Cognizant Technology Solutions India Pvt., Ltd v. The Income Tax Appellate Tribunal -'B' Bench

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 22.09.2021CORAMTHE HON'BLE Mr.JUSTICE M.SUNDARW.P.No.20267 of 2021andWMP.No.21524 of 2021 Cognizant Technology Solutions India Pvt., Ltd.,No.165, Eternity Building,6[th] Floor, St. Mary's RoadChennai-600 018. -Vs.- ... Petitioner 1. The Income Tax Appellate Tribunal -'B' Bench,Represented by its Registrar,'Rajaji Bhavan' - 2[nd] Floor,Besant Nagar,Chennai-600 090. 2.The Assistant Commissioner of Income Tax,Central Circle 1(1)3[rd] Floor, Investigation Building,46, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 3.Commissioner of Income Tax,Large Tax Payer Unit,7[th] Floor, Wanaparthy Block,Aayakar Bhavan, Nungambakkam,Chennai-600 034. ... Respondents Writ Petition filed under Article 226 of the Constitution ofIndia praying to issue a Writ of Mandamus, forbearing the 2[nd]respondent herein from proceeding further with the petitioner'sassessment in relation to AY-2014-2015 undertaken pursuant tothe 3[rd] Respondent's Order dated 01.08.2019 until such time asthe 'B' Bench of the 1[st] Respondent passes orders in ITANo.2820/CHNY/2019. For Petitioner : Mr.Arvind P.Datar for Mr.Srinath Sridevan For Respondents: Mr.A.P.Srinivas, Senior Standing counsel for R1 to R3 O R D E R Captioned writ petition and 'Writ Miscellaneous Petition' (WMP) thereat are in the admission Board before me. 2. Mr.Arvind P.Datar, learned Senior Advocate instructed byMr.Srinath Sridevan, counsel on record for writ petitioner-company, who is before me in this web hearing on a videoconferencing platform i.e., virtual Court submits that the writpetitioner is in a predicament qua an appeal, which 'Income TaxAppellate Tribunal' [hereinafter 'ITAT' for the sake of brevity]'B' Bench, Chennai is in seizin. This appeal bears No.IT-2820/CHNY-2019 and it pertains to Assessment year 2014-2015. 3. Learned Senior Advocate submitted that an order dated01.08.2019 made by third respondent in exercise of powers underSection 263 of 'Income-tax Act, 1961 (43 of 1961)' [hereinafter'IT Act' for the sake of brevity] is under challenge before ITATin aforementioned appeal. This order made by third respondentbeing an 'order dated 01.08.2019 under Section 263 of IT Act'shall hereinafter be referred to as 'Revisional Order' for thesake of convenience and clarity. 4. Owing to the limited scope of captioned writ petition,short facts shorn of elaboration will suffice. Short facts arethat the writ petitioner-company filed its income tax returnsfor 'Assessment Year 2014-2015' [hereinafter 'said AY' for thesake of brevity]; that the writ petitioner's case was selectedfor regular assessment under Section 143(3) and notice underSection 143(2) was issued, but it is not necessary to advert tothe dates of these notices as the same are not imperative forappreciating this order; that 'Assessing Officer' [hereinafter'AO' for the sake of convenience and clarity] in the course ofassessment requested for certain details pertaining to buy-backof shares undertaken by the writ petitioner-company inter aliaunder Section 77A of 'The Companies Act, 1956' [hereinafter'Companies Act' for the sake of brevity] for the 'FinancialYear' 2013-2014 ; that AO came to the conclusion that taxliability of writ petitioner-company is Nil as far as dividenddistribution taxes is concerned; that thereafter, thirdrespondent issued a notice under Section 263 of IT Act asaccording to the third respondent, this order of AO isprejudicial to the interest of the Revenue. This notice waschallenged by writ petitioner in this Court by way of WP.No.7542of 2018 and the same was dismissed by a learned Single Judgevide order dated 25.06.2019, directing the writ petitioner tofile response to the 263 pre-notice; that the writ petitionercarried it by way of intra-Court appeal i.e., WA.No.2081 of 2019and a Hon'ble Division Bench on 05.07.2019 sustained the order of Hon'ble Single Judge; that thereafter, writ petitioner filedits submissions and also appeared before third respondent; thatthis culminated in Revisional order; that the Revisional ordermade by third respondent is appealable under Section 253 of ITAct; that the appeal lies to ITAT; that the aforementionedappeal came to be filed on 03.10.2019 and the same is pending;that the appeal was last scheduled to be listed on 23.09.2021before ITAT 'B' Bench, but all the matters scheduled to belisted that day before ITAT 'B' Bench stood reposted to01.12.2021; that this Court is informed that the various Benchesconvene in different combinations owing to the limited number ofmembers and that resulted in the matter not being taken up on23.09.2021 though according to the appellant, appellant wasready to argue the matter; that in the interregnum, writpetitioner was visited with a notice from second respondentbeing notice dated 15.09.2021, which is pursuant to theRevisional Order of third respondent; that this notice dated15.09.2021 draws up a timeline and if the same is not adheredto, writ petitioner is likely to have an order from secondrespondent in terms of Revisional order which specificallydirects the AO to invoke the provisions of Sections 115(o) and115(p) of IT Act and examine distribution of dividends qua 222of IT Act and recover dividend distribution tax if that be so;that appeal before ITAT now stands listed on 01.12.2021, but ifthe AO passes order in the interregnum, the appeal will becomeinfructuous and the writ petitioner has to reinvent the wheel;that on the teeth of such a scenario captioned writ petition hasbeen filed. 