.
23.1 Learned counsel submits that whatever information was sought for by the first respondent were furnished by the petitioner. First respondent did not ask for the agreements and therefore, those being not relatable to the claim of the petitioner were not furnished. When subsequently in assessment proceedings for the assessment year 2013-14, the same assessing officer specifically sought for the agreements those were submitted by the petitioner. Therefore, it cannot be said that petitioner had failed to disclose fully and truly all material facts.
23.2 He further submits that though each assessment year may be a separate proceeding, nonetheless the law has now been made clear that documents furnished in other assessment years can be relied upon in the proceedings for the assessment year under consideration. He finally submits that respondents have failed to show or substantiate even a prima facie case for valid initiation of reassessment proceedings. Therefore, the writ petition should be allowed quashing the impugned notices and order.
24. Submissions made by learned counsel for the parties have received the due consideration of the Court.
25. Pursuant to the notice dated 27.03.2018 issued by the first respondent under Section 148 of the Act, petitioner filed its return of income on 17.04.2018 and thereafter requested to provide it the reasons recorded for reopening the assessment proceedings under Section 147 of the Act. Reasons to believe recorded by the assessing officer for initiating reassessment proceedings were provided to the petitioner on 26.04.2018. Petitioner filed objections on 02.08.2018 and 05.11.2018. Objections were dealt with and rejected by the first respondent vide the order dated 17.11.2018. It is not necessary to enter into the details of the order dated 17.11.2018. Suffice it to say first respondent asserted that there was failure on the part of the petitioner to fully and truly disclose all material facts necessary for assessment for the assessment year 2011-12. According to the first respondent, the following material facts necessary for its assessment were not disclosed by the petitioner:
a) IT Domains Cost Sharing Agreement effective from 01.01.2005;
b) Group Systems Development Agreement dated 06.06.2005;
c) Group Systems Development Agreement dated 23.10.2003;
d) OPSCO Development Agreement dated 17.05.2004;
e) Group Services Agreement dated 28.04.2005;
f) 3CEB Report for assessment year 2011-12.
25.1 Thereafter, the first respondent has asserted that there is no change of opinion leading to issuance of impugned notices. Reopening of assessment was done based on new material facts that were disclosed during the scrutiny assessment proceedings in the case of the petitioner for the assessment year 2014-15. These materials and materials mentioned supra were not available during the assessment proceedings for the assessment year 2011-12. In such circumstances, question of change of opinion would not arise.
25.2 First respondent has also stated that assessment in the case of the petitioner for the assessment year 2011-12 was reopened under Section 147 based on the facts observed and materials discovered during the assessment proceedings for the assessment year 2014-15 in the case of the petitioner itself. These facts have been mentioned in the reasons recorded by the assessing officer to establish the belief that income has escaped assessment. CIT (IT &TP) Hyderabad granted approval to the proposal for reopening of assessment after being satisfied with the reasons recorded by the assessing officer. There is a clear connection between the materials discovered subsequently and the belief formed by the assessing officer that taxable income has escaped assessment. The belief of the assessing officer is based on direct evidence and not based on any gossip or rumour; nor on any suspicion.
26. According to the respondents, first respondent had passed assessment order on 06.08.2019 under Section 144 read with Section 147 of the Act. Such draft assessment order is subject to the provisions of Section 144C of the Act.
27. Let us now examine the provisions of Section 144C of the Act.
28. Section 144C was inserted in the Act by the Finance (No.2) Act, 2009 with retrospective effect from 01.04.2009. It provides for and deals with reference to Dispute Resolution Panel. As per sub-section (1), the assessing officer shall notwithstanding anything to the contrary contained in the Act, in the instance, forward a draft of the proposed order of assessment (briefly, “the order”) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. Thus, sub-section (1) makes it clear that provisions of Section 144C shall have over-riding effect over other provisions of the Act, having used the expression notwithstanding anything to the contrary contained in this Act.
28.1 Sub-section (2) says that on receipt of the draft order, the eligible assessee shall within thirty days of the receipt by him of the order – (a) file his acceptance of the variations to the assessing officer, or (b) file his objections, if any, to such variation with the Dispute Resolution Panel and the assessing officer.
28.2 Sub-section (3) contemplates a situation where the assessee intimates to the assessing officer acceptance of the variation or no objections are received within the period specified in sub-section (2). In such a situation, the assessing officer shall complete the assessment on the basis of the draft order. Such assessment order shall be passed by the assessing officer within one month from the end of the month in which the acceptance is received or the period of filing of objections under sub-section (2) expires.
28.3 Sub-section (5) comes into play in a case where any objection is received from the eligible assessee. In such a case, the Dispute Resolution Panel shall issue directions as it may think fit for the guidance of the assessing officer to enable him to complete the assessment.
28.4 As per sub-section (6), the Dispute Resolution Panel shall issue the directions referred to in sub-section (5) after considering the following:- i) draft order; ii) objections filed by the assessee; iii) evidence furnished by the assessee; iv) report, if any, of the assessing officer, valuation officer or transfer pricing officer or any other authority; v) records relating to the draft order; vi) evidence collected by, or caused to be collected by the Dispute Resolution Panel; and vii) result of any enquiry made by or caused to be made by the Dispute Resolution Panel.
