Wp/473/2022 Of Salitho Ores Private Limited Thr. Jayant Gaunker v. Deputy Commissioner Of Income Tax, And 3 Ors

Maria S.IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO.471 OF 2022 WITHWRIT PETITION NO.472 OF 2022 WITHWRIT PETITION NO.473 OF 2022 WRIT PETITION NO.471 OF 2022 Tungabhadra Minerals Private Limited thr. ...PetitionerJayant GaunkerVersusDeputy Commissioner of Income Tax And 3 Ors. …RespondentsWITHWRIT PETITION NO.472 OF 2022 Salgaocar Mining Industries Private Limited ...Petitionerthr. Jayant GaunkerVersusDeputy Commissioner of Income Tax And 3 …RespondentsOrs. WITHWRIT PETITION NO.473 OF 2022 Salitho Ores Private Private Limited thr. Jayant ...PetitionerGaunkerVersusDeputy Commissioner of Income Tax And 3 …RespondentsOrs. Page 1 of 1430[th ]September 2022 Mr. Percy Pardiwala, Senior Advocate with Mr. Sukh SagarSyal, Mr. Ashwin D. Bhobe and Ms. Shaizeen Shaikh,Advocates for the Petitioners. Ms. Amira Razaq, Standing Counsel for the Respondent No.1.Mr. Raviraj Chodankar, Deputy Solicitor General of Indiafor Respondent No.4. CORAM: G. S. KULKARNI & BHARAT P. DESHPANDE, JJ. P.C. Date: 30[th] September 2022 We have heard Mr. Pardiwala, learned Senior Counsel forthe petitioner and Ms. Razaq, learned Standing Counsel for the Revenue on these petitions. 2.The challenge as raised in these petitions, as also agreed atthe bar, is analogous. Accordingly, the petitions are beingdisposed of by this common order. For convenience we refer tothe facts relevant to the first petition. 3. The petitioners being aggrieved inter alia by the orders dated20.06.2021 passed by the Assessing Officer for the AssessmentYear 2008-2009 and the consequent demand notices dated 5August 2021, 23 August 2021, 9 May 2022 , 8 June 2022, 2August 2022 and 29 August 2022 issued by the respondents havefiled these petitions. Mr. Pardiwala would submit that essentially the concern of the petitioners in the present proceedings is inregard to the refusal of stay to the demand notices. We note theprayers as made in the petition: (a) this Hon'ble Court may be pleased to issue a Writ ofCertiorari or a writ in the nature of Certiorari or any otherappropriate writ, order or direction under Article 226 of theConstitution of India calling for the records of thePetitioner's case and after examining the legality and validitythereof quash and set aside the Order dated 20[th] June, 2021for the A.Y. 2008-09 and the Notices dated 5[th] August,2021, 23rd August, 2021, 9th May, 2022, 8th June, 2022, 2ndAugust, 2022 and 29th August, 2022 and Orders dated 11thAugust, 2021, 17th November, 2021, 29th December, 2021for the recovery of a part of the demand arising from theOrder dated 20th June, 2021 for the A.Y. 2008-09.(b) this Hon'ble Court may be pleased to issue a Writ ofMandamus or a writ in the nature of Mandamus or anyother appropriate writ, order or direction under Article 226of the Constitution of India ordering and directingRespondent No.1 to forthwith withdraw and cancel theOrder dated 20th June, 2021 for the A.Y. 2008-09 and theNotices dated 5th August, 2021, 23rd August 2021, 9th May,2022, 8th June, 2022, 2nd August, 2022 and 29th August,2022 and Orders dated 11th August, 2021, 17th November,2021, 29th December, 2021 for the recovery of a part of thedemand arising from the Order dated 20th June, 2021 for theA.Y. 2008-09. (c) this Hon'ble Court may be pleased to issue a Writ ofProhibition or a writ in the nature of Prohibition or anyother appropriate writ, order or direction under Article 226of the Constitution of India ordering and directing theRespondents to permanently refrain from giving effect toand/or proceeding further with the recovery of any taxdemand for the A.Y. 2008-09. (d) Pending and hearing and final disposal of this Petition,this Hon'ble Court may be pleased to restrain theRespondents from acting upon the Order dated 20th June, th June, June, 2021 for the A.Y. 2008-09 and the Notices dated 5[th] August, (c) this Hon'ble Court may be pleased to issue a Writ ofProhibition or a writ in the nature of Prohibition or anyother appropriate writ, order or direction under Article 226of the Constitution of India ordering and directing theRespondents to permanently refrain from giving effect toand/or proceeding further with the recovery of any taxdemand for the A.Y. 2008-09. (d) Pending and hearing and final disposal of this Petition,this Hon'ble Court may be pleased to restrain theRespondents from acting upon the Order dated 20th June, th June, June, 2021 for the A.Y. 2008-09 and the Notices dated 5[th] August, 2021, 23rd August 2021, 9th May, 2022, 8th June, 2022, 2ndAugust, 2022 and 29th August, 2022 and Orders dated 11thAugust, 2021, 17th November, 2021, 29th December, 2021for the recovery of a part of the demand arising from theOrder dated 20th June, 2021 for the A.Y. 2008-09. (e) Ad interim relief in terms of prayer clause (d) be granted; (f) the Respondents be directed to pay the costs of thisPetition. (g) this Hon'ble Court may be pleased to grant such otherand further reliefs and orders as this Hon'ble Court maydeem fit and proper. (Note: Prayers are similar in the other petitions.) 