5. Mr.A.P.Srinivas, learned Senior standing counsel (Revenuecounsel) accepted notice on behalf of all the three respondents. 6. Owing to the short point that is being raised and owingto the limited prayer that is being made (the same shall bealluded to infra), with the consent of both sides, main writpetition is being taken up and the same is being disposed ofvide this order. 7. Limited prayer which learned Senior counsel makes is, ifthe Revisional order is kept in abeyance for a period of twelve(12) weeks from today i.e., upto 15.12.2021, the appeal beforeITAT can be heard out and that will give a quietus to the entirematter. This is the limited prayer that has been made before metoday. 8. Learned Revenue counsel, in response to the abovesubmission, responded by saying that the writ petitioner has notchosen to file a stay petition before ITAT and not having chosento do so it cannot now seek this limited prayer. 9. The entire matter now turns on whether the writpetitioner should have moved a stay petition. In response tothis, learned Revenue counsel drew the attention of this Courtto Section 253(7) of IT Act as also proviso to 254(2A). 10. To be noted, learned Senior counsel initially drew theattention of this Court to Rule 35A of 'Income Tax AppellateTribunal Rules, 1963' [hereinafter 'ITAT Rules' for the sake ofconvenience and clarity]. 11. Learned Revenue counsel drew the attention of this Courtto a judgment of Hon'ble Supreme Court rendered in 1969 andreported in AIR 1969 SC 430 being Income Tax Officer, CannanoreVs.M.K.Mohamad Kunhi case for the proposition that ITAT haspower to grant stay as the same is incidental or ancillary toits appellate jurisdiction. 9. The entire matter now turns on whether the writpetitioner should have moved a stay petition. In response tothis, learned Revenue counsel drew the attention of this Courtto Section 253(7) of IT Act as also proviso to 254(2A). 10. To be noted, learned Senior counsel initially drew theattention of this Court to Rule 35A of 'Income Tax AppellateTribunal Rules, 1963' [hereinafter 'ITAT Rules' for the sake ofconvenience and clarity]. 11. Learned Revenue counsel drew the attention of this Courtto a judgment of Hon'ble Supreme Court rendered in 1969 andreported in AIR 1969 SC 430 being Income Tax Officer, CannanoreVs.M.K.Mohamad Kunhi case for the proposition that ITAT haspower to grant stay as the same is incidental or ancillary toits appellate jurisdiction. 12. I carefully considered the short point that falls forconsideration as the ITAT is in seizin of the matter. Thoughsubmissions were made to say that buy-back of shares underSection 77A of Companies Act was in accordance with the valuefixed by RBI guidelines and that the Revenue has already taxedthe same in the hands of erstwhile shareholders of the Companyand it cannot be taxed now, I do not want to express any opinionor go into those aspects as these are on merits which arepending adjudication in ITAT. It will suffice to say that primafacie case can be inferred from ITAT being in seizin, i.e.,consideration of the correctness or otherwise of Revisionalorder made by third respondent. This takes us to the balance ofconvenience and irreparable/legal injury determinants. Balanceof convenience obviously ennures to the benefit of the writpetitioner as if the second respondent pursuant toaforementioned notice dated 15.09.2021, which was issued pendingappeal before ITAT, concludes the proceedings, the entire appealwould become infructuous. The other facet of the matter is,second respondent's such conclusion cannot also be found fault(if it happens) as, as of today the Revisional order isoperating and it is live. Therefore, assuming that an order ispassed between now and 01.12.2021 by second respondent, itcannot be said to be lack of jurisdiction and the secondrespondent cannot be found fault with for making such an order.Thereafter, it will be a situation or an attempt to put theclock back. Therefore, balance of convenience and possiblelegal injury and irreversible determinants also work in favourof limited stay for a limited period of twelve weeks. 13. Now what needs to be examined is the lone question as towhether the writ petitioner should have moved ITAT for stay (asalluded to supra). I am not inclined to look at Rule 35A ofITAT Rules as that is merely procedural and that deals with theprocedure for filing and disposal of stay petitions. I wouldrather look at the substantive provision and substantiveprovision which vests ITAT with powers to grant stay is Section253 (7) of IT Act, which reads as follows:'253.Appeals to the Appellate Tribunal- (1) .... (a) ..... (b) ..... (ba).... (c) ..... (d) ..... (e) ..... (f) .....