M/S. Coromandel Oils Pvt., Ltd., ( v. The Commissioner Of Income Tax

Date of Reserving the OrderDate of Pronouncing the Order09.09.201614.09.2016 Coram The Hon'ble Mr.Justice T.S.Sivagnanam Writ Petition No.26821 of 2016, M/s. Coromandel Oils Pvt., Ltd.,(PAN : )A Private Ltd., Company,rep. by its Director, Mr.Harshad V Doshi,having its Office at Doshi Towers,9[th] Floor, 156, Poonamallee High Road,Kilpauk, Chennai – 600 010. ...PetitionerVs. 1.The Tax Recovery Officer – 1,Company Range – 1,Room No.503, New Block, 5[th] Floor,121 Mahatma Gandhi Road,Nungambakkam, Chennai – 600 034.2.The Assistant Commissioner of Income Tax,Corporate Company Range – 1,121 Mahatma Gandhi Road, Nungambakkam,Chennai – 600 034. 3.The Commissioner of Income Tax-1,Company Circle – 1,121 Mahatma Gandhi Road, Nungambakkam,Chennai – 600 034.` ...RespondentsWrit Petition, filed under Article 226 of the Constitutionof India, for issuance of Writ of Certiorarified Mandamus tocall for records of the first respondent in T.R.No.69-C/2012-13/AAACC8855E, dated 08.01.2013, relating to the assessmentyears 2009-10, 2010-11, and 2011-12, and to quash the order ofattachment of the immovable property, and to direct the firstrespondent to lift the order of the attachment of the immovableproperty,and to return the original document given as a surety to the second respondent by letter, 04.09.2012. The petitioner is a Private Limited Company, and theyfiled this Writ Petition, challenging the order of attachment ofthe immovable property, passed by the first respondent/TaxRecovery Officer, under the provisions of the Income Tax Act,1961 (hereinafter, referred to as 'the Act') dated 08.01.2013,and to quash the same, and consequently, to direct the firstrespondent to lift the order of attachment and to return theoriginal documents, given as surety to the secondrespondent/Assistant Commissioner of Income Tax, by letter,dated 04.09.2012. 2.To decide the issue involved in this Writ Petition,the following facts are relevant:-i)The petitioner, for the assessment years 2009-10,2010-11, and 2011-12, admitted income from capital gains, on thegain so arrived at under the development of a residentialproject. The Assessing Officer/second respondent, by order,dated 27.06.2012, passed under Section 143 (3) of the Act,disallowed the capital gain computation, and assessed the entireprofit under normal computation, apart from levying penalty, byorder, dated 31.12.2012. Even before the completion of theassessment for the said three years, the second respondent, byorder, dated 06.02.2012, made provisional attachment in respectof the undivided shares of land, remaining unsold, out of thetotal extent of land as on 08.01.2013, in the property, atPerungudi Village, where the petitioner's Manufacturing Unit waslocated. The provisional attachment was also intimated to theSub Registrar, Neelankarai. ii) As against the orders passed by the secondrespondent, both on merits and levying penalty, the petitionerpreferred Appeals before the Commissioner of Income Tax (Appeals-I), viz., the third respondent herein. In the meantime, thepetitioner was treated as an assessee in default by the secondrespondent, and certified the arrears for all the assessmentyears. Pursuant to such certificate, the first respondent, byproceedings, dated 08.01.2013, passed an order of attachment ofthe immovable property, under Form No.I.T.C.P.-16, Rule 48 ofsecond schedule to the Act. Apart from attaching the saidproperty, the properties belonging to the Directors/Beneficial https://hcservices.ecourts.gov.in/hcservices/ Owners of the petitioner-Company were attached. Thereafter,the respective owners of the property had given surety byproducing documents. https://hcservices.ecourts.gov.in/hcservices/ Owners of the petitioner-Company were attached. Thereafter,the respective owners of the property had given surety byproducing documents. iii) Thus, the petitioner would contend that, not only theproperty of their Company has been attached, but also thesureties obtained from other Directors/Beneficial owners of thepetitioner-Company. In the interregnum, the Appeals filedagainst the orders of the second respondent were partly allowedby the Commissioner of Income Tax (Appeals -I) and the entirepenalty was deleted. Therefore, the demand raised by thesecond respondent had substantially reduced to nil. iv) Therefore, it is the contention of the petitionerthat the order of attachment effected by the first respondent onthe immovable property does not survive. Pursuant to theorder passed by the Commissioner of Income Tax (Appeals -I), thesecond respondent/Assessing Officer passed a consequentialorder, dated 27.09.2013, giving effect to the order of theCommissioner of Income Tax (Appeals-I). v) Challenging the order passed by