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2013 DIGILAW 2688 (BOM)

Vodafone India Ltd. v. Union of India

2013-12-24

M.S.SANKLECHA, MOHIT S.SHAH

body2013
ORDER 1. At the instance and request of counsel for both the sides, petition is taken up for final disposal at the stage of admission. By this petition under Art. 226 of the Constitution of India, the order of assessment dt. 29th Nov., 2013 passed by the AO under s. 143(3) r/w ss. 263 and 254 of the IT Act, 1961 (the Act) passed for asst. yr. 2005-06 is being challenged. The primary challenge to the impugned order dt. 29th Nov., 2013 is that the same has been passed In breach of principles of natural justice i.e. absence of fair opportunity of making a representation and in total defiance of the orders dt. 18th Sept., 2012 and 3rd April, 2013 passed by the Tribunal. 2. Briefly, the facts leading to this petition are: (a) On 5th Oct., 2005 the petitioner filed its return of income for the asst. yr. 2005-06 declaring its total income at nil. The petitioner had arrived at nil income by having claimed deduction of Rs. 307.93 crores under s. 80-IB of the Act from its total income. However, the AO by an order dt. 3rd Sept., 2007 passed under s. 143(3) of the Act while accepting the claim for deduction under s. 80-IB of the Act, determined the book profits of the petitioner at Rs. 348.58 crores as against Rs. 317.78 crores declared by the petitioner for the purposes of minimum alternate tax; (b) On 11th Nov., 2009, the CIT issued a notice to the petitioner in. exercise of its power of revision under s. 263 of the Act contending that the assessment order dt. 3rd Sept., 2007 of the AO was erroneous and prejudicial to the interest of Revenue to the extent it allowed deduction to the petitioner under s. 80-IA of the Act. After hearing the petitioner, the CIT in exercise of its power under s. 263 of the Act passed an order dt. 30th March, 2010 denying the petitioners claim for deduction under s. 80-IA of the Act. This was essentially on the basis of the draft assessment for the asst. yr. 2006-07 which was subsequently confirmed by the DRP by its order dt. 4th Feb., 2011; (c) Being aggrieved by the order dt. 30th March, 2010, the petitioner filed an appeal to the Tribunal. This was essentially on the basis of the draft assessment for the asst. yr. 2006-07 which was subsequently confirmed by the DRP by its order dt. 4th Feb., 2011; (c) Being aggrieved by the order dt. 30th March, 2010, the petitioner filed an appeal to the Tribunal. On 18th Sept., 2012, the appeal filed by the petitioner was dismissed thus upholding the exercise of power of revision under s. 263 of the Act. However, the Tribunal in its order dt. 18th Sept., 2012 directed the AO to decide the issue of the petitioner's entitlement to its claim for deduction under s. 80-IA of the Act without being In any manner influenced by the observations made in the order dt. 30th March, 2010 of the CIT or by the observations/findings made in the assessment order made under s. 143(3) of the Act for asst. yr. 2006-07; (d) In the meantime, pending disposal of the petitioner's appeal to the Tribunal against the order of the CIT dt. 30th March, 2010, the AO passed an order dt. 30th Dec, 2010 of assessment for asst. yr. 2005-06 in consequence of the order dt. 30th March, 2010 passed by the CIT under s. 263 of the Act. In the order dt. 30th Dec., 2010, the AO disallowed the entire claim of the petitioner for deduction under s. 80-IA of the Act; (e) Being aggrieved by the order of assessment dt. 30th Dec, 2010, the petitioner filed an appeal to the CIT(A). By an order dt. 13th Oct., 2011 the CIT(A) dismissed the petitioner's appeal. Consequent to the above dismissal, the petitioner filed an appeal to the Tribunal. The Tribunal by its order dt. 3rd April, 2013 took note of the fact that by its earlier order dt. 18th Sept., 2012 in an appeal filed from the order dt. 30th March, 2010 passed under s. 263of the Act, while dismissing the petitioners appeal, had specifically directed the AO to consider the petitioner's claim for deduction under s. 80-IA of the Act being uninfluenced by the observations either in the order dt. 30th March, 2010 of the CIT or by the order of assessment of the AO for the asst. yr. 2006-07. In view of the above, the Tribunal set aside the order dt. 30th March, 2010 of the CIT or by the order of assessment of the AO for the asst. yr. 2006-07. In view of the above, the Tribunal set aside the order dt. 30th Dec, 2010 of the AO holding that it is entirely based on the finding of the CIT under s. 263 of the Act and on the finding recorded in respect of the order of assessment relating to the asst. yr. 2006-07. Thus, the assessment order was held to be contradictory to the directions of the Tribunal's order dt. 18th Sept., 2012. Accordingly, the order of the AO was set aside and the matter restored to the AO for de novo adjudication for the asst. yr. 