Pr. Commissioner Of Income Tax v. Micro And Small Enterprise Facilitation Council And Anr. …

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 9[th] May, 2023 Date of decision: 6[th ]July, 2023 + W.P.(C) 13754/2019 and CM APPL. 55377/2019, 23859/2021, 42231/2021 …..Petitioner Through: Mr. Ruchir Bhatia, Sr. Standing Counsel, Mr. Shlok Chandra, Jr. Standing Counsel with Mr. Keshav Garg, Advocate, ( ) PR. COMMISSIONER OF INCOME TAX versus MICRO AND SMALL ENTERPRISE FACILITATION COUNCIL AND ANR. ….. Respondents Through: Mr. Jitendra Kumar Singh, Advocate for R-2. (M- ) Mr. S.B. Gupta in person. WITH + W.P.(C) 16294/2022 and CM APPL. 50997/2022, 54199/2022, 1336/2023 1336/2023 PR. COMMISSIONER OF INCOME TAX CENTRAL-1.. Petitioner Through: Mr. Ruchir Bhatia, Sr. Standing Counsel, Mr. Shlok Chandra, Jr. Standing Counsel with Mr. Keshav Garg, Advocate, versus MICRO AND SMALL ENTERPRISE FACILITATION COUNCIL& ANR. ….. Respondents Through: Mr Avishkar Singhvi Advocate with Mr Naved and Mr Vivek Kumar Advocates for R-1 (M: ). Mr. Jitendra Kumar Singh, Adv. for R-2. Mr. S.B. Gupta in person. CORAM: JUSTICE PRATHIBA M. SINGH JUDGMENT W.P.(C) 13754/2019 & 16294/2022 Prathiba M. Singh, J. Background 1. Both the present petitions raise interesting legal issues relating to the interplay between the Income Tax Act, 1961 (hereinafter ‘IT Act’) and the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter ‘MSMED Act’) relating to fee payable to CA Firms, for Special Audits directed under Section 142(2A) of the IT Act. 2. The Petitioner i.e., the Principal Commissioner of Income Tax, Central-1, has filed the present writ petitions challenging the directions for reference to arbitration passed by the Respondent No. 1 i.e., the Micro & Small Enterprise Facilitation Council (hereinafter ‘MSEFC’) - an authority established under Section 20 of the MSMED Act. Respondent No. 2 i.e., M/s SBG & Co. is a partnership firm of Chartered Accountants (hereinafter ‘CA Firm’) of which Mr. S.B. Gupta is a Partner. The said CA Firm is also registered as a `Micro Enterprise’ under the provisions of the MSMED Act. 3. The CA Firm, being on the panel of the Income Tax Department (hereinafter ‘IT Department’), was nominated as a Special Auditor by the IT Department in four cases for carrying out Special Audit in terms of Section 142(2A) of the IT Act. 4. After the completion of the said Special Audit assignments and the submission of the final audit reports, the CA Firm raised four invoices in respect of the said audits. The grievance of the Special Auditor- CA Firm is that qua the invoices raised, the full payment has not been made. Further, in respect of one of the assignments the payment has not been received at all. 5. Under such circumstances, the CA Firm invoked the provisions of the MSMED Act and approached the MSEFC by way of references under Section 18 of the Act. 6. Pursuant to the said references, the matter was thereafter referred to the Delhi International Arbitration Centre (hereinafter ‘DIAC’) by the MSEFC vide the impugned reference orders and a retired judge of the Supreme Court was appointed as the Arbitrator in W.P.(C) No. 16294/2022. However, in W.P.(C) No. 13754/2019, the ld. Arbitrator was yet to be appointed. 7. The IT Department has preferred the present two writ petitions, challenging the impugned reference orders passed by the MSEFC on the ground that the MSEFC under the MSMED Act lacks jurisdiction to deal with claims raised by Special Auditors under Section 142(2A) in respect of the fee payable in terms of Section 142(2D) of the IT Act. Brief Facts 8. The facts in the two writ petitions are set out below. W.P(C). 13754/2019 6. Pursuant to the said references, the matter was thereafter referred to the Delhi International Arbitration Centre (hereinafter ‘DIAC’) by the MSEFC vide the impugned reference orders and a retired judge of the Supreme Court was appointed as the Arbitrator in W.P.(C) No. 16294/2022. However, in W.P.(C) No. 13754/2019, the ld. Arbitrator was yet to be appointed. 7. The IT Department has preferred the present two writ petitions, challenging the impugned reference orders passed by the MSEFC on the ground that the MSEFC under the MSMED Act lacks jurisdiction to deal with claims raised by Special Auditors under Section 142(2A) in respect of the fee payable in terms of Section 142(2D) of the IT Act. Brief Facts 8. The facts in the two writ petitions are set out below. W.P(C). 13754/2019 9. On 21[st] / 22[nd] March 2013, the IT Department passed an order under Section 142(2A) of the IT Act, directing the Assessee i.e., M/s Sahara India (Firm), to get its accounts audited by the CA Firm, which was nominated as the Special Auditor, for the assessment year 2010-11. The Special Audit was to be conducted within a period of 60 days. 10. Thereafter, M/s Sahara India (Firm) filed W.P.(C) No. 3273/2013 titled ‘Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Delhi (Central)-1, New Delhi & Others’ before this Court, challenging the nomination of the Special Auditor by the IT Department. W.P.(C) 13754/2019 & 16294/2022 11. In W.P.(C) No. 3273/2013, an interim order dated 24[th] May 2013 was passed, directing that no assessment order by the IT Department would be passed in the said case. It was, however, directed that the Special Audit may continue. It was further directed that while the Special Audit may be carried on, the Special Audit report shall not be served upon M/s Sahara India (Firm). 12. In the meantime, the IT Department extended the period of Special Audit by a total period of 180 days in terms of Section 142(2C) of the IT Act. A further extension of 45 days was granted vide order dated 4[th] October 2013 passed in W.P.