Vedanta Limited, Erstwhile Sesa Sterlite Ltd./Sesa Goa Ltd.with Its Office At Sesa Ghor, 20, Edc Complex Patto, Panaji, Goa v. Commissioner Of Income Taxhaving His Office At Aaykar Bhavan, Patto, Panaji, Goa

1 TXA NO.1-16ca17-16 Santosh IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 1 OF 2016 WITH CIVIL APPLICATION NO.17 OF 2016 Vedanta Limited, Erstwhile Sesa Sterlite Ltd./Sesa Goa Ltd.With its office at Sesa Ghor, 20, EDC Complex Patto, Panaji, Goa. ... Appellant. Versus Commissioner of Income Taxhaving his office at Aaykar Bhavan, Patto, Panaji, Goa.... Respondent Mr. R.G. Ramani, Senior Advocate with Mr. Pranav S. ShenviKakodkar, Advocate for the Appellant. Ms. Susan Linhares, Standing Counsel for the Respondent. Coram:- M. S. SONAK & DAMA SESHADRI NAIDU, JJ.Date :- 27th November, 2020 ORAL JUDGMENT:- (Per M. S. Sonak, J.): Heard the learned Counsel for the parties.The learnedCounsel for the parties state that they have no objection to this Benchtaking up this matter. 2 TXA NO.1-16ca17-16 2.This Appeal was clubbed along with several writ petitionsand tax appeals, including Tax Appeal No.83/2015. By an order dated19[th] September, 2017, Rule was issued in the writ petitions and the taxappeals were admitted on the substantial questions of law set out in thesaid order. As many as six substantial questions of law were in factframed. 3.Mr. Ramani, the learned Senior Advocate for the Appellant,however, submits that none of the substantial questions of law asframed, really arise in the present Appeal. He submitted that thisCourt, in terms of Section 260A of the Income Tax Act, 1961 (IT Act)has sufficient powers to frame substantial questions of law which arisein the matter, even at the stage of final hearing of such an appeal.Accordingly, he proposes framing of the following substantial questionsof law as set out in clauses (i) and (ii) at paragraph 17 of the Memo ofAppeal : i)Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal is right in law inrejecting the appeal of the Appellant u/s 263 dated 9.1.2015and confirming the assumption of jurisdiction as well as themerits of the issues raised therein ? 3 TXA NO.1-16ca17-16 ii)Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal is right in law innot accepting the submissions of the Appellant that theissues with regard to the report of SFIO had been raised bythe Commissioner of Income Tax for Assessment Year 2006-07, 2007-08 and 2009-10 and had been held in theAppellant's favour after a detailed consideration of thematter by the Assessing Officer applying the principle ofconsistency and considering the identical factual and legalposition for Assessment Years between 2006-07, 2007-08and 2009-10 ? 4.Ms. Linhares, the learned Standing Counsel for the Revenueconsented to the framing of the aforesaid substantial questions of law,subject to the liberty of contending that the same do not arise, or inany case, are required to be answered against the Assessee and in favourof the Revenue, in the facts and circumstances of the present case. 5. Accordingly, by granting liberty to the Revenue to urge allpermissible defences, we frame the aforesaid substantial questions oflaw and with the consent of the learned Counsel for the parties,proceed to consider the same. Accordingly, by granting liberty to the Revenue to urge all 4 TXA NO.1-16ca17-16 6.The Appellant-Assessee filed returned of income on30/09/2008 for the Assessment Year 2008-09. Since some element ofTransfer Pricing was involved, the case of the Appellant was referred tothe Transfer Pricing Officer (TPO) in terms of Section 92CA of the ITAct. 5. Accordingly, by granting liberty to the Revenue to urge allpermissible defences, we frame the aforesaid substantial questions oflaw and with the consent of the learned Counsel for the parties,proceed to consider the same. Accordingly, by granting liberty to the Revenue to urge all 4 TXA NO.1-16ca17-16 6.The Appellant-Assessee filed returned of income on30/09/2008 for the Assessment Year 2008-09. Since some element ofTransfer Pricing was involved, the case of the Appellant was referred tothe Transfer Pricing Officer (TPO) in terms of Section 92CA of the ITAct. 7.The TPO made an order dated 31/10/2011, determining thearm's length price in respect of certain transactions relating to importsand exports. Based thereon, the Assessing Officer (AO) made draftorder under Section 143(3), read with Section 144-C of the IT Act on30/12/2011. The Appellant filed objections to the draft order and thematter was duly referred to the Dispute Resolution Panel (DRP) interms of Section 144-C(2)(b) of the IT Act. The DRP, by an orderdated 7/9/2012 rejected the Appellant's objections and based thereon,the AO made the final assessment order dated 19/10/2012 underSection 143(3), read with Section 144-C(13) of the IT Act. 8.The concerned Commissioner of Income Tax (CIT), bynotice dated 3/2/2014, sought to exercise the revisional powers underSection 263 of the IT Act, inter alia, by reference to Serious FraudInvestigation Officers' reports, which were available in the meanwhile.The Appellant, vide letter dated 11/3/2014, lodged objections to theexercise of such revisional jurisdiction. 