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2005 (5) TMI 39
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....46,730 and book profits under section 115JB of the Act were shown at a loss of Rs. 30,17,013. This revised return was processed on June 18, 2004. The case for the assessment year was taken up for scrutiny and a statutory notice under section 143(2) was issued and duly served upon the assessee-company. After providing opportunity to the assessee through its representative, the Assessing Officer vide order dated March 21, 2005, assessed the income of the assessee under section 143(3) of the Act at Rs. 59,92,40,000, after making certain additions and disallowing certain deductions claimed by the assessee. The tax payable on the assessed income was calculated at Rs. 26,52,66,896. In furtherance of the order of assessment, the Assessing Officer issued a notice of demand under section 156 of the Act. However, he reduced the period for payment of the tax to seven days (7) instead of allowing 30 days, as contemplated under section 220 of the Act. The notice of demand was issued on that very date, i.e., March 21, 2005. The petitioner has raised a challenge to the legality and validity of exercise of this statutory discretion vested in and by the Assessing Officer in this writ petition....
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....ssessee, therefore, the power has been exercised by the Assessing Officer judiciously and in consonance with the provisions of the Act. The respondents, thus, pray for dismissal of the writ petition. The answer to the rival contentions raised in the present writ petition would obviously lie on a comprehensive discussion on the ambit and scope of the statutory powers vested in the Assessing Officer under section 220(1) of the Act. The provisions of law undoubtedly empower the Assessing Officer to curtail the period for payment of tax, but would it be permissible to read these provisions and hold that there are no limitations on exercise of such power. Before we dilate on various aspects of the provisions of section 220 of the Act, reference to this section can usefully be made at this stage: "220. When tax payable and when assessee deemed in default.- (1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice: Provided that, where the Assessing Officer has any reason to believe that it will be detrimenta....
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.... he may think fit to impose in the circumstances of the case. (4) If the amount is not paid within the time limited under subsection (1) or extended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default. (5) If, in a case where payment by instalments is allowed under sub-section (3), the assessee commits default in paying any one of the instalments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default. (6) Where an assessee has presented an appeal under section 246 or section 246A, the Assessing Officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. (7) Where an assessee has been assessed in respect of income aris....
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....es a protection to an assessee who has preferred an appeal under section 246 of the Act to make an application of the Assessing Officer and request him not to treat the assessee in default in relation to the demand raised during the pendency of the appeal. These various provisions of section 220 clearly indicate various checks and balances, which are provided by the Legislature. To impose, and discretion to waive interest, treat an assessee as a defaulter or not, explicitly indicate the extent of statutory powers vested in the authorities in relation to recovery of a demand raised by the Assessing Officer under section 156 of the Act. The Assessing Officer exercises quasi-judicial powers vested in him under these statutory provisions. Exercise of such authority would presuppose application of mind with due compliance with the pre-requisites indicated in the provisions. Every quasi-judicial order would require the concerned authority to act in conformity with the provisions as well as ensure that the indicated legislative object is achieved. The fairness in exercise of such powers should not be faulted with on the ground of arbitrariness and non-recording of the satisfaction in conf....
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....d and construed into general harmony with the terms of the consequence. For proper applicability of the proviso to sub-section (1) of section 220, it will be appropriate to spell out the following essential features: (a) Sub-section (1) pre-supposes existence and issuance of a notice under section 156 of the Act. (b) The Assessing Officer should have "reason to believe that it will be detrimental to the Revenue if the full period of 30 days is allowed". (c) Wherever the Assessing Officer intends to reduce such period he would do so with the previous approval of the Joint Commissioner. Discharge of quasi-judicial functions makes it mandatory for the concerned authority to record a reason-based satisfaction. The reasons should have a direct nexus that the order is passed to avoid detriment to the interest of the Revenue. The belief of the officer should have nexus to the reason for such belief and both these features in turn should have nexus to the interest of the Revenue. The belief thus should not be imaginary or unrelatable to any kind of cogent material on record of the Assessing Officer's file. Such material could relate to anything which comes to the notice of t....
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....ve" that the other party has been living must relate to the standards of belief of a reasonable mind and not to those of a particular petitioner. In the case of Dr. Partap Singh v. Director of Enforcement [1985] 155 ITR 166; 58 Comp Cas 477; AIR 1985 SC 989, their Lordships of the Supreme Court held that it is open to the court to examine the question in relation to rational connection or a relevant bearing to the formation of the belief and not extraneous or irrelevant to the purpose of the section. To that extent it was held that the proceedings initiated by the Taxing Officer under section 34 would be open to challenge in a court of law. Still in another case of Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC); AIR 1981 SC 1363, the Supreme Court held: "that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid." Absence of reasons in such decision-making may even prima facie suggest misuse of power in the given facts of a case. The reasons must have nexus....
