Courtdt.02.11.2018 In Wa v. Union Ofindia And Others Reported In (2011) 4 Scc 623

IN THE HIGH COURT OF JUDICATURE AT MADRAS ( Civil Appellate Jurisdiction ) Monday, the Third day of December Two Thousand Eighteen PRESENT THE HON`BLE MR JUSTICE T. S. SIVAGNANAM AND THE HON`BLE MR JUSTICE N. SATHISH KUMAR CMP No.21693 of 2018 in WA.2440/2018 1 DIRECTOR GENERAL OF INCOME TAX [ PETITIONERS ] (INV) TAMIL NADU AND PONDICHERRY, TAMIL NADU AND PONDICHERRY NNO.46, O.NO.108, MG ROAD, NUNGAMBAKKAM, CHENNAI. 2 PRL DIRECTOR OF INCOME TAX ( INV), MADRAS, INVESTIGATION WING, NO.46, OLD NO.108, MG RD, NUNGAMBAKKAM, CH-343 ADDL DIRECTOR OF INCOME TAX INVESTIGATION, UNIT-3, NNO.46, OLD NO.108, MG ROAD, NUNGAMBAKKAM, CH-34 4 DEPUTY DIRECTOR OF INCOME TAX INVESTIGATION, UNIT-3 (2), NNO.46, OLD NO.108, MG ROAD, NUNGAMBAKKAM, CH-34 5 DEPUTY DIRECTOR OF INCOME TAX INVESTIGATION, UNIT-4 (3), NNO.46, OLD NO.108, MG ROAD, NUNGAMBAKKAM, CH-34 6 ASST COMMISSIONER OF INCOME TAX, CIRCLE -1, NO.138/3, LMR SHOPPING ARCADE, III FLOOR, SALEM RD, NAMAKKAL-637 001Vs 1 T.S.KUMARASWAMY [ RESPONDENT ]PROPRIETOR, CHRISTY FRIEDGRAM INDUSTRY, A2 AND A3, SIDCO INDUSTRIAL ESTATE, ANDIPALAYAM,TIRUCHENGODE, NAMAKKAL DIST. Petition praying that in the circumstances stated thereinand in the affidavit filed therewith the High Court will be pleasedto permit the 2nd petitioner to revoke the order dt 07.11.2018which is passed pursuant to the order of the Honble Courtdt.02.11.2018 in WA no.2440/2018. (CMP.21693/2018) Order : This petition coming on for orders upon perusingthe petition and the affidavit filed in support thereof and uponhearing the arguments of M/S.A.P.SRINIVAS, Standing Counsel for thepetitionerandofMR.P.S.RAMAN,SENIORCOUNSELFORMR.R.PARTHASARATHY, Advocate for the Respondent the court made thefollowing order:- (Order of the Court was made by T.S.Sivagnanam, J.) This petition has been filed by the Director General of IncomeTax (Investigation) and six others who are the officials of theIncome Tax Department to permit the second petitioner, namely, thePrincipal Director of Income Tax (Investigation) (hereinafterreferred to as “the PDIT (Investigation)), Chennai to revoke theorder dated 07.11.2018 passed pursuant to the order passed by theDivision Bench on 02.11.2018 in this appeal. 2.Mr.Sathish Parasaran, learned senior counsel appearing forthe petitioners submitted that the application filed by the revenuewith the prayer to permit them to revoke the order dated 07.11.2018which is to be dismissed as not maintainable on the ground that anyattempt by the Executive Authority to provide itself a protectivecover against challenges or criticism to its action by passing thebug to the judiciary in the official decision should be resistedand avoided. In support of such contention, the learned counselplaced reliance on the decision of the Hon'ble Supreme Court in thecase of Priyadarshini Dental College and Hospital vs. Union ofIndia and others reported in (2011) 4 SCC 623. 3.We have heard Mr.A.P.Srinivas, learned Standing Counselappearing for the revenue on the above submissions. 4.In our considered view, the petition filed by the revenue ismaintainable and we are entitled to consider the same and we are ofthe firm opinion that it is not an attempt to pass on the bug tothis Court and to obtain a protective cover against thedepartmental action. We support such conclusion with the followingreasons. 5.The Division Bench passed an order on 02.11.2018 in thisappeal which arose out of a challenge to an order dismissing themiscellaneous petition filed by the appeal to pass a suitableinterim orders in the writ petition which was challenging thesearch and seizure operations as well as the orders of attachmentpassed against the assessees. The order passed by the DivisionBench dated 02.11.2018 is quoted herein below:https://hcservices.ecourts.gov.in/hcservices/ 5.The Division Bench passed an order on 02.11.2018 in thisappeal which arose out of a challenge to an order dismissing themiscellaneous petition filed by the appeal to pass a suitableinterim orders in the writ petition which was challenging thesearch and seizure operations as well as the orders of attachmentpassed against the assessees. The order passed by the DivisionBench dated 02.11.2018 is quoted herein below:https://hcservices.ecourts.gov.in/hcservices/ “Heard Mr.P.S.Raman, learned Senior Counsel appearing for theappellant and Mr.A.P.Srinivas, learned Standing Counsel for therespondents for some time. 2.It appears that the appellant had moved the writ courtseeking interim relief as against the search and seizure/attachmentin the premises of the appellant by the respondent-authorities andthey are aggrieved by the order of the learned Single Judge indismissing the application which sought for interim order andtherefore, they are before this Court. 