5 TXA NO.1-16ca17-16 9.The CIT, on 11/11/2014, issued yet another notice to theAssessee, this time referring to, inter alia, Justice Shah CommissionReport which was available in the meantime. Again, the Assessee videletter dated 3/12/2014, lodged its objections to the exercise ofrevisional jurisdiction. The CIT, vide order dated 9/1/2015, in exerciseof its revisional jurisdiction, set aside the assessment order and directedthe Assessee to pass a fresh assessment order, after verifying andexamining all the relevant facts of the case, legal position and givingadequate opportunity of being heard to the Assessee. 10.The Assessee instituted an appeal bearing No.107/PNJ/2015before the Income Tax Appellant Tribunal (ITAT) against the CIT'sorder dated 9/1/2015. By the impugned Judgment and Order dated10/9/2015, the ITAT dismissed this appeal. Hence, the present appealunder Section 260-A of the IT Act on the aforesaid substantialquestions of law. 11.Mr. Ramani, the learned Senior Advocate for the Assesseesubmits that the AO's order dated 19/10/2012 had merged into theorder of the Commissioner (Appeals) dated 17/5/2013 in ITANo.89/PNJ/2012. He, therefore, submits that it was not open to theCIT to thereafter initiate revisional proceedings under Section 263 of 6 TXA NO.1-16ca17-16 the IT Act. He submits that, in any case, the issues for the AssessmentYear 2008-09 are identical to the issues which arise in the AssessmentYear 2009-10. He submits that for the Assessment Year 2009-10,theRevenue has practically accepted most of the contentions of theAssessee and, therefore, applying the principle of consistency anydifferent view for the Assessment Year 2008-09, was unsustainable. Mr.Ramani submits that for these two reasons, amongst others, theimpugned orders made by CIT on 9/1/2015 and the ITAT on10/9/2015 deserve to be set aside. 12.Mr. Ramani also submitted that the Commissioner was notentitled to exercise the revisional jurisdiction based upon the SFIOreports which were at the later stage withdrawn or clarified or theJustice M.B. Shah report which had recorded its findings withoutcompliance with the principles of natural justice and fair play. Herelied upon the decision of this Court in Sesa Sterlite Limited vs. TheAssistant Commissioner of Income-Tax and ors.[1] in support of thesecontentions. 12.Mr. Ramani also submitted that the Commissioner was notentitled to exercise the revisional jurisdiction based upon the SFIOreports which were at the later stage withdrawn or clarified or theJustice M.B. Shah report which had recorded its findings withoutcompliance with the principles of natural justice and fair play. Herelied upon the decision of this Court in Sesa Sterlite Limited vs. TheAssistant Commissioner of Income-Tax and ors.[1] in support of thesecontentions. 13.Mr. Ramani finally submitted that on behalf of the Assesseeseveral grounds, as indicated in paragraph 2 of the ITAT's order dated10/9/2015 were in fact raised, but the ITAT chose to focus only on1Writ Petition No.141/2015 and connected matters dated 9/7/2019 7 TXA NO.1-16ca17-16 one of the grounds and this is also a good reason to interfere with theITAT's impugned order. 14.For all the aforesaid reasons, Mr. Ramani submitted that thesubstantial questions of law as framed are required to be answered infavour of the Assessee and against the Revenue. As a consequence, hesubmitted that the impugned orders made by the CIT and the ITAT inthis matter are required to be set aside. 15.Ms. Linhares, the learned Standing Counsel for the Revenuesubmitted that only one ground was pressed before the ITAT and,therefore, it is not open to the Assessee to urge any further grounds inthis Appeal. She points out that the record of the ITAT bears somesacrosancy and the same cannot be questioned in this appeal,particularly since the Assessee never bothered to take out anyrectification application before the ITAT. Ms. Linhares, the learned Standing Counsel for the Revenue 16.Ms. Linhares submits that the principles of res judicata assuch are not applicable to the income tax proceedings as each year is aseparate unit for assessment and, therefore, there is no breach of anyprinciple of consistency as urged on behalf of the Assessee. Ms. Linhares relies upon the reasoning reflected in the 8 TXA NO.1-16ca17-16 impugned orders and submits that the present appeal may bedismissed, particularly since full opportunity has been guaranteed tothe Assessee in the fresh assessment which the AO has been directed toundertake. 18.The rival contentions now fall for our determination. 19.From the perusal of the ITAT's order dated 10/9/2015, it isapparent that though several grounds may have been raised by theAssessee in its Appeal Memo, only one ground based upon consistency,was pressed by relying upon the order of the AO for the AssessmentYear 2009-10. 