M/S.international Seaport Dredging Private Limited v. Deputy Commissioner Of Income-Tax International Taxation Circle 1 (2) 4[Th] Floor, Bsnl Building 16 Greams Road Chennai – 600 006

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 25.04.2018 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM M/s.International Seaport Dredging Private LimitedRepresented by its Manager Mr.Amedeo Peyron .. Petitioner in both W.Ps'Versus Deputy Commissioner of Income-taxInternational Taxation Circle 1 (2)4[th] Floor, BSNL Building16 Greams RoadChennai – 600 006. .. Respondent in both W.Ps' W.P.No.10319 of 2018 is filed under Article 226 of theConstitution of India, seeking to issue a Writ of Certiorari,calling for records pertaining to PAN/TAN: dated31.03.2018 under Section 201(1)/(1A) of the Income Tax Act forthe assessment year 2011-12 on the file of the respondent hereinand quash the same. W.P.No.10320 of 2018 is filed under Article 226 of theConstitution of India, seeking to issue a Writ of Certiorari,calling for records pertaining to TDS Remittance/FY-2010-11dated 01.03.2018 culminating into the show cause notice inPAN:AABCI2286E/DCIT-1(1)/2017-18 dated 27.03.2018 on the file ofthe respondent herein, and quash the same. For Petitioner : Mr.N.V.Balaji(In both W.Ps')For Respondent : Mrs.Hema Muralikrishnan(In both W.Ps') Senior Standing Counsel Heard Mr.N.V.Balaji, learned counsel for the petitionerand Mrs.Hema Muralikrishnan, learned Senior Standing Counsel forthe respondent. 2. With the consent on either side, these writ petitionsare taken up for disposal. 3. The petitioner is a private limited company, engagedin the business of dredging and marine engineering servicesinvolving designing, construction, developing, modernizing,extending and maintaining ports and harbours. In these writpetitions, the petitioner challenges the order passed by therespondent under Section 201(1)(1A) of the Income Tax Act 1961. 4. After elaborately hearing the learned counsel for theparties and carefully perusing the materials placed on record, Iam of the considered view that the matter requires re-examination and re-consideration by the respondent, for whichpurpose, the matter has to be remanded to the respondent. Thisconclusion is supported by the following reasons: (i) The first and foremost reason for this Court to beconvinced that the matter has to be sent back to the respondentfor fresh consideration is the manner in which the order hasbeen passed. In spite of exercising great care to understandthe manner in which the respondent has passed the order, thisCourt is unable to clearly decipher as to which is the findingrendered by the respondent vis-a-vis the petitioner'scontentions and which are details and materials pertaining tothe party whom the petitioner has effected payments. Therefore,on this short ground, the matter ought to be sent back to therespondent for fresh consideration. (ii) The second reason, which has convinced this Court toremand the matter, is on account of the fact that materialswhich have been disclosed or mentioned in the impugned orderwere never disclosed to the assessee. When the notice dated23.12.2017 was issued, there was no inclination that therespondent proposes to direct the petitioner to pay tax andinterest by referring to the orders which were passed in thecase of M/s.Baggerwerken Decloedt en Zoon nv, Belgium. In fact,the respondent has verbatim extracted the order rather, scannedthe order and pasted it in the impugned order. This is why,this Court made an observation in the preceding paragraph thatit is difficult to decipher as to which are the observations andfindings with regard to the petitioner and which are thosepertaining to the Belgium Company against whom the order dated23.12.2017 was passed . 5. At the very fist instance, viz., when the respondentissued notice dated 01.03.2018, calling for details, there wasno whisper as to the basis for calling for the details.Strictly speaking, this may not be required at that stage, but,however, upon perusal of the details furnished by thepetitioner, if the respondent proposes to make the petitionerliable for payment of interest based upon the materials, whichare available with the respondent pertaining to the otherassessee viz., Belgium Company or for that matter the FrenchCompany, such details ought to have been disclosed in the noticedated 27.03.2018. 6. Mr.N.V.Balaji, emphatically states, even during thecourse of discussion with the respondent pursuant to the replygiven by the petitioner dated 29.03.2018, the petitioner was notmade known that the respondent proposes to refer to the orderpassed in respect of the Belgium Company or such other mattersnor there was a stray reference that the respondent proposes torely upon the materials, which have been collected behind theback of the assessee. These are sufficient to hold that therehas been gross violation of principles of natural justice.Further from the reply dated 29.03.2018, I find that thepetitioner has not only placed on record the type of thebusiness activities and the facts relatable to the same, but hasalso discussed about the judicial precedents, which they seek torely upon. The petitioner placed reliance on the decision ofthis Court in the case of CIT V Van Oord ACZ Equipment BVreported in (2015) 373 ITR 133 (Mad) in the context of IndiaNetherlands DTAA and distinguished the decision in the case ofPoompuhar Shipping Corporation Ltd., reported in [2014] 360 ITR257 (Mad). However, the respondent has not even referred tothose decisions, much less distinguished the stand taken by thepetitioner in their reply dated 29.03.2018. This is one morereason to hold that the impugned order is in violation ofprinciples of natural justice and could be termed as a non-speaking order. 