3.The learned Senior Counsel appearing for the appellantswould submit that there is some illegality in the procedurefollowed by the authorities while making such search andseizure/attachment and because of the seizure/attachment, theappellant is unable to run the business resulting in stalling oftheir all business activities and they are not even able todisburse wages to their employees and therefore, it causes muchhardship to the appellant. The learned Senior Counsel appearingfor the appellant fairly expresses the willingness on the part ofthe appellant to furnish bank guarantee as an interim measure inthe matter. It is further submitted by the learned Senior Counselthat out of the amount the appellant receives from the CivilSupplies Corporation in respect of their business transactions,only 5% would be the profit of the appellant and therefore, theywould furnish bank guarantee for the appropriate amount. 4.In the circumstances, we hereby permit the appellant topursue the matter before the Commissioner concerned forthwithseeking his indulgence to set right the things with regard to theillegality in the procedure alleged to have been adopted by theofficer concerned in the matter of search and seizure/attachment.In such event, the Commissioner concerned shall re-consider theissue on merits and in accordance with law. If the appellant isaggrieved even thereafter, it is left open to them to move thelearned Single Judge or this Court. List the matter on 9.11.2018.” 6.In the order passed by the Division Bench, the Court hasrecorded the submissions of the learned senior counsel for theappellant and in paragraph 4 of the order, it has permitted theappellant to pursue the matter before the Commissioner concernedforthwith seeking indulgence to set right the things with regard tothe illegality in the procedure alleged to have been adopted by theofficer concerned in the matter of search and seizure/attachment.On the appellant approaching the Commissioner, the Commissioner wasdirected to re-consider the issue on merits and in accordance withlaw leaving it open to the appellant to move the Single Bench orthe Division Bench, if they are aggrieved even thereafter. Aspointed out by the learned counsel appearing for the revenue, thereappears to be two limb to the directions/liberty issued/granted.The first is with regard to the contentions raised by the assesseewith regard to the illegality in the matter of search and seizurehttps://hcservices.ecourts.gov.in/hcservices/and consequently with the order of attachment. The assessee accepted the order dated 02.11.2018 and went before theCommissioner who has passed the order dated 07.11.2018. Before thesecond petitioner, namely, the PDIT (Investigation), the authorityhas recorded that in the representation of the assessee dated03.11.2018, certain facts were mentioned and assertions have beenmade. However, the authority has not dealt with the same on theground that the matter is sub-judice before this Court. Takinginto consideration the submissions made by the assessee that a sumof Rs.417,46,20,742/- are the receivables for the four concerns,one of whom is the assessee, namely, Christy Friedgram Industry andconsidering the submissions made, the PDIT (Investigation) orderedthat the payments due for suppliers of Rs.117,18,38,346/- may bereleased to the assessee after the Investigating Officer verifiesthe genuineness of the claim and the balance surplus available fromthe receivables of Rs.297,56,42,396/- are to be released ordeposited in the PD account in the name of the PDIT (Investigation)towards part of the tax liability alone on the admitted undisclosedincome of Rs.1350 Crores. Alternatively in terms of theobservations made by the Division Bench in its order dated02.11.2018, it was stated that an irrevocable Bank Guaranteetowards tax liability on the admitted amount of Rs.1350 Crores froma Scheduled Commercial Bank may be furnished so that the orders ofattachment dated 24.10.2018 can be revoked after receiving the BankGuarantee. 7.It appears that the Department received certain informationfrom the Tamil Civil Supplies Corporation (TNCS) vide communicationdated 20.11.2018 mentioning that the amounts payable to theassessee and other concerns is Rs.57.11 Crores. According to theassessee this letter was very much available with the Departmenteven before this petition was filed. Be that as it may, theDepartment has issued a notice to the assessee dated 26.11.2018among other things stating as follows: “3.From the communication received from Integrated ChildDevelopment Services and Tamil Nadu Civil Supplies, Chennai it hasbeen ascertained that the amount of receivables is onlyRs.179,75,98,248/-. However, you have reported receivables ofRs.417.46 Crores. Therefore, you have misrepresented and furnishedincorrect information regard the quantum of receivables before theundersigned and hence the said order dated 07.11.2018 requires tobe revoked. In these circumstances, you are required to show causewhy the Integrated Child Development Services, Chennai & Tamil NaduCivil Supplies, Chennai and also why action as per the provisionsof Income Tax Act, 1961 should not be initiated for furnishingfalse information. 