Vodafone India Limited v. Deputy Commissioner Of Income-Tax

Sharayu Khot. IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 289 OF 2018 Vodafone India Limited …Petitioner Versus 1.Deputy Commissioner of Income-tax (TDS)2(3) 2.Union of India …Respondents ---------- Mr. Jehangir Mistry, Senior Advocate, Mr. Fereshte Sethna, Ms.Mrunal Parekh, Mr. Adhiraj Malhotra, Ms. Divya Hirwat, for thePetitioner. Mr. Suresh Kumar, for the Respondents. ---------- CORAM :M.S. SANKLECHA &RIYAZ I. CHAGLA, JJ. DATE : 20 February 2018 ORDER : 1.At the request of the parties, the Petition is disposed of finally, at the stage of admission. 16-WP-289-18.doc 2.This Petition under Article 226 of the Constitution ofIndia, challenges an order dated 11 October 2017 passed byRespondent No. 1-Deputy Commissioner of Income Tax,withdrawing/cancelling the Certificate dated 18 May 2017issued under Section 197 of Income Tax Act, 1961 (“The Act”for short). The above Certificate dated 18 May 2017 haddirected the parties mentioned therein obliged to deduct taxunder various Sections of Chapter XVII-B of the Act, to deducttax at lower rate of 0.39 percent instead of the normal rates. 3.It is an undisputed position before us that the factsarising in this case are identical to the facts arising in Tata SkyLimited Vs. Union of India (Writ Petition No. 2817 of 2017)and M/s. Tata Teleservices (Maharashtra) Limited Vs. TheDeputy Commissioner of Income Tax & Ors. (Writ Petition2701 of 2017) so far as the decision making process leading tothe passing of the impugned order dated 11 October 2017 isconcerned. 16-WP-289-18.doc 4.In this case, we find that the Show Cause Noticedated 30 August 2017 seeking cancellation/withdrawal of theCertificate dated 18 May 2017 issued under Section 197 of theAct was issued on the directions of Commissioner of Income Tax(TDS-2 Mumbai). In the aforesaid circumstances, as in the caseof Tata Sky Limited (supra) M/s. Tata Teleservices(Maharashtra) Limited (supra), there would be no efficaciousalternative remedy available to the Petitioner, as the Authorityto whom the revision application under Section 264 of the Act,could be made is the very authority who has directed, theRespondent No. 1 to review the Certificate dated 18 May 2017already granted. Besides on identical fact situation relating toTata Sky Limited(supra)M/s. Tata Teleservices(Maharashtra) Limited (supra), the order passed therein werewith the consonance of the Commissioner of Income Tax.Therefore, in the present facts, there is no efficacious alternativeremedy available to the Petitioner. Thus, this also is a casewhere we exercise our extraordinary writ jurisdiction in theabsence of an efficacious alternative remedy. 16-WP-289-18.doc 5.We find that in this case, as in Tata Teleservices(Maharashtra) Limited (supra), an order canceling a certificateissued under Section 197 of the Act, was passed on the groundthat the aspect of pending demand has not been considered inthe context of Rule 28AA of the Income Tax Rules, 1961 whilegranting the certificate under Section 197 of the Act. This,without furnishing a copy of the reasons recorded at the time ofissuing the certificate under Section 197 of the Act. This nonfurnishing of copy of the reasons recorded was held by us to bea flaw in the decision making process. Thus, making theimpugned order unsustainable. 6.In our order dated 25 January 2018 in TataTeleservices (Maharashtra) Limited (supra), the reasonstherein on the above aspect in paragraphs 19 to 22 thereof, onidentical facts, are as under:- “19 The Petitioner's primary grievance is that theimpugned order dated 23 October 2017, canceling thecertificate dated 4 May 2017 is completely withoutjurisdiction. It is not open to the Assessing Officer to 6.In our order dated 25 January 2018 in TataTeleservices (Maharashtra) Limited (supra), the reasonstherein on the above aspect in paragraphs 19 to 22 thereof, onidentical facts, are as under:- “19 The Petitioner's primary grievance is that theimpugned order dated 23 October 2017, canceling thecertificate dated 4 May 2017 is completely withoutjurisdiction. It is not open to the Assessing Officer to even initiate review proceedings in the absence of anychange in circumstances which existed while grantingcertificate dated 4 May 2017. It is not disputed thatSection 197(2) of the Act empowers the AssessingOfficer to cancel the certificate issued under Section197(1) of the Act with regard to lower and/or nilwithholding tax issued under Section 197(1) of theAct. However, it is submitted that there is no change inthe financial and other circumstances as existing whenthe certificate dated 4 May 2017 was issued and whenthe impugned order canceling the above certificate waspassed. Therefore, the impugned order is withoutjurisdiction. 