(C) No. 3273/2013 titled ‘Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Delhi (Central)-1, New Delhi & Others’. 13. Pursuant to the aforementioned extensions, the CA Firm carried out the Special Audit of M/s Sahara India (Firm). 14. Thereafter, the IT Department requested the CA Firm to not submit the Special Audit report to M/s Sahara India (Firm) in terms of the directions by the order dated 24th May 2013 passed in W.P.(C) No. 3273/2013 titled ‘Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Delhi (Central)-1, New Delhi & Others’. 15. The CA Firm, through letter dated 18th November 2013, sought clarification regarding the submission of the Special Audit report to M/s Sahara India (Firm) upon completion of the Special Audit. It also submitted Fee Bill No. 43 dated 14th November 2013, for an amount of Rs. 1,11,37,500/- (exclusive of Service Tax) and Rs.1,25,14,095/- (inclusive of Service Tax) to the IT Department along with the timesheet in respect of the said Special Audit assignment. 16. On 5[th] September 2016, W.P.(C) No. 3273/2013 titled ‘Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Delhi (Central)-1, New Delhi & Others’ was disposed of. 17. In 2018, having not received the payment of its fee bill, the CA Firm filed a writ petition being W.P.(C) No. 1773/2018 titled ‘M/s SBG & Co. vs. The Union of India & Ors.’ before this Court, regarding the payment of its fees. 18. W.P.(C) No. 1773/2018, was disposed of vide order dated 26th February 2018, with a direction that the writ petition would be treated as a representation to the Competent Authority i.e., the IT Department in this case, which would inform the CA Firm about their decision on the fee within a period of eight weeks. 16. On 5[th] September 2016, W.P.(C) No. 3273/2013 titled ‘Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Delhi (Central)-1, New Delhi & Others’ was disposed of. 17. In 2018, having not received the payment of its fee bill, the CA Firm filed a writ petition being W.P.(C) No. 1773/2018 titled ‘M/s SBG & Co. vs. The Union of India & Ors.’ before this Court, regarding the payment of its fees. 18. W.P.(C) No. 1773/2018, was disposed of vide order dated 26th February 2018, with a direction that the writ petition would be treated as a representation to the Competent Authority i.e., the IT Department in this case, which would inform the CA Firm about their decision on the fee within a period of eight weeks. 19. However, no such decision was made by the Competent Authority within the said period. Consequently, the CA Firm filed a contempt petition being CONT.CAS(C) 456/2018 titled ‘SBG & Company v. B K S Pandya’ before this Court. Further, an application was moved seeking extension of time to comply with the said order. 20. Finally, after various communications and submissions between the IT Department and the CA Firm, on 10th /11th July 2018, the IT Department passed the order under Section 142(2D) of the IT Act, determining the fee of the CA Firm at Rs. 33,84,000/-. 21. On 11[th] July 2018, an order was passed disposing of the application seeking extension of time, moved in W.P(C) 1773/2018 recording the submission by the IT Department that the amount payable had been determined and the same would be credited to the CA Firm within one week. 22. However, the payment of the fee in terms of the abovementioned order dated 11[th] July 2018 was not credited by the IT Department to the CA Firm within the one-week period. 23. On 1st September 2018, the IT Department paid the amount of Rs.35,93,808/- (Rs. 33,84,000/- plus GST @ 18% i.e., Rs. 6,09,120/- less TDS @ 10% of Rs. 3,99,312/-) as determined under Section 142(2D) of the IT Act. The receipt of the said payment was acknowledged by the CA Firm in its letter dated 4th September 2018. However, the CA Firm considered the said payment as a part-payment towards its total fee amount and sought the payment of the balance amount along with interest in terms of the provisions of the MSMED Act. Thus, the CA Firm was aggrieved by the amount of fee as determined and paid by the IT Department in terms of Section 142(2D) of the IT Act. 24. As a result, on 16th November 2018, the CA Firm filed a reference under Section 18 of the MSMED Act before the MSEFC for the recovery of the balance amount of fee along with interest as provided under Section 15 and Section 16 of the MSMED Act. 25. Thereafter, the MSEFC initiated conciliation proceedings between the CA Firm and the IT Department. Despite a number of meetings being held for conciliation between the parties, conciliation proceedings between the parties failed and were accordingly terminated. It may be pertinent to note that the IT Department raised objections over the applicability of Section 16 of the MSMED Act to payments pursuant to order under Section 142(2D) of the IT Act, as recorded in the minutes of the joint meeting held on 20[th]December 2018.Further, in its written submissions before the MSEFC, the IT Department challenged the jurisdiction of the MSEFC. W.P.(C) 13754/2019 & 16294/2022 26. Finally, on 19th September 2019, the MSEFC passed the impugned reference order, whereby the MSEFC referred the case to the DIAC under Section 18(3) of the MSMED Act for initiating arbitration proceedings. 27. The DIAC thereafter, issued letter dated 28th September 2019 informing the CA Firm and the IT Department of the impugned reference and the details regarding the arbitration proceedings, such as filing of statement of claims as also other formalities pertaining to the arbitration proceedings. W.P.