4.Mr. Pardiwala has drawn our attention to the impugnedAssessment Order dated 20 June 2021 passed in the petitioner'scase which is for the Assessment Year 2008-09 issued under theprovisions of Section 143(3) read with Section 153A of theIncome Tax Act 1961 (for short 'the IT Act'). The assessment inquestion is issued on the basis of a search and seizure action takenagainst the petitioner under the provisions of Section 132 of theIncome Tax Act, 1961. By the Assessment Order in questionthere is an addition of income in the petitioner's hands in thetune of 264.59 crores for the Assessment Year 2008-09.₹Consequent to the Assessment Order a tax demand is raisedagainst the petitioner which is for an amount of 239.54 crores.₹Similar is the position in the companion matters, however, theamounts are different. 5.The petitioner has already assailed the assessment ordersby filing an appeal before the Commissioner of Income Tax(Appeals) which are stated to be pending adjudication. In themeantime, the petitioner approached the Assessing Officer byan application dated 30.07.2021 praying for stay of the taxdemand inter alia also contending that such demand is notjustified on the ground of the assessment order being badand illegal when considered on its merits. The petitioner alsoraised an issue on financial stringency contending that it wouldnot make it possible for the petitioner to deposit the tax asdemanded. The petitioner contended that the balance ofconvenience was in favour of the petitioner and a prima facie casemade out by the petitioner for stay of the tax demand. TheAssessing Officer by an order dated 11.08.2021 without assigningany reasons rejected the petitioner's stay application. Beingaggrieved by such decision of the Assessing Officer the petitionerapproached the Principal Commissioner of Income Tax, by anapplication dated 13.08.2021, inter alia, praying for stay of thedemand in view of the pendency of the appeal and on theextensive grounds as made out by the petitioner in the stayapplication as filed before the Assessing Officer. The petitionerscontend that in their application before the Assessing Officerdated 30.07.2021 a substantive case on the aspect of “financial stringency” was made out by the petitioner, which was notconsidered by the Assessing Officer and without assigning anyreasons their prayer for stay was rejected by an order dated11.08.2021. stringency” was made out by the petitioner, which was notconsidered by the Assessing Officer and without assigning anyreasons their prayer for stay was rejected by an order dated11.08.2021. 6.The Principal Commissioner heard the petitioner on suchapplication and by order dated 17.11.2021 did not accept thepetitioner's'' case on stay of the demand notice, inter aliaobserving that the additions made are based on evidences foundduring search proceedings and the issues are not exactly same asalready decided by the appellate authorities in earlier assessmentyears. It was observed that in the facts and circumstances of thecase and Instruction No. 1914 and OM dated 29.02.2016, thepetitioner be directed to remit 10% of the taxes due as per thedemand notices served for the relevant assessment years before 15December 2021. 7.Mr. Pardiwala has made submissions that the petitioners'case although was considered on other aspects, however, thePrincipal Commissioner had not considered the specific case ofthe petitioner on financial distress in deciding petitioner's prayerfor stay of the demand. It is stated that on such backdrop thepetitioner re-approached the Principal Commissioner by another application dated 06.12.2021, categorically pointing out theissues of financial stringency as already detailed in theapplications filed in relation to the stay of the demand, therebypraying before the Principal Commissioner to consider suchcontentions, and the material placed on record, to stay thedemand. 8.Such application of the petitioner came to be decided bythe Principal Commissioner by an order dated 29.12.2021,whereby in rejecting the petitioner's application in paragraph 7 ofhis order the Principal Commissioner observed thus: '7. Regarding financial stringency claimed by theassessee, the AO in his report submitted that the overseasBVI companies controlled by Late Anil V Salgaocarrealised net trading profit of USD $ 690,650,641 whichincludes profit illegally shifts outside India belonging toSalgaocar Group of companies, which has been utilisedfor purchase of various overseas assets which includeapartments, office units, residences, oil tanker, cruiseliner, barges, towing tugs, cranes, aircraft etc. Further it isalso revealed from Suit 821 documents that the tradingprofits earned from the under invoicing of iron orderexports by Salgaocar Group of Companies in India havealso been utilised to invest in India as well as variousforeign entities like Subarnarekha Port India, Ideal PortIndia, Vertex Newton Mumbai, Salgaocar Asia Pte Ltd,African Pte Ltd, Venus Shining Bulk Carrier, SalgaocarSwaziland, GIP general Trading LLC, Navy Impex LLCetc. In view of the above facts of the case, it can be said that the assessee is not able to prove any financial distressto the company to pay the demand.' On such reasoning the Principal Commissioner concludedthat 10% of the tax is required to be remitted by the petitionerwithin 10 days of the receipt of the said demand in question.Accordingly, a fresh demand has been raised by the respondentsby notice dated 29.08.2022 which was received by the petitioneron 03.09.2022. It is on such conspectus assailing the said ordersthe petitioner has approached this Court in the presentproceedings. 