the Commissioner ofIncome Tax (Appeals -I), the petitioner as also the RevenueDepartment filed Second Appeals before the Income Tax Tribunal'C' Bench, Chennai (for short, ITAT). The ITAT, by order,dated 26.06.2015, allowed the Appeal filed by the petitioner anddismissed the Appeal filed by the Revenue Department. As aconsequence thereof, the second respondent passed orders, dated08.09.2015 and 14.09.2015, giving effect to the order of ITAT.In terms of giving effect to the order of ITAT for the aforesaidthree assessment years, the demand of tax in respect of theassessment year 2009-10 was Nil, and with regard to twoassessment years, 2010-11 and 2011-12, the petitioner wasentitled for refund. vi) It appears that the petitioner has also filedan Application under Section 154 of the Act, on 13.01.2016,which is stated to be pending. Even before that, thepetitioner had submitted a letter, dated 30.10.2015, requestingfor lifting the attachment. This was followed by two otherrepresentations, and similar prayer was also made by theDirectors of the petitioner-Company, who had furnished surety,but, no action had been initiated, which has necessitated thepetitioner to approach this Court, challenging the order ofattachment. 3.The learned counsel appearing for the petitionercontended that the petitioner cannot be treated as a defaulter,and even if the Revenue has challenged the order of ITAT, byfiling Tax Case Appeal before this Court, still the petitionercannot be treated as defaulter. Even assuming that the Revenue https://hcservices.ecourts.gov.in/hcservices/ succeeds in the Tax Case Appeal filed before this Court, yet,the petitioner cannot be treated as assessee in default, as theyare entitled to a notice of 30 days, and if the liability iscleared by then, they are not a defaulter. Therefore, theimpugned order of attachment cannot survive after ITAT passedorders, which order has been given effect to by the secondrespondent. 3.The learned counsel appearing for the petitionercontended that the petitioner cannot be treated as a defaulter,and even if the Revenue has challenged the order of ITAT, byfiling Tax Case Appeal before this Court, still the petitionercannot be treated as defaulter. Even assuming that the Revenue https://hcservices.ecourts.gov.in/hcservices/ succeeds in the Tax Case Appeal filed before this Court, yet,the petitioner cannot be treated as assessee in default, as theyare entitled to a notice of 30 days, and if the liability iscleared by then, they are not a defaulter. Therefore, theimpugned order of attachment cannot survive after ITAT passedorders, which order has been given effect to by the secondrespondent. 4. It is further submitted by the learned counsel thatfor four years, the petitioner is suffering. Apart from that,their Directors are also suffering, as they are unable to sellthe property. The value of the property, which has beenattached is more than Rupees Ten Crores, the value of theproperty, given as surety by Directors, is more than RupeesTwenty Crores, and action of the Revenue Department, in refusingto consider the petitioner's request for raising attachment nottenable. It is submitted that, this Court, in the case of(Sri Lakshmi Brick Industries Vs. The Tax Recovery Officer)reported in (2013) 351 ITC 0345 has considered a similar issueto release the property, which was the subject matter ofattachment, and rendered the decision, following the decision ofthe Hon'ble Supreme Court, in the case of (Sri Mohan Wahi Vs.Commissioner of Income Tax and others) reported in (2001) 248ITR 799. 5.The learned Senior Standing Counsel for therespondent/Income Tax Department has referred to Section 225 (3)of the Act, and submitted that, where a certificate has beendrawn up, and subsequently, the amount of the outstanding demandis reduced as a result of an Appeal, or other proceeding, underthe Act, the Tax Recovery Officer shall, when the order, whichwas the subject matter of such Appeal, or other proceeding hasbecome final and conclusive, amend the certificate, or cancelit, as the case may be. Placing emphasis on the words“final'' and ''conclusive'', it is submitted that the orderpassed by ITAT has not attained finality, and it has not becomeconclusive, as the Department as filed Tax Case Appeal beforethis Court, under Section 260 A of the Act, and the same is tobe numbered shortly, as there is a delay in re-presenting thepapers. Therefore, it is submitted that, as long as the orderpassed by ITAT has not become final and conclusive, the questionof raising the attachment does not arise. 