(C) 13754/2019 & 16294/2022 26. Finally, on 19th September 2019, the MSEFC passed the impugned reference order, whereby the MSEFC referred the case to the DIAC under Section 18(3) of the MSMED Act for initiating arbitration proceedings. 27. The DIAC thereafter, issued letter dated 28th September 2019 informing the CA Firm and the IT Department of the impugned reference and the details regarding the arbitration proceedings, such as filing of statement of claims as also other formalities pertaining to the arbitration proceedings. 28. In response to the same, while the CA Firm filed its statement of claim with DIAC, the IT Department vide letter dated 19th November 2019, challenged the jurisdiction of DIAC in terms of Section 293 of the IT Act. Further, it sought minimum 7 days’ time to file the statement of claims and to suggest the names of Arbitrators. The IT Department, vide letter dated 12th December 2019, also informed the DIAC that it was in the process of filing a writ petition and requested that the proceedings be kept in abeyance till the outcome of the writ petition. 29. Thereafter, the IT Department filed the present writ petition. 30. Vide order dated 23[rd] December 2019, this Court stayed the impugned order dated 19[th] September 2019 along with the proceedings emanating therefrom. W.P. (C) 16294/2022 31. This petition deals with the Special Audit of three entities, in respect of which the CA Firm was nominated as a Special Auditor by the IT Department under Section 142(2A) of the IT Act. The three entities are: - (i) M/s Sahara India Financial Corporation Limited (hereinafter ‘SIFCL’) Signature Not Verified (ii) M/s Reverse Logistics Company Private Limited (hereinafter ‘Reverse’) (iii) M/s Oracle India Private Limited (hereinafter ‘Oracle’) 32. In the case of Oracle, nomination letter dated 29th December 2011, was issued by the IT Department regarding the nomination of the CA Firm as Special Auditor of Oracle, for the assessment year 2008-09. The Special Audit report was to be submitted within a period of 90 days. Subsequently, vide letter dated 30th March 2018, the IT Department requested the CA Firm to commence the Special Audit after 1st April 2018, in compliance with the order dated 13th March 2018 passed by this Court in ITA No. 1110/2012. 33. In the case of SIFCL, the IT Department nominated the CA Firm as the Special Auditor on 24th March 2014 vide order under Section 142(2A) of the IT Act, directing the SIFL to get its accounts audited by the CA Firm for the assessment 2011-12. The Special Audit report was to be submitted within a period of 60 days. 34. In the case of Reverse, nomination letter dated 26th December 2017, was issued by the IT Department regarding the nomination of the CA Firm as Special Auditor of Reverse, for assessment year 2015-16. The Special Audit report was to be submitted within a period of 90 days. 35. The Special Audits were concluded in respect of all three entities despite some extensions in the audit period and the Special Audit reports were also prepared and provided to the Assessee-entities by the CA Firm. 36. Consequently, the CA Firm sent letters to the IT Department dated 3[rd]December 2014, 20[th] June 2018 and 19[th] December 2018 regarding the payment of fees for the Special Audits of SIFCL, Reverse and Oracle, Page 8 of 54 respectively, along with the respective invoices. The details of the invoices are set out as under: - (i) SIFCL-Invoice No. 21 dated 3[rd] December 2014 for Rs. 1,56,91,605/- (exclusive of Service Tax) and Rs. 1,76,31,088/- (inclusive of Service Tax) 1,56,91,605/- (exclusive of Service Tax) and Rs. 1,76,31,088/- (inclusive of Service Tax) (ii) Reverse-Invoice No. 75 dated 20[th] June 2018 for Rs. 1,96,12,500/- (exclusive of GST) and Rs. 2,31,42,750/- (inclusive of GST) (exclusive of GST) and Rs. 2,31,42,750/- (inclusive of GST) (iii) Oracle- Invoice No. 23 dated 19[th] December 2018 for Rs. 2,01,45,000/- (exclusive of GST) and Rs. 2,37,71,100 /- (inclusive of GST) of GST) Page 8 of 54 respectively, along with the respective invoices. The details of the invoices are set out as under: - (i) SIFCL-Invoice No. 21 dated 3[rd] December 2014 for Rs. 1,56,91,605/- (exclusive of Service Tax) and Rs. 1,76,31,088/- (inclusive of Service Tax) 1,56,91,605/- (exclusive of Service Tax) and Rs. 1,76,31,088/- (inclusive of Service Tax) (ii) Reverse-Invoice No. 75 dated 20[th] June 2018 for Rs. 1,96,12,500/- (exclusive of GST) and Rs. 2,31,42,750/- (inclusive of GST) (exclusive of GST) and Rs. 2,31,42,750/- (inclusive of GST) (iii) Oracle- Invoice No. 23 dated 19[th] December 2018 for Rs. 2,01,45,000/- (exclusive of GST) and Rs. 2,37,71,100 /- (inclusive of GST) of GST) 37. On 12[th] July 2019 and 19[th] July 2019, the IT Department passed orders under Section 142(2D) of the IT Act, determining the remuneration of the CA Firm with respect to the Special Audits of Oracle and Reverse, respectively. The amounts determined under Section 142(2D) of the IT Act by the IT Department are set out below. (i) Oracle at Rs. 67,50,000/- (exclusive of GST) i.e., Rs. 79,65,000/- (inclusive of GST (ii) Reverse at Rs. 60,90,000/- (exclusive of GST) i.e., Rs. 71,86,200/- (inclusive of GST) 38. However, at this stage, no remuneration was determined by the IT Department with respect to the Special Audit of SIFCL. Department with respect to the Special Audit of SIFCL. 