9.Mr. Pardiwala has made extensive submissions including onmerits of the case of the petitioner, which no doubt, is thepetitioner's case in the pending appeal, to contend that a primafacie case was made out by the petitioner for a stay on the tax asdemanded, during the pendency of the appeal. However, Mr.Pardiwala would fairly submit that the immediate concern of thepetitioner is in regard to the demand of 10% of the tax asassessed, as raised against the petitioner by the notices inquestion. Mr. Pardiwala would submit that in the said threesuccessive orders as passed refusing stay on the tax demandnotices, none of the orders have considered the petitioner'scategorical case, as pleaded, on the aspect of financial distress. It is hence his submission that the demand notices are required tobe stayed. 9.Mr. Pardiwala has made extensive submissions including onmerits of the case of the petitioner, which no doubt, is thepetitioner's case in the pending appeal, to contend that a primafacie case was made out by the petitioner for a stay on the tax asdemanded, during the pendency of the appeal. However, Mr.Pardiwala would fairly submit that the immediate concern of thepetitioner is in regard to the demand of 10% of the tax asassessed, as raised against the petitioner by the notices inquestion. Mr. Pardiwala would submit that in the said threesuccessive orders as passed refusing stay on the tax demandnotices, none of the orders have considered the petitioner'scategorical case, as pleaded, on the aspect of financial distress. It is hence his submission that the demand notices are required tobe stayed. 10. In support of his submissions that it would be imperativefor the respondents to consider the issue of financial hardship indeciding the stay application, reliance is placed on the decision ofthe co-ordinate Bench of this Court in the case of MumbaiMetropolitan Region Development Authority v/s. DeputyDirector of Income -tax (Exemption-1)1. Referring toparagraph 11 of the said decision Mr. Pardiwala submits that thisCourt referring to the settled position in law on the issue of a stayof demand on such ground as laid down in KEC InternationalLtd. V/s. B. R. Balakrishnan[2], UTI Mutual Funds v/s. ITO[3]and UTI Mutual Fund v/s. ITO has held that in cases where theassessee/applicant relies upon financial difficulties, the authorityconcerned should briefly indicate whether the asssessee is in a“financially sound and viable position” to deposit the amounts orthe apprehension of the revenue of non-recovery later on, is. correct warranting deposit 11. Mr. Pardiwala would thus submit that apart from the 1 (2015) 273 CTR 317 (Bombay) 2 (2001) 251 ITR 158 3 (2012) 345 ITR 71 (Bom) petitioner making out a case on merits certainly a case of financialhardship was made out by the petitioners which was required tobe considered by the Assessing Officer as also the PrincipalCommissioner in deciding the stay application. Mr. Pardiwalawould submit that the Principal Commissioner has in fact notassigned any reason and has merely quoted observations as madeby the Assessing Officer in his report, which according to thepetitioners, was an issue of an assail on the merits of thepetitioners case in the pending appeal. According to Mr.Pardiwala what was necessary to be seen is the financial stringencyas categorically pleaded by the petitioner in the stay applications. 12. On the other hand, Ms. Razaq, learned Standing Counselfor the Revenue at the outset has objected to the maintainabilityof the petitions. She would support the impugned orders. Ms.Razaq would contend that this is a clear case where the demandswould be justified even when the Court considers the merits ofthe case. She would submit that the Court, thus ought not tointerfere and more particularly when the appeal itself is pendingthe petitioner ought not to urge such issues and needs to complywith the demand of deposit of the 10% of the total amount of taxpayable as assessed. 12. On the other hand, Ms. Razaq, learned Standing Counselfor the Revenue at the outset has objected to the maintainabilityof the petitions. She would support the impugned orders. Ms.Razaq would contend that this is a clear case where the demandswould be justified even when the Court considers the merits ofthe case. She would submit that the Court, thus ought not tointerfere and more particularly when the appeal itself is pendingthe petitioner ought not to urge such issues and needs to complywith the demand of deposit of the 10% of the total amount of taxpayable as assessed. 