20 In the present facts, we note that impugned orderdated 23 October 2017 cancels the certificate dated 4May 2017 on the ground that it was issued by mistakei.e. not having considered Rule 28AA (2) of the Rulesin the context of the pending demands. The Revenuehas filed an affidavit in reply dated 11 January 2018of Respondent No. 1- Mr. M. Ashok Babu, JointCommissioner of Income Tax, opposing the admissionand also relies upon it at the final hearing. We findthat the order preceding the grant of the certificate hasnot been annexed to the affidavit filed by the Revenue.This Court in Larsen & Toubro Ltd., (supra) has heldthat an issue of certificate must necessarily be precededby an order under Section 197(1) of the Act. In factthe issue of certificate is the result of an order holdingthat the applicant is entitled to a certificate underSection 197 of the Act. It must of necessity be so, as inthe absence of the reasons being recorded, theCertificate under Section 197 of the Act, would not beopen to challenge by the Revenue, as it would beimpossible to state that it is erroneous and prejudicialto the Revenue. The Revenue would be helpless.Therefore, the recording of reasons is necessary as only then it could be subject to Revision by theCommissioner of Income Tax under Section 263 of theAct. then it could be subject to Revision by theCommissioner of Income Tax under Section 263 of theAct. 21Therefore, it appeared to us while correcting theorder which was dictated in Court on 16 January2017 that the order prior to issuing the certificatedated 4 May 2017 ought to have been communicatedto the Petitioner along with the notice, seeking toreview the earlier certificate on account of mistake. Inthe above circumstances we kept the petition on boardfor directions on 23 January 2018 as this issue wasnot addressed by the Revenue at the hearing. In factthe petitioner had contended before us that theRespondent No. 1 had no jurisdiction to cancel thecertificate dated 4 May 2017 in the absence of anychange in the circumstances. However, we wanted tohear and consider the Revenue’s response on the aboveaspect of jurisdiction. Therefore, on 23 January 2018we expressed our prima faice view on the issue to theparties, particularly that the absence of the orderleading to the grant of the certificate being given to thePetitioner, leads to an adverse inference against theRevenue i.e. all issues including Rule 28AA (2) of theRules were considered in the order passed leading tothe issuing of Certificated dated 4 May 2017. Wespecifically invited the attention of the Revenue to thespecific observation found in para 7 of the decision ofthis Court in Larsen & Toubro Ltd. (supra) and alsoto the decision of the Apex Court in Liberty Oil MillsVs. U.O.I. 1984(3) SCC 465 which while construingthe words “without assigning any reasons” held that itdoes not do away with the requirement of reasonsexisting for the decision, it only does away withcommunicating the same. In fact in this case theSection does not do away with requirement of issuinga reasoned order while issuing a Certificate under Section 197 of the Act. 22 At the request of the Revenue the petition wasposted for directions on 25 January 2018 to enable theRespondent to respond on the above issue. On 25January 2018, the Revenue did not make anysubmission to counter our prima facie view includingour drawing an adverse inference on account of nonfurnishing of the order/reasons leading to the issue ofthe certificate dated 4 May 2017. Therefore, weconclude that there would have been reasons recordedin the file before issuing a certificate dated 4 May2017 and this ought to have been furnished to theparty before resting its case in the impugned order onthe ground that the aspect of Rule 28 AA of the Ruleswas not considered at the time of granting theCertificate. Further if the Revenue seeks to cancel thesame on the ground that a particular aspect has notbeen considered then before taking a decision to cancelthe certificate already granted, it must satisfy therequirement of Natural Justice by giving a copy of thesame to the parties and hear them on it before takingdecision to cancel the certificate. This is particularly soas in the present facts the show cause notices dated 16August 2017 and 30 August 2017 seeking to reviewthe Certificate dated 4 May 2017 did not indicate thatthe review is being done as the Certificate dated 4 May2017 was granted without considering theapplicability of Rule 28 AA of the Rules in the contextof the petitioner’s facts. Therefore, there was noopportunity/occasion for the petitioner to seek a copyof the reasons recorded while issuing a certificate dated4 May 2017. Moreover, this becomes all the moreimportant as we have found on examination of factsthat there is no change in facts as existing on 4 May2017 and as existing when the impugned order dated23 October 2017 was passed. Thus, in the present 16-WP-289-18.doc facts, according to us, there is a flaw in the decisionmaking process which vitiates the impugned orderdated 23 October 2017.” 7.The Revenue does not dispute that on the above 16-WP-289-18.doc facts, according to us, there is a flaw in the decisionmaking process which vitiates the impugned orderdated 23 October 2017.” 7.The Revenue does not dispute that on the above issue, the facts are similar here and the dispute standsconcluded against the Revenue by the above decision in the caseof Tata Teleservices (Maharashtra) Limited (supra). 8.In the above view, the impugned order dated 11October 2017 passed by the Respondent No. 1, which cancelsthe Certificate dated 18 May 2017 is quashed and set aside. It ismade clear that the other contentions raised by the Petitionerand Revenue's objections to the same have not been consideredby us for the purpose of disposing of this Petition. 9.Accordingly, the Writ Petition is disposed of in theabove terms. [RIYAZ I. CHAGLA J.] [M.S. SANKLECHA, J.]