39. The IT Department, thereafter, released the following payments: - (i) Reverse- Rs. 64,55,400/- (Rs.60,90,000/- plus GST @ 18% i.e., Rs.10,96,200/- less IT TDS of Rs. 6,09,000/- less GST TDS of Rs. 1,21,800/-) (ii) Oracle-Rs.71,55,000/-(Rs.67,50,000/- plus GST@18% i.e., 12,15,000/- less ITTDS of Rs.6,75,000/- less GST TDS of Rs.1,35,000/-). 40. The said payments were treated a part-payment of the total fee amount. The CA Firm sought the payment of the balance amounts along with interest in terms of the provisions of the MSMED Act. Thus, the CA Firm was aggrieved by the amount of fee as determined and paid by the IT Department in terms of Section 142(2D) of the IT Act. 41. Resultantly, the CA Firm filed 3 references before the MSEFC in the year 2020, regarding the disputed fee amounts. 42. In response to the references filed by the CA Firm, the MSEFC initiated conciliation proceedings between the CA Firm and the IT Department. A number of meetings were held for conciliation between the parties. As is evident from a perusal of the minutes of the conciliation meetings, the CA Firm filed declaration under Section 76(d) of the Arbitration & Conciliation Act, 1996 thereby terminating the conciliation proceedings. Accordingly, the conciliation proceedings were terminated by the MSEFC in all the three cases. 43. Finally, on 10[th] December 2021, the MSEFC passed the impugned reference orders in all the three cases, whereby it referred the cases to the DIAC under Section 18(3) of the MSMED Act for initiating arbitration proceedings. The details of the impugned reference orders dated 10[th]December 2021 regarding all the three entities are set out below. (i) Reference No. F.14(510)/DC/C/HQ/MSEFC/Delhi Central/2020- 21/8693 with respect to the Special Audit of SIFCL (ii) Reference No. F.14(510)/DC/C/HQ/MSEFC/Delhi Central/2020-21/8697 with respect to the Special Audit of Oracle (iii) Reference No. F.14(510)/DC/C/HQ/MSEFC/Delhi Central/2020-21/8688 with respect to the Special Audit of Reverse. 44. In terms of the aforementioned impugned reference orders, the DIAC issued letters in all the three cases to the CA Firm and the IT Department intimating them about the impugned references and the details regarding the arbitration proceedings, such as filing of statement of claims as also other formalities pertaining to the arbitration proceedings. 45. In response thereto, the CA Firm filed its statement of claims in the arbitration proceedings regarding all the three entities. 21/8693 with respect to the Special Audit of SIFCL (ii) Reference No. F.14(510)/DC/C/HQ/MSEFC/Delhi Central/2020-21/8697 with respect to the Special Audit of Oracle (iii) Reference No. F.14(510)/DC/C/HQ/MSEFC/Delhi Central/2020-21/8688 with respect to the Special Audit of Reverse. 44. In terms of the aforementioned impugned reference orders, the DIAC issued letters in all the three cases to the CA Firm and the IT Department intimating them about the impugned references and the details regarding the arbitration proceedings, such as filing of statement of claims as also other formalities pertaining to the arbitration proceedings. 45. In response thereto, the CA Firm filed its statement of claims in the arbitration proceedings regarding all the three entities. 46. On 7th July 2022, the Ld. Sole Arbitrator, passed a combined order in the arbitration proceedings in all the three cases, whereby last opportunity was granted to the IT Department to appear in the proceedings as also to file its Statement of Defense and other relevant documents on or before 22nd July 2022, else it would be proceeded against ex-parte. 47. Thereafter, the ld. Arbitrator passed further orders dated 8th September 2022 and 12[th] October 2022 in the said arbitration proceedings. 48. Aggrieved by the impugned reference orders dated 10th December 2021 and the proceedings emanating therefrom, the IT Department filed the present petition. 49. Vide order dated 25th November 2022, this Court stayed the impugned reference orders dated 10th December 2021 along with the proceedings emanating therefrom. W.P.(C) 13754/2019 & 16294/2022 50. It is of import to note that during the course of the proceedings in the present petitions, the IT Department passed an order dated 8th May 2023 under Section 142(2D) of the IT Act with respect to the Special Audit of SIFCL determining the remuneration at Rs. 15,25,000/- which it submitted before the Court. Submissions Submissions by the Petitioner 51. On behalf of the Petitioner, Mr. Ruchir Bhatia, ld. Counsel has made the following submissions: A. That the role of the Special Auditor under Section 142(2A) of the IT Act is determined by the Principal Chief Commissioner or the Chief Commissioner or other similarly placed senior officials of the Income Tax Department. The remuneration is also to be fixed by the senior officials of the IT Department after taking into consideration the nature of the assignment, the kind of work done and the total time that is reasonably to be spent. B.That the Special Auditor appointed under Section 142(2A) of the IT Act, in fact, steps into the shoes of the Assessing Officer and has a very important responsibility which he has to discharge. The functions of the Special Auditor have been considered in various judicial decisions, which would show the special character of his responsibility. That the Special Audit assignment is in the nature of a ‘statutory C.That the Special Audit assignment is in the nature of a ‘statutory obligation’. The responsibility being given to the Special Auditor is not a contractual relationship. The conduct of Special Audit is a statutory duty cast upon the Special Auditor and there is a statutory determination of the fee in terms of the provisions of the IT Act. There is no