4.Your case stands posted for hearing on 30/11/2018 at 11.00am at Room No.207, Investigation Building, 46, Mahatma Gandhi Road,Chennai – 34.” https://hcservices.ecourts.gov.in/hcservices/ 8.It is submitted by the learned counsel appearing for theassessee that they received the above referred communication onlyafter the time fixed for hearing. Be that as it may, the assesseehave challenged the order dated 07.11.2018 by a separate writpetition which is pending before the learned Single Judge oncertain other grounds. Considering these facts, we are of theconsidered view that the Department is well justified in movingthis Court as there are several writ petitions pending apart fromthe direction issued in the writ appeal by the Division Bench andthe main writ petition has also been pending. In the fitness ofthings, it is appropriate on the part of the Department to seek forleave from this Court to revoke the order dated 07.11.2018.Therefore, we find that it is not a case where the authorities areattempting to pass on the bug to the Court or to obtain protectiveorders so as to put the assessee in disadvantage position.Therefore, the preliminary objection raised by the assessee standsrejected. 9.Now, we move to consider the relief sought for by theassessee before us. In the opinion of the Department which isbased upon the communication received from the Integrated ChildDevelopment Services (ICDS) and Tamil Nadu Civil Supplies (TMCS),the receivables is only Rs.179,75,98,248/- and the assessee hadreported receivables of Rs.417.46 Crores. The Department is of theprima facie view that the assessee has misrepresented and furnishedincorrect information regard the quantum of receivables before theauthorities and hence, the order dated 07.11.2018 requires to berevoked. Therefore, the communication dated 26.11.2018 has beenissued which is in the nature of show cause notice. The assessee'scase is that the communication sent by the TNCS and ICDS to theauthority dated 22.11.2018 has not been reckoned which clearlyshows that the receivables are more than Rs.350 Crores. 10.Thus, considering the factual matrix the matter definitelyrequires to be re-considered and the assessee should be given anopportunity to place materials. Further, the TNCS and ICDS arealso required to be heard by the authority before taking a decisionand an Officer not below the rank of Managing Director should bepresent before the concerned authority with all records to show asto what are the receivables by the assessee and the other concerns. 11.Considering the above facts, C.M.P.No.21693 of 2018 isallowed and consequently the order dated 07.11.2018 stands revokedand the matter stands remanded to the Principal Director of IncomeTax (Investigation), Tamil Nadu and Pondicherry, InvestigationWing, Chennai – 34 for taking a fresh decision after givingeffective opportunity to the assessee. It is made clear that theabove direction has been issued in the light of the stand taken bythe Department that the receivables are lesser than what theassessee had stated before them at the time when the order dated07.11.2018 was passed. The said authority is directed to concludethe hearing and pass orders within a period of one week from todayhttps://hcservices.ecourts.gov.in/hcservices/(03.12.2018). 12.List the main writ appeal on 11.12.2018. -sd/- 03/12/2018 / TRUE COPY / Sub-Assistant Registrar ( Statistics / C.S. ) High Court, Madras - 600 104. TO1 DIRECTOR GENERAL OF INCOME TAX (INV) TAMIL NADU AND PONDICHERRY, TAMIL NADU AND PONDICHERRY NNO.46, O.NO.108, MG ROAD, NUNGAMBAKKAM, CHENNAI. 2 PRINCIPAL DIRECTOR OF INCOME TAX (INV), MADRAS, INVESTIGATION WING, NO.46, OLD NO.108, MG RD, NUNGAMBAKKAM, CH-34 3 ADDITINAL DIRECTOR OF INCOME TAX INVESTIGATION, UNIT-3, NNO.46, OLD NO.108, MG ROAD, NUNGAMBAKKAM, CH-34 4 DEPUTY DIRECTOR OF INCOME TAX INVESTIGATION, UNIT-3 (2), NNO.46, OLD NO.108, MG ROAD, NUNGAMBAKKAM, CH-34 5 DEPUTY DIRECTOR OF INCOME TAX INVESTIGATION, UNIT-4 (3), NNO.46, OLD NO.108, MG ROAD, NUNGAMBAKKAM, CH-34 6 ASSTSTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, NO.138/3, LMR SHOPPING ARCADE, III FLOOR, SALEM RD, NAMAKKAL-637 001 7 THE PRINCIPAL DIRECTOR OF INCOME TAX(INVESTIGATION) TAMIL NADU ANDPONDICHERRY, INVESTIGATION WING, CHENNAI 34. From 26.2.2001 the Registry is issuing certified copies of the Interim Orders in this formatRRI 03/12/2018 (IT) https://hcservices.ecourts.gov.in/hcservices/