(2) ....(3) ....(4) ....(5) ....(6) .... (a) ..... (b) ..... (c) ..... (d) .....(7) An application for stay of demand shall beaccompanied by a fee of five hundred rupees.' 13. Now what needs to be examined is the lone question as towhether the writ petitioner should have moved ITAT for stay (asalluded to supra). I am not inclined to look at Rule 35A ofITAT Rules as that is merely procedural and that deals with theprocedure for filing and disposal of stay petitions. I wouldrather look at the substantive provision and substantiveprovision which vests ITAT with powers to grant stay is Section253 (7) of IT Act, which reads as follows:'253.Appeals to the Appellate Tribunal- (1) .... (a) ..... (b) ..... (ba).... (c) ..... (d) ..... (e) ..... (f) .....(2) ....(3) ....(4) ....(5) ....(6) .... (a) ..... (b) ..... (c) ..... (d) .....(7) An application for stay of demand shall beaccompanied by a fee of five hundred rupees.' 14. A careful perusal of Section 253(7) makes it clear thatpower of ITAT to grant stay is qua a demand. In the instantcase, there is no disputation or disagreement that there is nodemand. Therefore, if 253(7) is invoked the question as towhether ITAT can stay the Revisional order becomes a matter ofdebate. In the instant case, I deem it appropriate to leavethis debate open. The reason is M.K.Mohamad Kunhi's caserendered in 1969 (pressed into service by learned Revenuecounsel and alluded to supra) does not come to the aid of theRevenue in the case on hand. In 1969, there was no specificprovision for stay. Sub-Section 7 of Section 253 was broughtinto statue book or in other words, it kicked in only on andfrom 01.10.1998 vide Finance Act, 1998. Likewise, Section 254(2A) and the proviso therein kicked in only in 2007. Therefore,M.K.Mohamad Kunhi's case was rendered by Hon'ble Supreme Courtat a point of time when there was no specific provision for stayqua ITAT in a appeal. Now that there is a specific provisionnamely sub-section (7) of Section 253 read with proviso to Sub-Section 2A of Section 254, the scenario or the obtaining legalposition is completely different. This Court is also informedthat this proposition/principle i.e., proposition that 'absent https://hcservices.ecourts.gov.in/hcservices/ demand an appellant cannot move a stay petition under Section253(7) before ITAT' is not blessed with authorities. As itinvolves a larger debate and in the light of the limited prayerthat is sought for, I deem it appropriate to leave this questionopen and dispose of captioned writ petition and WMP therein bymaking the following order:a) Revisional order being order dated 01.08.2019 madeby third respondent will be kept in abeyance or inother words all further proceedings pursuant to thisRevisional order will remain stayed for a period oftwelve (12) weeks from today i.e., upto 15.12.2021;b) It is open to the writ petitioner to move ITAT forexpeditious disposal of appeal before ITAT filed beingAppeal No. IT-2820/CHNY-2019 filed on 03.10.2019; c) Though obvious, it is made clear that this Court hasnot expressed any view or opinion on the merits of thematter as the ITAT is in seizin of the matter and itis, at the moment, the domain of the Tribunal. d) This Court has left open the question of incidentaland ancillary powers of Tribunal to grant stay in thelight of specific provisions namely Section 253(7) and254(2A) proviso of IT Act. 15. Writ petition disposed of with the above directives.Consequently, connected WMP is also disposed of. There shall beno order as to costs. s/d- True Copy Sub-Assistant Registrar kmiTo 1. The Income Tax Appellate Tribunal -'B' Bench,Represented by its Registrar,'Rajaji Bhavan' - 2[nd] Floor,Besant Nagar, Chennai-600 090. 2.The Assistant Commissioner of Income Tax,Central Circle 1(1), 3[rd] Floor, Investigation Building,46, Mahatma Gandhi Road,Nungambakkam, Chennai-34.Central Circle 1(1), 3[rd] Floor, Investigation Building,46, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 3.Commissioner of Income Tax,Large Tax Payer Unit, 7[th] Floor, Wanaparthy Block,Aayakar Bhavan, Nungambakkam,Chennai-600 034. 15. Writ petition disposed of with the above directives.Consequently, connected WMP is also disposed of. There shall beno order as to costs. s/d- True Copy Sub-Assistant Registrar kmiTo 1. The Income Tax Appellate Tribunal -'B' Bench,Represented by its Registrar,'Rajaji Bhavan' - 2[nd] Floor,Besant Nagar, Chennai-600 090. 2.The Assistant Commissioner of Income Tax,Central Circle 1(1), 3[rd] Floor, Investigation Building,46, Mahatma Gandhi Road,Nungambakkam, Chennai-34.Central Circle 1(1), 3[rd] Floor, Investigation Building,46, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 3.Commissioner of Income Tax,Large Tax Payer Unit, 7[th] Floor, Wanaparthy Block,Aayakar Bhavan, Nungambakkam,Chennai-600 034. W.P.No.20267 of 2021and WMP.No.21524 of 2021 PA(CO)SP(26/10/2021)