contractual relationship between the IT Department and the Special Auditor. D. That‘Pratius Merchants P. Ltd. v. DCIT (2018) 404 ITR 474 (Guj)’ and ‘DLF Ltd. v. Additional Commissioner of Income Tax (2014) 366 ITR 390 (Del.)’ are relied upon to argue that the purpose of a Special Audit is to facilitate the Assessing Officer in the completion of the assessment proceedings and to arrive at the correct taxable income. The assignment, being ‘statutory’ in nature, the only remedy is under the Income Tax Act, 1961 or by way of a writ petition. Such an audit can never be described as a ‘commercial contract’ or an ‘agreement’ where the word ‘consideration’ is used. D. That‘Pratius Merchants P. Ltd. v. DCIT (2018) 404 ITR 474 (Guj)’ and ‘DLF Ltd. v. Additional Commissioner of Income Tax (2014) 366 ITR 390 (Del.)’ are relied upon to argue that the purpose of a Special Audit is to facilitate the Assessing Officer in the completion of the assessment proceedings and to arrive at the correct taxable income. The assignment, being ‘statutory’ in nature, the only remedy is under the Income Tax Act, 1961 or by way of a writ petition. Such an audit can never be described as a ‘commercial contract’ or an ‘agreement’ where the word ‘consideration’ is used. E.That the applicability of the MSMED Act, requires the existence of a buyer and supplier relationship and agreement between the parties. Reference is made to Section 2(d) as also Section 15 and Section 24 of the MSMED Act in this regard. As per his submission, there is no ‘consideration’ which is paid in terms of the Indian Contract Act,1872 and therefore, it cannot be held that the relationship is a contractual relationship. On the other hand, in fact, it is a relationship where the assignment has been given to the statutorily appointed Special Auditor, which would directly be under the supervision of the Chief Commissioner, Income Tax. Owing to the specialized nature of the assignment, the provisions of the MSMED Act cannot be invoked. F.That reference is also then made to the statement of claims filed by the CA Firm before the DIAC wherein it is clearly alleged that the W.P.(C) 13754/2019 & 16294/2022 Signature Not Verified consideration determined is palpably incorrect, which therefore takes it into the jurisdiction of the IT Act and not under the MSMED Act. G. That Section 24 of the MSMED Act would not be applicable and would not be attracted in this case inasmuch as the Act itself would apply only if the conditions under Section 15 and the definition of ‘buyer’ under Section 2(d) of the MSMED Act are satisfied. The Petitioner/IT Department cannot be termed as a ‘buyer’ within the meaning of the MSMED Act as there is no ‘consideration’ which has been paid. There is also no agreement but a ‘nomination’ which has been made by the IT Department. Since the MSMED Act itself is not attracted in the present case, Section 24 of the said Act would have no application. H.That there is no conflict between Section 18 and Section 24 of the MSMED Act and the provisions of the IT Act. I. That insofar as Section 24 of the MSMED Act is concerned, reliance is placed on Section 293 of the IT Act to argue that none of the orders made under the IT Act can be agitated by way of a civil suit in a civil court. Since arbitral proceedings are in the nature of civil proceedings, Section 293 of the IT Act would be a complete bar for the MSEFC to exercise jurisdiction in the present case. Reliance was placed on ‘Commissioner of Income Tax v. Parmeshwari Devi Sultania (1998) 97 Taxmann 269 (SC)’ and ‘Sunil Vasudeva v. Sunder Gupta (2019) 110 Taxmann.com 298 (SC)’. J. Thatit is a settled position that arbitration proceedings are akin to civil proceedings and hence the provisions of Section 293 of the IT Act are squarely applicable in this case. W.P.(C) 13754/2019 & 16294/2022 Page 14 of 54 K.That as per the statement of claims filed by the CA Firm before the DIAC wherein it is clearly alleged that the consideration determined is palpably incorrect, which therefore takes it into the jurisdiction of the IT Act and not under the MSMED Act. J. Thatit is a settled position that arbitration proceedings are akin to civil proceedings and hence the provisions of Section 293 of the IT Act are squarely applicable in this case. W.P.(C) 13754/2019 & 16294/2022 Page 14 of 54 K.That as per the statement of claims filed by the CA Firm before the DIAC wherein it is clearly alleged that the consideration determined is palpably incorrect, which therefore takes it into the jurisdiction of the IT Act and not under the MSMED Act. L.That insofar as W.P.(C) 13754/2019 is concerned, it is submitted that the CA Firm was well aware that the appointments under Section 142(2A) of the IT Act can only be challenged by way of writ petitions in this Court. In fact, when there was delay in the passing of the orders under Section 142(2D) of the IT Act, the CA Firm itself had invoked Article 226 of the Constitution of India. Mr. Bhatia, cited the judgments in ‘P.N. Mishra v. Union of India (2005) 272 ITR 482 (Del)’ and ‘Dhanesh Gupta and Co. v. CIT (2010) 327 ITR 246 (Del)’as also the writ filed by the Respondent himself, being WP(C) 1773/2018 titled ‘SBG & Co. v UOI & Ors’, to argue that it is usual for CA Firms to raise challenges to proceedings under Section 142 of the IT Act by way of a writ petition, which are entertained by the Court. M.That the earlier writ petition filed by the CA Firm in 2018 i.e., W.P(C) 1773/2018 titled ‘SBG & Co. Chartered Accountants through its Partner v. The Union of India & Ors.’ the CA Firm took a specific plea that there is no alternate efficacious remedy except to file a writ petition at the stage when the Commissioner of Income Tax had not taken any decision on the CA Firms’ fee payable under Section 142(2D) of the IT Act. N.That relying upon paragraph 14 as also upon the plea in the said writ petition it was further argued that as per the guidelines envisaged in the proviso to Section 142(2D) of the IT Act as laid down in Rule W.P.