Wa/770/2018 Of The Asst. Commissioner Of Income Tax v. M/S. Epson India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24 DAY OF APRIL, 2018 PRESENT HON’BLE MR.JUSTICE DINESH MAHESHWARI, CHIEF JUSTICE AND HON’BLE MR.JUSTICE P.S.DINESH KUMAR -WRIT APPEAL NO.770 OF 2018 (TIT) BETWEEN: THE ASST. COMMISSIONER OF INCOME TAX CIRCLE – 2(1) (2) ROOM NO.218, 2 FLOOR BMTC DEPOT, 6 FLOOR BANGALORE – 560 095 ... APPELLANT (BY SRI.ARAVIND K.V., ADVOCATE) AND: M/S. EPSON INDIA PVT. LTD. 12 FLOOR, THE MILLENIA TOWER A NO.1, MURPHY ROAD, ULSOOR BANGALORE – 560 008 PAN NO.: (BY SRI.K.P.KUMAR, SENIOR COUNSEL FOR SRI.T.SURYANARAYANA, ADVOCATE) ... RESPONDENT --- THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE HIGH COURT ACT, PRAYING TO SET ASIDE THE ORDER PASSED IN WRIT PETITION NO.12913/2017 (I-IT) DATED 09.01.2018. THIS APPEAL COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE CHIEF JUSTICE, DELIVERED THE FOLLOWING: JUDGMENT This intra-Court appeal is directed against the order dated 09.01.2018, as passed in W.P.No.12913/2017, whereby, a learned Single Judge of this Court, while dismissing the writ petition filed by the petitioner/appellant, has imposed the costs of �50,000/- personally to be recovered from the officers concerned, who sanctioned the filing of petition and who filed the petition. This Court issued notice for final disposal in this appeal only on the limited aspects, as specified in the order dated 13.03.2018 that reads as under: “Heard learned counsel for the appellant and perused the material placed on record. Issue notice for final disposal returnable in two weeks only on the limited aspects as to why the observations as made in the order impugned be not clarified to be tentative in nature, relevant only for the purpose of prayer for interim relief; and as to why the part of order impugned imposing costs be not modified. Hand summons in addition to ordinary process is permitted.” The relevant background aspects of the matter are that by way of the order dated 10.03.2017, as passed in S.P.No.31/Bang/2017 [In I.T.(T.P) A.No.293/Bang/2017] for the assessment year 2012-13, the Income Tax Appellate Tribunal, Bengaluru Bench ‘C’ [‘the Tribunal’] considered the prayer of the respondent – assessee for stay against the impugned demand of �22.17 crores arising from Transfer Pricing Adjustment made on account of the expenditure towards Advertisement, Marketing and Promotion (AMP). The Tribunal observed that the issue raised in the assessee’s appeal regarding Transfer Pricing Adjustment in respect of AMP expenditure was a debatable one; and hence, after finding a primafacie case, directed the assessee to make a further payment of �2 crores above the payment of 15% of the demand in question already made and stayed the balance demand for a period of 90 days or till disposal of the appeal. The orders so passed by the Tribunal were sought to be questioned by the petitioner/appellant in the writ petition aforesaid. However, the learned Single Judge was of the view that the Tribunal was entitled to pass an interim order and the order in question appeared to be fair and reasonable and not prejudicial to the Department, particularly when the appeal filed by the assessee was set down for final hearing. The learned Single Judge, in the order dated 02.01.2018, expressed concern that the Department had been filing such petitions without any rhyme or reason and called upon the Chief Commissioner of Income Tax to file his affidavit as to for what reason filing of such writ petition was considered necessary and as to why exemplary costs be not imposed in the matter. The orders so passed by the Tribunal were sought to be questioned by the petitioner/appellant in the writ petition aforesaid. However, the learned Single Judge was of the view that the Tribunal was entitled to pass an interim order and the order in question appeared to be fair and reasonable and not prejudicial to the Department, particularly when the appeal filed by the assessee was set down for final hearing. The learned Single Judge, in the order dated 02.01.2018, expressed concern that the Department had been filing such petitions without any rhyme or reason and called upon the Chief Commissioner of Income Tax to file his affidavit as to for what reason filing of such writ petition was considered necessary and as to why exemplary costs be not imposed in the matter. It appears that the affidavit pursuant to the aforesaid directions of the learned Single Judge was filed by the Principal Commissioner of Income Tax (2), Bengaluru. Thereafter, the learned Single Judge considered the matter in the impugned order dated 09.01.2018 and on being not satisfied with the submissions made on behalf of the petitioner/appellant, proceeded to dismiss the writ petition while imposing costs of �50,000/-, to be recovered from the officers who had sanctioned the filing and who had filed the petition. Learned counsel for the petitioner/appellant would submit that the writ petition against the order of Tribunal was filed bona fide, particularly in view of the findings recorded against the assessee by the officers concerned. The learned counsel would also argue that the Department felt constrained to file the writ petition for want of consistency in the Tribunal’s approach in the matters of stay. Learned counsel submits that in any case, imposition of personal costs on the officers concerned was not called for in the present case. Learned counsel for the petitioner/appellant would further submit that several observations made by the learned Single Judge in the order impugned may cause prejudice to the case of the Department before the Tribunal. Learned counsel has, therefore, prayed for setting aside of such observations as also waiving the costs imposed. Shri K.P.Kumar, learned Senior Counsel appearing for the respondent has, in all fairness, not opposed the prayer made on behalf of the petitioner/appellant that the observations made in the order impugned be not considered prejudicial to their case before the Tribunal and for waiving of the costs. Learned Senior Counsel would, however, maintain that the interim order as passed by the Tribunal calls for no interference. Having given thoughtful consideration to the entire matter, though we are not at variance with the learned Single Judge on the basics that indiscriminate filing of the writ petitions in relation to the interim orders need to be eschewed and the matters should not be unnecessarily dragged in the higher Courts but, on the facts and circumstances of the present case where, as against the impugned demand of �22.17 crores, the Tribunal granted the stay with deposit of �2 crores in addition to �3.32 crores; and looking to the issues involved, as regards expenditure towards AMP, it is difficult to deduce that the writ petition was filed in an entirely irresponsible manner or that the authorities should be penalized in monetary terms on that count. In the totality of circumstances, we do not find it necessary to dilate further in this matter. In our view, interest of justice shall be served with the clarification that the observations occurring in the order impugned would only be considered as being relevant for the purpose of the consideration of the matter for interim relief and by waiving the costs imposed. It would, however, be expected of the authorities concerned to take necessary steps so as to guard against filing of frivolous petitions, as indicated and observed by the learned Single Judge. With the observations foregoing, this appeal is allowed to the extent indicated above. No costs. In the totality of circumstances, we do not find it necessary to dilate further in this matter. In our view, interest of justice shall be served with the clarification that the observations occurring in the order impugned would only be considered as being relevant for the purpose of the consideration of the matter for interim relief and by waiving the costs imposed. It would, however, be expected of the authorities concerned to take necessary steps so as to guard against filing of frivolous petitions, as indicated and observed by the learned Single Judge. With the observations foregoing, this appeal is allowed to the extent indicated above. No costs. All other aspects of the matter are left open to be examined by the Tribunal in the pending appeal in accordance with law. The pending interlocutory application also stands disposed of. Sd/- CHIEF JUSTICE Sd/- JUDGE AHB