7. On facts, Mr.N.V.Balaji, learned counsel appearing forthe petitioner pointed out that total payment remitted toBaggerwerken Decloedt En Zoon being Rs.142,15,98,070/- does notpertain to the relevant year, but, pertains to the earlier yearsand the respondent has mechanically adopted the said figure andworked out 25% of the receipts as Rs.35,53,99,518/- andcalculated TDS at 40% under Section 201(1) at Rs.14,21,59,807/-and also interest at 1%. Though such a stand has been taken bythe learned counsel, I find that such a specific plea was nottaken by the assessee in the reply dated 29.03.2018. Furtherthe learned counsel pointed out that when the petitioner'sAssessing Officer was in the process of completing the 7. On facts, Mr.N.V.Balaji, learned counsel appearing forthe petitioner pointed out that total payment remitted toBaggerwerken Decloedt En Zoon being Rs.142,15,98,070/- does notpertain to the relevant year, but, pertains to the earlier yearsand the respondent has mechanically adopted the said figure andworked out 25% of the receipts as Rs.35,53,99,518/- andcalculated TDS at 40% under Section 201(1) at Rs.14,21,59,807/-and also interest at 1%. Though such a stand has been taken bythe learned counsel, I find that such a specific plea was nottaken by the assessee in the reply dated 29.03.2018. Furtherthe learned counsel pointed out that when the petitioner'sAssessing Officer was in the process of completing the assessment for the assessment year 2011-12, queries were raisedby the Assessing Officer, which were replied by the petitioner,wherein, they have specifically mentioned as to why tax need notbe deducted at source in respect of the floating equipments andmore particularly, the amount paid to Baggerwerken Decloedt &Zoon Nv, on the ground that TDS is not applicable as per India-Belgium treaty. Further with regard to the payments made to theFrench Company viz., Societe De Draggage International SA, tothe tune of Rs.13,98,17,692/- the learned counsel for thepetitioner, placed reliance on the assessee's own case for theassessment year 2010-11 in ITA No.418/Mds/2015 on the file ofthe Income tax Appellate Tribunal, 'D' Bench, Chennai, whereinthe first question, which pertain to non-deduction of tax atsource under Section 195 of the Act and the Tribunal referringto India-Sweden treaty, which did not provide for taxation ofright to use equipment, held that it would be applicable toIndia-France treaty as well and accepted the case of theassessee. However, the revenue is on an appeal before thisCourt, but there is no order of stay. Therefore, it issubmitted that there is absolutely no basis for the respondentto pass the impugned order, that too in the manner done. 8. Mr.N.V.Balaji, contended that the impugned proceedings iswholly barred by limitation, as the proceedings have beeninitiated beyond the period of six years and therefore, it isvoid ab initio. 9. Mrs.Hema Muralikrishnan, learned Senior Standing Counselfor the respondent strenuously contended that the impugned orderis an appealable order and if the petitioner is aggrieved, hehas to file an appeal and without exhausting the appeal remedy,the petitioner should not be permitted to approach this Courtunder Article 226 of the Constitution of India. 10. Further, the learned Senior Standing Counsel submittedthat the question of limitation was not specifically raised bythe petitioner at any earlier point of time and it is raised bythe petitioner for the first time before this Court. In anyevent, the question of limitation being a question of lawespecially in the present case, whether the issues revolvearound the amendment brought about to Section 201(3). It ispointed out that the amendment extending the period oflimitation to 7 years was only prospective, whereas the earlieramendment was retrospective and this distinction is veryimportant in the case on hand. Thus the question of limitationbeing a question of law, though there may be facts, which may berequired to be looked into, but the contention raised by thepetitioner in the instant case, appears to be a pure question oflaw. Therefore, the petitioner cannot be shutout from raising such an issue though not raised by them, while submitting theirreply dated 29.03.2018. One other aspect, which has to bepointed out, is that if the respondent had proposed to placereliance on materials or orders which were passed in respect ofBelgium Company or French Company or for that matter proposed torely on and refer to statements recorded from the petitioner'semployees, the assessee was entitled to put on notice about suchcourse of action. This having not been done, this Court isfully convinced that there are several grounds to hold that theimpugned order is in violation of principle of nature justice.Having held so, the necessary consequence that has to follow isto set aside the impugned order and remand the matter to therespondent for fresh consideration. However, in the instantcase, I propose to take a slightly different approach. Therespondent having referred to several materials and informationnot pertaining to the petitioner/assessee in the impugned orderand arriving at a conclusion against the petitioner largelybased on such information, the impunged proceedings can bedirected to be treated as a show cause notice. 11. The learned counsel for the petitioner would submit thatthe petitioner should be furnished with all information that therespondent has referred to and relied on or might have collectedbehind the back of the petitioner. Though the learned counselmay be partly right in making such a request, I am of the viewthat such request of the petitioner has to be considered by therespondent though not immediately but a little later, as theCourt proposes to direct. 12. In the result, these writ petitions are disposed ofdirecting the petitioner to treat the impugned order as a showcause notice and submit their preliminary objection to theimpugned order. In the preliminarily objection, the petitioneris entitled to raise the plea of limitation. Apart from that,if the petitioner requires any documents, records, statementetc., then they shall clearly indicate, which are documentsrequired by them and the relevancy of the documents to theircase. On such request being made, the respondent shall bear inmind the principle of natural justice and furnish copies of therecords sought for by the petitioner and give the petitionersufficient time to submit their objections. After objections aresubmitted, the respondent shall afford an opportunity ofpersonal hearing which should not be an empty formality andshould be an effective personal hearing, where all issues are tobe clarified and necessary documents obtained from thepetitioner and clear record of the personal hearing bemaintained. After conclusion of such personal hearing, therespondent is directed to pass fresh orders on merits and inaccordance with law. Till such exercise is completed, nocoercive action shall be initiated against the petitioner pursuant to the impugned order. No costs. Consequently,connected miscellaneous petition is closed. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar vsmToDeputy Commissioner of Income-taxInternational Taxation Circle 1 (2)4[th] Floor, BSNL Building16 Greams RoadChennai – 600 006.+1cc to Mr.N.V.Balaji, Advocate Sr.31450+1cc to Mr.Hema Muralikrishnan, Senior Standing Counsel Sr.30965W.P.Nos.10319 and 10320 of 2018kan[co]srg 18/05/2018