20.The ITAT has quite correctly held that since the CIT's orderdated 9/1/2015 had merely directed the AO to pass fresh assessmentorder, the issues as to whether the facts and circumstances for theAssessment Year 2009-10 were identical to the issues for theAssessment Year 2008-09 can always be gone into by the AO aftergranting full opportunity to all concerned. 21.Besides, the ITAT has also quite correctly held that theprinciples of res judicata as such are not applicable in such matters.This is because every year is a separate unit for assessment and the facts 9 TXA NO.1-16ca17-16 and circumstances relevant to every such assessment order are requiredto be assessed accordingly. 22.At this stage, it is not possible to accept the contention raisedon behalf of the Assessee that several other grounds had, in fact, beenurged before the ITAT and that the same were not considered. It issettled position in law that the record before a Court or a Tribunalcannot be challenged in this manner. If the Assessee was indeed seriousabout this contention, then, a minimum that was expected of theAssessee was to have pointed this out to the ITAT soon after theimpugned order was made. It is not uncommon that several groundsare raised in the Appeal Memo, but at the time of arguments, only oneor two grounds are actually pressed. 9 TXA NO.1-16ca17-16 and circumstances relevant to every such assessment order are requiredto be assessed accordingly. 22.At this stage, it is not possible to accept the contention raisedon behalf of the Assessee that several other grounds had, in fact, beenurged before the ITAT and that the same were not considered. It issettled position in law that the record before a Court or a Tribunalcannot be challenged in this manner. If the Assessee was indeed seriousabout this contention, then, a minimum that was expected of theAssessee was to have pointed this out to the ITAT soon after theimpugned order was made. It is not uncommon that several groundsare raised in the Appeal Memo, but at the time of arguments, only oneor two grounds are actually pressed. 23.The CIT, in exercising its revisional jurisdiction, has satisfiedthe twin requirements as prescribed in Section 263 of the ITAT Act.There was material before the ITAT to at least prima facie infer thatthere was under-invoicing and that this aspect of under-invoicing wasnot considered by the AO in making his assessment order. The CIT, inexercising its revisional jurisdiction, has not shut out any of thedefences open to the Assessee, but has directed the AO to pass a freshassessment order after verifying and examining all the relevant facts ofthe case, legal position and giving adequate opportunity of being heard 10 TXA NO.1-16ca17-16 to the Assessee. 24.In Malabar Industrial Co. Ltd. vs. Commissioner of IncomeTax[2], the Hon'ble Supreme Court has held that the CIT can pass anorder under Section 263 of the IT Act even on debatable issues.Similarly, it is clear where the assessment was completed withoutproper inquiries which circumstances necessitated, it is competent forthe CIT to invoke the revisional jurisdiction and direct freshassessment, after verifying and examining all relevant facts, as well aslegal position as may be involved. 25.The ruling in Sesa Sterlite Limited (supra) relied upon by Mr.Ramani was in the context of challenges to the orders of reopening ofthe assessment by issuance of notices under Section 148 of the IT Act.No doubt, as contended by Mr. Ramani, certain observations in thesaid Judgment may have some bearing on the assessment and,therefore, it ought to be clarified by us that the Assessee can rely uponthe said ruling in case the AO is to be permitted to make a freshassessment. The ruling in Sesa Sterlite Limited (supra) relied upon by Mr. 26.Both, the CIT, as well as the ITAT, have already made clearthat adequate opportunity of being heard is required to be extended to 11 TXA NO.1-16ca17-16 the Assessee in the fresh assessment proceedings to be undertaken bythe AO. Therefore, no liberty or clarification is necessary. In any case,it is clarified that the Assessee will be entitled to rely upon all legallypermissible material, including the decision of this Court in SesaSterlite Limited (supra) and there is no doubt that the AO, inundertaking the fresh assessment, will take into account all suchcontentions of the Assessee and make a fresh order in accordance withlaw, on its own merits. 27. In the aforesaid circumstances, the substantial questions of law are required to be answered against the Assessee and in favour ofthe Revenue and this appeal is required to be dismissed. 28.The Appeal is, accordingly, dismissed, but with clarificationthat all the contentions of the Assessee, as well as the Revenue, are tobe taken into account by the AO in making the fresh assessment order. The Appeal is, accordingly, dismissed, but with clarification 29.The interim order made in this Appeal is hereby vacated. 30.The Appeal and the Misc. Application are disposed of in theaforesaid terms. There shall be no order as to costs. DAMA SESHADRI NAIDU, J. M. S. SONAK, J.