(C) 13754/2019 & 16294/2022 Page 15 of 54 14B of the IT Rules, there was a duty to determine the fee upon the IT Department. O.That, overall, there are four Special Audit assignments in which the CA Firm was nominated by the IT Department. In respect of all the four assignments, the IT Department has made its determination regarding the amounts. The only option/remedy available to the Respondent- CA Firm is a challenge through a writ petition. However, the Respondents have not challenged the same by way of a writ petition. P.That there has been no delay by the IT Department in approaching this Hon’ble court by way of the present writ petitions. Further, it is submitted that the proceedings before an authority lacking inherent jurisdiction are nullity and thus, void ab initio. 52. On 17[th] March 2023, the Court directed both the parties to bring their respective computations of the amounts paid/payable for their perusal. On the next date i.e., 16[th] March 2023, Respondent No. 2/CA Firm handed over the computation of the amounts paid and payable as directed by the Court. 53. Mr. Bhatia, then handed over the tabulated details of the amounts determined and paid to the CA Firm under Section 142(2D) of the IT Act regarding the four Special Audit assignments. 54. Order dated 8[th] May 2023 passed by the IT Department, was also placed before this Court, in respect of the final assignment in respect of which the fee was yet to be determined, determining the remuneration under Section 142(2D) of the IT Act at Rs. 15,25,000/-. Submissions by Respondent No. 2 55. On the other hand, on behalf of the Respondent No.2- CA Firm, Mr. S.B. Gupta, appearing in person, raised the following contentions: That where there is a relationship of ‘buyer’ and ‘supplier’ and 53. Mr. Bhatia, then handed over the tabulated details of the amounts determined and paid to the CA Firm under Section 142(2D) of the IT Act regarding the four Special Audit assignments. 54. Order dated 8[th] May 2023 passed by the IT Department, was also placed before this Court, in respect of the final assignment in respect of which the fee was yet to be determined, determining the remuneration under Section 142(2D) of the IT Act at Rs. 15,25,000/-. Submissions by Respondent No. 2 55. On the other hand, on behalf of the Respondent No.2- CA Firm, Mr. S.B. Gupta, appearing in person, raised the following contentions: That where there is a relationship of ‘buyer’ and ‘supplier’ and A.That where there is a relationship of ‘buyer’ and ‘supplier’ and there is ‘consideration’ involved under an agreement /contract, the MSMED Act would be attracted. Reference is made to Section 18(1) as also Section 2(n) and 2(d) of the MSMED Act to argue that in terms of the definitions of ‘buyer’ and ‘supplier’, respectively, the Respondent CA Firm is the ‘supplier’, and the IT Department is the ‘buyer’ of the Special Audit ‘services’ supplied by the former to the latter in terms of an ‘agreement/contract’. Thus, all the necessary trappings of a commercial contract exist in this regard. The exact nature of the appointment is also clearly prescribed in the nomination letter. Thus, the MSMED Act would be applicable. B.That, even if there is no agreement under the MSMED Act, the existence of an agreement cannot be considered a pre-condition. Reliance is placed upon the Supreme Court’s decision in ‘Gujarat State Civil Supplies Corporation’ as also on ‘Principal Chief Engineer vs. Manibhai & Bros.’, of the Gujarat High Court, which was thereafter upheld by the Supreme Court. C.That in terms of the procedure for the appointment of a Special Auditor under Section 142(2A) of the IT Act, it is the discretion of the CA Firm so appointed to accept or decline such offer before the nomination of the CA Firm by the IT Department. He relies upon ‘Dhanesh Gupta & Co. vs. CIT [327 ITR 246]’ in support of this submission. D. That the reports which were submitted by the CA Firm, were fully accepted by the IT Department and no deficiencies were raised. All the Special Audit assignments were also carried out on time. Since there exists a promise to pay, the word ‘remuneration’ as used in Section 142(2D) of the IT Act would have to be deemed to be ‘consideration’. E. That in terms of Section 142(2D) of the IT Act is concerned, the determination by the IT Department shall be final and the expenses including the fees are to be paid by the Assessee. However, as per the proviso inserted with effect from 1[st] June 2007, the phrase relating to finality of determination was conspicuously missing. In respect of the assignments given after 1st June 2007, the payment of fee is to be made by the Central Government. The Commissioner, IT Department is thus stated to be an interested party subject to bias. If such finality was read into the proviso, it would be unconstitutional and violative of Article 14. Reliance is also placed on the salutary principle of natural justice that no man can be a judge in his own cause to argue that the IT Department cannot be judging its own case as to whether the determination is final. Reliance is placed upon two decisions of the ld. Supreme Court in ‘J. Mohapatra & Co and Anr. v. State of Orissa & Anr. [Civil Appeal No. 6814/1981]’ as also ‘Union of India & Anr v. Tulsiram Patel & Ors. [Civil Appeal No. 6814/1981]’. F. That in terms of Section 293 of the IT Act, it is only the availment of a remedy before the Civil Court which is barred. Reliance is placed upon the Gujarat High Court Judgment which has also been upheld by the Suprem Court in ‘Principal Chief Engineer v. Manibhai W.P.