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.... such remedy on the one hand, there on the other he would be exposed to liability of interest and penalty immediately on the expiry of the reduced period. Thus, an order of the Assessing Officer under the proviso to section 220(1) vests the assessee with serious consequences. Once such are the serious consequences of the default in compliance with the direction for payment of tax in the reduced period, the greater would be the obligation upon the Assessing Officer to act fairly and judiciously. There has to be definite cause or reason before the Assessing Officer capable of being understood by the person of common prudence that but for such an order there will be detriment to the Revenue. In other words, the recovery of the demand raised by the Revenue is likely to be defeated if the full prescribed period is granted to the assessee. Invocation of such provisions in a routine or a mechanical manner would not be permissible. The language of the section does not suggest that the Legislature intended to arm the Assessing Officer with powers carte blanche. The higher the power, the greater is the obligation to act judiciously. Reason is the soul of any judicious order. The order suppor....
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....ntention to delay or to avoid any process of the court or obstruct or delay the decree that may be passed against the defendant, the defendant has absconded or left the limitation of the jurisdiction of the court, is about to do so or has disposed of or removed his property or any part thereof under the jurisdiction of the court, the court could issue a warrant of arrest with a direction that such defendant be brought before the court and be directed to furnish security subject to such terms and conditions as the court may deem fit and proper. Under different rules of this Order 38, vast powers have been vested in the court in relation to the defendant as well as the property in suit, or both. Attachment before judgment is one of the known concepts. In civil law, this jurisdiction is quite familiar and the procedure is known as saisie conservatoire whereby the assets of a debtor may be impounded before a judgment, and orders commonly known as a Mareva injunction often practised in British, Australian and even in Indian law under the provisions of the said order. Even if a power to pass an order or grant an injunction is vested, it would be granted only if it is right to do so. Lega....
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....w, we may refer to the reasons which persuaded the Assessing Officer to reduce the period of 30 days to 7 days in this case, as they appear from the record produced before the court. On March 21, 2005, after passing an order under section 143(3) of the Act, the Assessing Officer further made the following order: "It has been gathered that the assessee-company is winding up its manufacturing activities in the country. There has also not been any payments of advance tax on the due dates, viz., June 15, 2004, September 15, 2004, and December 15, 2004. For the due date March 15, 2005 also, there is no information as on date regarding any payment having been received on account of advance tax from the assessee. Since a substantial demand of Rs. 26,52,66,896 has been raised pursuant to the finalization of the assessment proceedings for the assessment year 2002-2003, I have reasons to believe that it will be detrimental to the Revenue if the full period of thirty days is allowed. Therefore, as per the proviso to section 220(1) of the Income-tax Act, 1961, a reduced period of seven days (7) has been given to the assessee in the notice of demand in the prescribed form (ITS 7)." The ch....
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....d that penalty proceedings have been initiated separately and copy of the order be furnished to the assessee giving seven days time for payment of the demand. There are two reasons which have been stated by the Assessing Officer while issuing the impugned order. Firstly, that it has been gathered that the petitioner-company is winding up its manufacturing activity in the country, and secondly, that it had not paid any payments of advance tax on the due dates including March 15, 2005. These reasons have been recorded by the officer on March 21, 2005. While recording the second reason it has been specifically noticed by the Assessing Officer that there was no information as on date regarding any payment having been received on account of advance tax from the assessee. This reason is factually incorrect. It is not even disputed before us that on March 15, 2005, the petitioner-company had deposited advance tax to the extent of Rs. 4.32 crores. In regard to previous instalments of advance tax, no query was raised on the assessee by the Assessing Officer and they had no occasion to explain their case to the authorities. It has been stated on affidavit before us that non-payment of thr....
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.... passing of the order under section 220(1) of the Act. The respondents have not placed on record any material to show that the manufacturing activity was reduced by the company with an intention to evade payment of tax due from the assessee. While one reason is factually incorrect, the other is without any foundation. The Assessing Officer could have easily called upon the assessee to show the proof if the assessee had paid the advance tax on March 18, 2005 or even March 21, 2005, when admittedly the representative of the assessee had appeared before the Assessing Officer. In the counter affidavit before us, it is admitted that instalment of advance tax was paid by the assessee on March 15, 2005. This fact, the Assessing Officer could even departmentally verify but no attempt was made by him in this direction. Therefore, this could not be treated as a valid ground for reduction of the period in terms of the proviso to section 220(1) of the Act. The reasons recorded by the Assessing Officer for forming an opinion that it would be detrimental to the Revenue to grant the full period were relevant material and had a direct bearing on the object of the section. The provisions of the ....