28.5 However, before issuing any such direction as contemplated under sub-section (5), the Dispute Resolution Panel may make such further enquiry as it thinks fit or cause any further enquiry to be made by any income tax authority and report the result of the same to the Dispute Resolution Panel.
28.6 As per sub-section (8), the Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order. However, it shall not set aside any proposed variation or issue any direction under subsection (5) for further enquiry and passing of the assessment order.
28.7 Sub-section (9) clarifies that if members of the Dispute Resolution Panel differ in opinion on any point, that point shall be decided according to the opinion of the majority. Sub-section (10) makes it clear that every direction issued by the Dispute Resolution Panel shall be binding on the assessing officer. However, as per subsection (11) no direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the assessing officer on such directions which are prejudicial to the interest of the assessee or to the interest of the revenue respectively. There is a time limit of nine months for issuance of such direction under sub-section (12).
28.8. Sub-section (13) says that upon receipt of the directions issued under sub-section (5), the assessing officer shall, in conformity with the directions, complete the assessment notwithstanding anything to the contrary contained in Section 153 or Section 153B. However, at this stage, the assessing officer is not required to provide any further opportunity of being heard to the assessee.
28.9 Sub-sections (14) to (14C) are not relevant for the present discourse. However, as per the proviso to subsection (14C), no direction shall be issued after 31.03.2024.
28.10 Sub-section (15)(a) defines “Dispute Resolution Panel” to mean a collegiums comprising of three Principal Commissioner or Commissioners of Income Tax constituted by the Central Board of Direct Taxes. “Eligible assessee” is defined in sub-section (15)(b) to mean, any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of Section 92CA; and any foreign company
29. From the above, it is evident that an elaborate procedure is laid down in Section 144C of the Act. Assessing officer is under a mandate to forward a copy of draft order to the eligible assessee, whereafter the eligible assessee would have the opportunity to file objection. In the event objection is filed, the Dispute Resolution Panel shall issue directions to the assessing officer for his guidance to complete the assessment after considering, amongst others, the objections filed and evidence furnished by the assessee. The Dispute Resolution Panel has also the liberty to make further enquiry if it considers necessary. But before issuing such direction, the Dispute Resolution Panel shall have to provide an opportunity of hearing to the assessee if such directions are prejudicial to the interest of the assessee.
30. As we have seen, the Dispute Resolution Panel is a high powered body comprising of three very senior officers of the Income Tax Department. The Dispute Resolution Panel is constituted by the Central Board of Direct Taxes.
31. Thus, from the above, it is evident that the eligible assessee, in this case the petitioner, has an effective remedy provided by the statute itself for ventilation of its grievance.
32. It is trite law that the power of the High Court under Article 226 of the Constitution of India cannot be fettered by any statutory limitation, it being a constitutional power. Therefore, notwithstanding availability of adequate and efficacious alternative remedy under the relevant statute, a High Court exercising writ jurisdiction may still entertain a challenge made by an aggrieved party by way of a writ petition. As Supreme Court has clarified, it is not a case of maintainability; it is a case of entertainability. As a measure of self-imposed limitation, a writ Court would not ordinarily invoke its jurisdiction when an aggrieved party has adequate and efficacious remedy provided under the statute. However, notwithstanding availability of such alternative remedy, if it is a case of violation of the principles of natural justice or where there has been an infringement of any fundamental right or an action is palpably without jurisdiction or where vires of a statute is under impugnment, the High Court would still exercise its extraordinary jurisdiction under Article 226 of the Constitution of India.
33. Adverting to the facts of the present case, we are of the view that the exceptions carved out as mentioned supra, are absent. Contentions raised by the first respondent that petitioner did not disclose fully and truly all material facts necessary for assessment and as a result, there is escapement of income from assessment for the assessment year 2011-2012, cannot simply be brushed aside. In such a case, it would be just and proper if the procedure prescribed under the statute is followed, in which event, petitioner would have all the opportunities and remedies to present its case.
34. That being the position, we are of the considered opinion that the present is not a fit case for invoking the writ jurisdiction under Article 226 of the Constitution of India and interdict the reassessment proceedings without allowing it to be proceeded as per procedure laid down under the law. However, since we have refused to entertain the writ petition on the point of statutory remedy available to the petitioner, we refrain from expressing any opinion on merit. Therefore, any observations made while coming to the aforesaid conclusion are only in the context of the present decision. Accordingly, all contentions are kept open.
35. Subject to the above, writ petition is dismissed.
36. Interim order passed earlier stands vacated.
Miscellaneous petitions, pending if any, shall stand closed. However, there shall be no order as to costs.
Notes ;-
1 259 ITR 19
2. 116taxmann.com 151
3. 79 ITR 582
4. (1993) 4 SCC 77
5. 41 ITR 191
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