6.Further, it is submitted by the learned SeniorStanding Counsel that the procedure under Rule 12 of secondschedule to the Act has to be followed, and such a contingencywould arise only after finality is arrived at the proceeding,and therefore, the prayer sought for by the petitioner cannot beacceded to, by the Department. In support of the saidcontention, reliance has been placed on the decision of this Court, in the case of (Pyramid Saimira Theatre Ltd., Vs.Commissioner of Income Tax) reported in (2009) 316 ITR 75 Madrasand the decision of the Hon'ble High Court of Calcutta, in thecase of (Income Tax Officer Vs. Ghanshyamdas Jatia) reported in(1976) 105 ITR 693 (CAL). 7.Heard Mr.R.Sivaraman, the learned counsel appearingfor the petitioner, and Mr.T.Ravikumar, learned Senior StandingCounsel (Income Tax Department) appearing for respondents, andperused the materials placed on record. Court, in the case of (Pyramid Saimira Theatre Ltd., Vs.Commissioner of Income Tax) reported in (2009) 316 ITR 75 Madrasand the decision of the Hon'ble High Court of Calcutta, in thecase of (Income Tax Officer Vs. Ghanshyamdas Jatia) reported in(1976) 105 ITR 693 (CAL). 7.Heard Mr.R.Sivaraman, the learned counsel appearingfor the petitioner, and Mr.T.Ravikumar, learned Senior StandingCounsel (Income Tax Department) appearing for respondents, andperused the materials placed on record. 8.The factual matrix of the case, as set out in thepreceding paras, pertaining to the assessment, and, culminatingin the order of ITAT, is not disputed by the Revenue. The factthat, giving effect to orders have been passed by the secondrespondent pursuant to the order passed by ITAT, on 08.09.2015and 14.09.2015, for all three assessment years, is not disputed.The only defence, putforward by the Revenue for refusing toaccede to the prayer sought for by the petitioner for raisingthe attachment is that, the order passed by ITAT has not becomefinal and conclusive. In this regard, reference was made toSection 225 (3) of the Act, and Rule 12 of second schedule tothe Act. 9.As noticed above, sub-section 3 of Section 225 usesthe expressions “final” and “conclusive”. It has to be seen,as to how the expressions should be understood, in the givenfacts and circumstances of the case. 10.The contention of the Revenue is that, the terms''final'' and ''conclusive'' would mean the finality attached tothe order, when the order is challenged and taken to the logicalend, or in the case, where the Department accepts the judgment.In other words, the stand taken by the Revenue is that, even ifthe Revenue fails to succeed in the Tax Case Appeals, yet, theygot a remedy of Appeal to the Hon'ble Supreme Court, and onlythereafter, the proceeding could be construed as final andconclusive. However, I am not in a position of subscribing tosuch a submission, as Section 225 (3) should not be read inisolation, but should be read along with Section 222. This isso because, in terms of Section 222, where, an assessee is indefault, or is deemed to be in default in making payment of tax,the Tax Recovery Officer may issue a certificate, specifying theamount of arrears due from the assessee, and shall proceed torecover from such assessee, the amount so specified, by one ormore of the modes, which includes attachment and sale of theassessee's immovable properties. The second schedule sets outthe procedure for recovery of tax. Therefore, the action, thatis required to be taken prior to the property being attached isthat, the Tax Recovery Officer should issue a certificate thatthe assessee is in default. 11.In Sri Mohan Wahi's case (supra), a house property,owned by one late B.P. was the subject matter of attachment,and the proclamation of sale was issued for sale of theproperty, and the property was sold and the highest bidderdeposited the money. The widow of the owner of the propertyfiled a Suit to restrain the sale, claiming that the shares oftwo of her sons could not have been attached, and advertised forsale. In the said Suit, order of interim injunction wasgranted by the Civil Court, as a result of appellate and otherproceedings, all the demands against the Firm stood wiped outand reduced to nil. Therefore, the assessee addressed theIncome Tax Officer that the demand had been cancelled, and theTax Recovery Officer may be informed accordingly. Inspite ofthe same, the Tax Recovery Officer confirmed the sale, and theRevision Petition filed against the same before theCommissioner, under Section 264 of the Act was dismissed. Asdid the High Court, when a Writ Petition challenging thedismissal of Revision Petition was filed, and on Appeal to theHon'ble Supreme Court, the Hon'ble Supreme Court reversed thedecision of the High Court, and held that the Tax RecoveryOfficer could not have confirmed the sale, when the demands onaccount of tax, for the recovery of which certificates wereissued, had admittedly ceased to exist. 