(C) 13754/2019 & 16294/2022 Page 18 of 54 and Brothers (Sleeper)[FA No. 637 of 2016]’ to argue that the MSEFC is not a judicial authority let alone a civil court. F. That in terms of Section 293 of the IT Act, it is only the availment of a remedy before the Civil Court which is barred. Reliance is placed upon the Gujarat High Court Judgment which has also been upheld by the Suprem Court in ‘Principal Chief Engineer v. Manibhai W.P.(C) 13754/2019 & 16294/2022 Page 18 of 54 and Brothers (Sleeper)[FA No. 637 of 2016]’ to argue that the MSEFC is not a judicial authority let alone a civil court. G.That the appointment under Section 142(2A) of the IT Act is not a statutory appointment since it fastens the duty upon the Assessee to get its accounts audited from the nominated CA concern. It does not cast any obligation on the CA firm to compulsorily carry out the audit. H.That insofar as Section 24 and Section 18 of the MSMED Act are concerned, both the provisions make it clear that they are notwithstanding any other law for time being in force. As long as the buyer-supplier relationship is established, the dispute relates to the recovery of amounts and the supplier is within the jurisdiction of the MSEFC, the jurisdiction of the MSEFC cannot be excluded. Further, these non-obstante provisions of the MSMED Act have an overriding effect as compared to Section 293 and Section 142(2D) which are merely normal provisions of the IT Act. I.That insofar as the role of the Petitioner is concerned, the Special Act would be the MSMED Act and not the Income Tax Act. Reliance is placed upon GE T&D India Ltd. v. Reliable Engineering as also Insurance Corporation of India v. D J Bhadur in support of this submission. J.That even if the IT Act and the MSMED Act are both treated as special statutes, the MSMED Act is of 2006 and thus being a later enactment than the Income Tax Act, the provisions of the MSMED Act would prevail. Reliance is placed upon ‘Gujarat State Civil Supplies Corporation v. Mahakali Foods Pvt. Ltd.’ in support of this submission. K. That the since the dispute is about the quantum of money payable and the facts would have to be gone into, civil proceedings would have to be initiated. He relies upon ‘State of UP. & Ors. v. Bridge & Roof Co. (India ) Ltd. [Civil Appeal no. 10774/1996] in support of this submission. L.That the order passed in the earlier writ petition being WP(C) 1773/2018 filed by the Respondent, the issue was not decided on merits. Thus, the bar of res-judicata would not be applicable in the case of WP(C) 13754/2019.Reliance is placed upon‘Workmen vs. Board of Trustees of Cochin Port 1978 AIR 1283’, ‘Gulabchand Chhotalal vs. State of Bombay 1965 AIR 1153’ and ‘ITC vs. CCE & Anr’ 2004 Scale 540 . M.That the Petitioner has filed the present writ petition in a malafide manner. N.That the Respondent has computed the fee as approved in ‘Rakesh Raj & Associates vs. CIT[WP(C) No. 1230/2015] and Dhanesh Gupta & Co. vs. CIT [2010]327 ITR 246 (Del). Further, the objection is irrelevant as the issue in the present case relates to the jurisdiction of the MSEFC over the dispute and not the quantum of fee payable. O.It is specifically submitted, that the Petitioner, by its own admission has accepted that there lies no remedy in the IT Act against the order under Section 142(2D) of the same, and thus the Respondent cannot be left remediless and would be entitled to explore alternate remedies that it may be eligible for. P. That the present petitions are not maintainable on account of non-maintainability of writ jurisdiction during arbitral proceedings. Further as the jurisdiction of the MSEFC over the dispute was not challenged before the MSEFC the writ jurisdiction is not maintainable. He relies upon the decision in ‘BHEL v. MSEFC [W.P.(C) 10886/2016]’, wherein the ld. Single Judge of this Court has held that if the jurisdiction is not challenged before the MSEFC, the same cannot be raised in a writ petition. Analysis & Findings Maintainability cannot be left remediless and would be entitled to explore alternate remedies that it may be eligible for. P. That the present petitions are not maintainable on account of non-maintainability of writ jurisdiction during arbitral proceedings. Further as the jurisdiction of the MSEFC over the dispute was not challenged before the MSEFC the writ jurisdiction is not maintainable. He relies upon the decision in ‘BHEL v. MSEFC [W.P.