13. We have heard learned counsel for the parties and withtheir assistance we have perused the record. On perusal of theorders by which the stay of the demand has been rejected by theAssessing Officer as also by the Principal Commissioner ofIncome tax, we may observe that in the petitioner's applicationdated 30.07.2021 the petitioner had averred a categorical case offinancial hardship. However, the Assessing Officer rejected thepetitioner's application of a stay on the demand, withoutassigning any reasons. The petitioner accordingly approached thePrincipal Commissioner praying for stay of the demand,reiterating the specific grounds in that regard contending that theAssessing Officer has not applied his mind to the aspect offinancial stringency and therefore the demand needs to be stayed.However, the fate of the petitioner before the PrincipalCommissioner was not different. Although other issues on meritsare considered by the Principal Commissioner, we find that thereare no reasons in the context of financial hardship, in both theorders passed by the Principal Commissioner being orders dated11.08.2021 and order dated 29.12.2021. Thus, the case of thepetitioner on financial stringency is not at at all considered in theperspective it ought to have been considered by the PrincipalCommissioner, after applying his mind to the specific plea astaken by the petitioners in that regard. Such plea was required to be decided by considering the facts and figures from the materialsas placed on record, so as to determine by giving reasons as towhether the plea was at all genuine and acceptable. 14. It is clearly seen from the decision cited by Mr. Pardiwala inthe case of Mumbai Metropolitan Region DevelopmentAuthority v/s. Deputy Director of Income -tax (Exemption-1)(supra) that this Court considering the earlier decisions on suchissue as noted by us, has held that the aspect of financial hardshipis one of the grounds which is required to be considered by theauthority concerned and the authority concerned should brieflyindicate whether the assessee is financially sound and viable todeposit the amount or the apprehension of the revenue of non-recovery later is correct warranting deposit. We find that at thisstage such test is not applied in passing of the impugned orders bythe Principal Commissioner who has simplicitor referred to theAssessing Officer's report in rejecting stay on deposit of the tax. 15. We are conscious that the proceedings are pending beforethe Commissioner of Income Tax (Appeals) and hence, we neednot delve on any issues on the merits as any observations onmerits of the petitioner's contentions would not be in the interestof the parties in the adjudication of the appeals. This would also not be fair to such proceedings. However, considering thislimited issue with regard to the stay of demand, we are of theopinion that the Principal Commissioner needs to reconsidersuch issue and pass an appropriate order considering the issue offinancial stringency as canvassed by the petitioner by furnishingreasons. In the light of the above discussion, we dispose of thesepetitions by the following order:- ORDER a) The Principal Commissioner of Income Tax is directed to 15. We are conscious that the proceedings are pending beforethe Commissioner of Income Tax (Appeals) and hence, we neednot delve on any issues on the merits as any observations onmerits of the petitioner's contentions would not be in the interestof the parties in the adjudication of the appeals. This would also not be fair to such proceedings. However, considering thislimited issue with regard to the stay of demand, we are of theopinion that the Principal Commissioner needs to reconsidersuch issue and pass an appropriate order considering the issue offinancial stringency as canvassed by the petitioner by furnishingreasons. In the light of the above discussion, we dispose of thesepetitions by the following order:- ORDER a) The Principal Commissioner of Income Tax is directed to hear the petitioner(s) on the stay application on the specificplea of the petitioner in regard to financial stringency andafter granting an opportunity of a hearing to thepetitioner(s), pass an appropriate order on such issue. Letsuch exercise be undertaken as expeditiously as possible andin any case within 2 months from today. b) In the meantime, till a fresh decision on such issue istaken, the impugned demands in question, relevant to thesepetitions shall not be acted upon by the respondents. 16. We clarify that considering the view taken by us, we havenot considered the issue of maintainability of the petitions. 17. We further clarify that this order is in no manner anyexpression on the contentions of both the parties in the pendingproceedings. 18. All contentions of the parties on merits are expressly keptopen. 19. The petitions are disposed of. No costs. BHARAT P. DESHPANDE, J G. S. KULKARNI, J MARIA SUZANA REBELLO Digitally signed by MARIA SUZANA REBELLO Date: 2022.10.03 19:30:30 +05'30'