12. It was further held in Sri Mohan Wahi's case(supra) that the term ''reduced'' in Section 225 (3) of the Actwould include a case, where the demand, consequent upon anappeal, or any proceeding, under the Act has been reduced to nilalso. Further, it was pointed out that the combined effect ofSection 225 (3) of the Act and Rules 56 and 63 of schedule II isthat, before an order confirming the sale is actually passed bythe Tax Recovery Officer, the demand of tax consequent upon anorder made in appeal, or other proceedings under the Act hadbeen reduced to nil, the Tax Recovery Officer is obliged tocancel the certificate, and, as soon as the certificate iscancelled, he shall have no power to make an order confirmingthe sale. Though this interpretation was made, taking note ofRules 56 and 63 of schedule II to the Act, yet, the underlyinglegal principal is that, once the demand has been reduced tonil, the Tax Recovery Officer has no power to confirm the sale.If that be the case, then, it would apply with more force in acase of attachment, which is a step anterior to sale. 13. The decision rendered in Sri Mohan Wahi's case(supra) was taken into consideration by the learned Single Judgeof this Court, in Sri Lakshmi Brick Industries case (supra)wherein, it was held as follows:- “ 12 . In the present case, the orderof the Income Tax Appellate Tribunal, whichis the highest fact finding authority, heldinfavour of the petitioner assessee andthatorder has been given effect to. As aconsequence,the Tax Recovery Officer is boundto give effect of the order of the AssistantCommissioner, who accepted the order of theTribunal. It is another matter for theDepartment to proceed in Appeal, and theDepartment is always at liberty to proceedfor recovery, if they succeed in the Appealbefore the Court. The provisions of Section225(2) of the Income Tax Act,1961, gives amandate to Tax Recovery Officer to passappropriate orders based on the orders passedin Appeal, or other proceedings. 13. In such view of the matter, thefirst respondent Tax Recovery Officer isdirected to pass necessary orders, consequentto the proceedings of the AssistantCommissioner of Income Tax, Circle XIV,accepting the order of the Tribunal. Takingnote of the nil payment insfor as theassessee for all the assessment year, the TaxRecovery Officer has to release the propertyfrom attachment in terms of the order of theTribunal, and consequent to the order of theAssistant Commissioner of Income Tax, CircleXIV. The Writ Petitions are allowed asabove. No costs.” 13. In such view of the matter, thefirst respondent Tax Recovery Officer isdirected to pass necessary orders, consequentto the proceedings of the AssistantCommissioner of Income Tax, Circle XIV,accepting the order of the Tribunal. Takingnote of the nil payment insfor as theassessee for all the assessment year, the TaxRecovery Officer has to release the propertyfrom attachment in terms of the order of theTribunal, and consequent to the order of theAssistant Commissioner of Income Tax, CircleXIV. The Writ Petitions are allowed asabove. No costs.” 14.The learned Senior Standing Counsel for the Revenuepointed out that, in the decision rendered in Sri Lakshmi BrickIndustries (supra), the Court did not interpret the expressions''final'' and ''conclusive'', and therefore, the said decisioncannot be applied to the facts of the case on hand. Thiscontention does not merit acceptance, as the decision in SriMohan Wahi's case (supra) was rendered, taking intoconsideration the scope of Section 225 (3) read with Rule 12 ofsecond schedule to the Act. This was taken note of in SriLakshmi Brick Industries (supra), and therefore, the groundraised by the Revenue, is not a ground to distinguish thedecision in Sri Lakshmi Brick Industries (supra). 15. In the considered view of this Court, the decision inSri Lakshmi Brick Industries (supra) would apply with full forceto the case of the petitioner herein. 16.The learned Senior Standing Counsel for the Revenuehas referred to the decision in Ghanshyamdas Jatia's case, andsubmitted that, unless the outstanding demand is reduced by anorder in Appeal, or other proceeding, and such order has becomefinal and conclusive, the question of lifting the attachmentdoes not arise, and the position would be that, the certificateproceeding already started under the original assessment in suchcase remains in abeyance, subject to the provisions of Section225 (4) abiding with the last order, as it attains finality andconclusiveness. In the said decision, the matter was pendingbefore the Tribunal, and the Court observed that the matter hadnot attained the character of final and conclusive order, andtherefore, it did not have any effect on the certificateproceeding, which remained in abeyance pending decision by afinal and conclusive order. 