(C) 10886/2016]’, wherein the ld. Single Judge of this Court has held that if the jurisdiction is not challenged before the MSEFC, the same cannot be raised in a writ petition. Analysis & Findings Maintainability 56. Insofar as the maintainability of the present writ petitions is concerned, though, this Court is exercising jurisdiction under Article 227 of the Constitution of India, in view of the decision in Surender Kumar Singhal & Ors. v. Arun Kumar Bhalotia & Ors’, [2021 SCC OnLine Del 3708: (2021) 279 DLT 636] the position that emerges is that if there is complete lack of jurisdiction in the arbitral tribunal, a writ petition would be entertainable under exceptional circumstances. The relevant part of the said judgement is set out as under: “Maintainability 18. Dealing with the first aspect, the law is well settled that Arbitral tribunals are a species of tribunals over which the High Court exercises writ jurisdiction. Challenge to an order of an arbitral tribunal can be raised by way of a writ petition. In Union of India v. R. Gandhi, President Madras Bar Association (supra) the Supreme Court observed on the question as to what constitutes ‘Courts’ and ‘Tribunals’ as under: “38. The term ‘Courts’ refers to places where justice is administered or refers to Judges who exercise judicial functions. Courts are established by the state for administration of justice that is for exercise of the judicial power of the state to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. Courts refer to Civil Courts, Criminal Courts and High Courts. Tribunals can be either private Tribunals (Arbitral Tribunals), or Tribunals constituted under the Constitution (Speaker or the Chairman acting under Para 6(1) of the Tenth Schedule) or Tribunals authorized by the Constitution (Administrative Tribunals under Article 323A and Tribunals for other matters under Article 323B) or Statutory Tribunals which are created under a statute (Motor Accident Claims Tribunal, Debt Recovery Tribunals and consumer fora). Some Tribunals are manned exclusively by Judicial Officers (Rent Tribunals, Motor Accidents Claims Tribunal, Labour Courts and Industrial Tribunals). Other statutory Tribunals have Judicial and Technical Members (Administrative Tribunals, TDSAT, Competition Appellate Tribunal, Consumer fora, Cyber Appellate Tribunal, etc).” 19. Similar observations were made by the Supreme Court in SREI Infrastructure Finance Limited (supra) as under: “14. Arbitration is a quasi judicial proceeding, equitable in nature or character which differs from a litigation in a Court. The power and functions of arbitral tribunal are statutorily regulated. The 19. Similar observations were made by the Supreme Court in SREI Infrastructure Finance Limited (supra) as under: “14. Arbitration is a quasi judicial proceeding, equitable in nature or character which differs from a litigation in a Court. The power and functions of arbitral tribunal are statutorily regulated. The tribunals are special arbitration with institutional mechanism brought into existence by or under statute to decide dispute arising with reference to that particular statute or to determine controversy referred to it. The tribunal may be a statutory tribunal or tribunal constituted under the provisions of the Constitution of India. Section 9 of the Civil Procedure Code vests into the Civil Court jurisdiction to entertain and determine any civil dispute. The constitution of tribunals has been with intent and purpose to take out different categories of litigation into the special tribunal for speedy and effective determination of disputes in the interest of the society. Whenever, by a legislative enactment jurisdiction exercised by ordinary civil court is transferred or entrusted to tribunals such tribunals are entrusted with statutory power. The arbitral tribunals in the statute of 1996 are no different, they decide the lis between the parties, follows Rules and procedure conforming to the principle of natural justice, the adjudication has finality subject to remedy provided under the 1996 Act. Section 8 of the 1996 Act obliges a judicial authority in a matter which is a subject of an agreement to refer the parties to arbitration. The reference to arbitral tribunal thus can be made by judicial authority or an arbitrator can be appointed in accordance with the arbitration agreement under Section 11 of the 1996 Act.” 20. Thus, the Supreme Court held that arbitral tribunals are private tribunals unlike those tribunals set up under the statute or specialized tribunals under the Constitution of India. Thus, a Petition under Article 227 challenging orders of an Arbitral Tribunal would be maintainable. …Scope and Extent of interference 21.Coming now to the question as to what would be the scope of interference under Article 226/227 against orders passed by the Arbitral Tribunals, though a number of judgements have been cited by both parties, recent decisions of the Supreme court and of this Court have settled the issue …. 25. A perusal of the above-mentioned decisions, shows that the following principles are well settled, in respect of the scope of interference under Article 226/227 in challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act. (i) An arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable;(ii) The non-obstante clause in section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a Constitutional provision; (iii) For interference under Article 226/227, there have to be `exceptional circumstances’; (iv) Though interference is permissible, unless and until the order is so perverse that it is patently lacking in inherent jurisdiction, the writ court would not interfere; (v) Interference is permissible only if the order is completely perverse i.e., that the perversity must stare in the face (vi) High Courts ought to discourage litigation which necessarily interfere with the arbitral process; (vii) Excessive judicial interference in the arbitral process is not encouraged; (viii) It is prudent not to exercise jurisdiction under Article 226/227; (ix) The power should be exercised in `exceptional rarity’ or if there is `bad faith’ which is shown; (x) Efficiency of the arbitral process ought not to be allowed to diminish and hence interdicting the arbitral process should be completely avoided.;” 57.Thus, even while applying the strict test for entertaining of writ