17.However, in contradistinction to the present case, theAppeal filed by the petitioner/assessee has been allowed in fullby ITAT, and demand of tax, in respect of the assessment year2009-10 was Nil, and with regard to two assessment years, it hasresulted in refund. Thus, to say that the order of attachmentshould still continue till the matter reaches the Hon'bleSupreme Court would be an interpretation, which would beinconsistent with the provisions of the Act, more particularly,by reading together Sections 222 and 225 of the Act. 18. As rightly pointed out by the learned counsel for thepetitioner, the object of the demand is to secure the interestof the revenue. The Income Tax Officer acquires jurisdiction toattach the property based on a certificate issued by the TaxRecovery Officer, certifying that the assessee is a defaulter.As on date, the Tax Recovery Officer has not issued such acertificate. Even assuming that the Tax Case Appeal filed bythe Revenue is entertained, that by itself, will not make thepetitioner as an assessee in default, on account of the factthat the entire tax liability is wiped of pursuant to the orderof ITAT. 18. As rightly pointed out by the learned counsel for thepetitioner, the object of the demand is to secure the interestof the revenue. The Income Tax Officer acquires jurisdiction toattach the property based on a certificate issued by the TaxRecovery Officer, certifying that the assessee is a defaulter.As on date, the Tax Recovery Officer has not issued such acertificate. Even assuming that the Tax Case Appeal filed bythe Revenue is entertained, that by itself, will not make thepetitioner as an assessee in default, on account of the factthat the entire tax liability is wiped of pursuant to the orderof ITAT. 19. Assuming further that the Revenue succeeds in the TaxCase Appeal, automatically, the assessee will not be treated asdefaulter, since the consequential orders have to be passed,notice of demand have to be issued, time has to be granted,thereafter, proceeding has to be initiated and certificate hasto be issued by the Tax Recovery Officer, declaring thepetitioner as defaulter, and only then, the order of attachmentof immovable property of the petitioner could be effected. Furthermore, the decision in the case of Sri Lakshmi BrickIndustries (supra) was challenged by the Revenue, by way of WritAppeal, being Writ Appeal No.1527 of 2013 and it is pending,and it is submitted that the issue involved in the Writ Appealhas become infructuous. 20.Thus, the decision of this Court in the case of SriLakshmi Brick Industries (supra) being the jurisdictional Courtfor the respondent, the same would bind over the respondent, asheld by the Hon'ble Supreme Court in the case of (M/s. EastIndia Commercial Co. Ltd., and another Vs. Collector of Customs,Calcutta) reported in A.I.R. (1962) S.C. 1893, that the lawdeclared by the highest court in the State is binding onauthorities, or tribunals under its superintendence, and thatthey cannot ignore it, either in initiating a proceeding ordeciding on the rights involved in such a proceeding. 21.The learned Senior Standing Counsel for the Revenuerelied upon the decision of this Court in Pyramid SaimiraTheatre Ltd.,( supra). On a carefully going through the saiddecision, it is noted that the decision was on an entirelydifferent issue, not with specific reference to the point, whichhas been agitated as to the effect of expressions ''final'' and''conclusive''. Therefore, the said decision does not rendersupport to the stand of the Revenue. 22.For all the aforesaid reasons, the Writ Petition isallowed, and the first respondent/Tax Recovery Officer isdirected to pass appropriate orders for lifting the order ofattachment of the immovable property of the petitioner, andreturn the original documents given as surety to the secondrespondent, vide letter, dated 04.09.2012, and pass necessaryconsequential orders with due intimation to the Sub Registrar,Neelankarai. The above direction shall be complied with by thefirst respondent, within a period of four weeks from the date ofreceipt of a copy of this order. No costs. Consequently,connected Writ Miscellaneous Petitions are closed. -s/d-Assistant RegistrarTrue Copy Sub-Assistant Registrar sd https://hcservices.ecourts.gov.in/hcservices/ To 1.The Tax Recovery Officer – 1,Company Range – 1,Room No.503, New Block, 5[th] Floor,121 Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034. 2.The Assistant Commissioner of Income Tax,Corporate Company Range – 1, 121 Mahatma Gandhi Road, Nungambakkam,Chennai – 600 034. 3.The Commissioner of Income Tax-1,Company Circle – 1, 121 Mahatma Gandhi Road, Nungambakkam,Chennai – 600 034. +1 cc to Mr.R.Sivaraman Advocate sr 52645 +1 cc to Mr.T.Ravikumar Senior Standing Counsel for I.T.Department Sr.51935 Writ Petition No.26821 of 2016 aa27/09/2016