2005-06 after following the principle of natural justice; (f) Consequent to the above, the AO issued a notice dt. 7th Aug., 2013 calling upon the petitioner to submit necessary evidence in support of its claim for deduction under s. 80-IAof the Act. In response, the petitioner filed various replies, wherein they submitted their claim for deduction under s. 80-IA of the Act, both on factual as well as legal grounds; (g) Apparently not satisfied with the replies of the petitioner on 27th Nov., 2013, the AO issued a show-cause notice to the petitioner in respect of the assessment for the asst. yr. 2005-06 and called upon the petitioner to explain with sufficient documentary evidence its claim for deduction under s. 80-IA of the Act. The petitioner was called upon to furnish its reply to the above show-cause notice on or before 3.30 p.m. on 28th Nov., 2013. (h) We are informed that the petitioner filed the necessary details in the form of compilation of documents on 29th Nov., 2013. However, to its shock, the petitioner received an order dt. 29th Nov., 2013, after it had filed its reply, denying it the benefit of its claim for deduction under s. 80-IA of the Act; 3. Mr. Percy Pardiwala, senior counsel in support of the petition submits: (a) The AO issued a show-cause notice on 27th Sept., 2013, seeking to deny the benefit of deduction claimed by the petitioner under s. 80-IA of the Act and sought a response to the same by 3.30 p.m. on 28th Nov., 2013. This was a very short time to file its reply along with evidence. This was a very short time to file its reply along with evidence. Nevertheless the petitioner had filed its reply/evidence/submissions in the form of compilation on 29th Nov., 2013. However, the AO without having considered the reply has passed a 76 page order on 29th Nov., 2013. Thus, the petitioner did not get sufficient time to respond to the notice and this was a breach of principles of natural justice; and (b) In any event, on merits also the impugned order dt. 29th Nov., 2013 of the AO is in breach of the directions of the Tribunal as contained in the Tribunal orders dt. 18th Sept., 2012 and 3rd April, 2013 wherein the AO has been directed to pass an order without being influenced by the observations made in the order dt. 30th March, 2010 of the CIT under s.263 of the Act as also the assessment order passed for the asst. yr. 2006-07. However, the impugned assessment order denies the petitioner its claims for deduction under s. 80-IA of the Act by relying upon the finding in both the aforesaid orders. 4. As against the above, Mrs. Bharucha, counsel appearing for the Revenue in support of the impugned order submits: (a) In case the petitioner is aggrieved by the impugned order dt. 29th Nov., 2013 of the AO, it has an alternative remedy of appeal provided under the Act to the CIT(A). In view of the above, this petition should not be entertained and the petitioner be directed to avail of the statutory remedy of appeal; (b) There has been no breach of natural justice in as much as the notice dt. 27th Nov., 2013, calling upon the petitioner to show cause why their claim for deduction under s. 80-IAof the Act should not be disallowed itself refers to the fact that the petitioner had been afforded sufficient opportunities to present its case over a longer period including the grant of personal hearing, yet nothing was brought on record to by the petitioner to support its claim for deduction under s. 80-IA of the Act. In that view of the matter, there has been no breach of natural justice as sufficient opportunity to present its claim had been granted to the petitioner; and (c) The alleged grievance of the petitioner that the impugned assessment order dt. 29th Nov., 2013 has been passed in defiance of the orders dt. In that view of the matter, there has been no breach of natural justice as sufficient opportunity to present its claim had been granted to the petitioner; and (c) The alleged grievance of the petitioner that the impugned assessment order dt. 29th Nov., 2013 has been passed in defiance of the orders dt. 18th Sept., 2012 and 3rd April, 2013 of the Tribunal could be considered by the appellate authority, constituted under Act viz., CIT(A) to which the petitioner can file the appeal. Therefore there is no reason to entertain this petition. 5. We have considered the rival submissions. Normally, we would not entertain a petition under Art 226 of the Constitution of India where an alternative remedy in the form of appeal is provided in the statute. In the present case, the order of the assessment dt. 29th Nov., 2013 is an order from which an appeal would lie under s. 246Aof the Act to the CIT(A). However, this non-exercise of our writ jurisdiction in case of availability of an alternative remedy is a self-imposed restriction based upon convenience and discretion rather than a rule of law. In appropriate cases where there is a serious flaw in the decision-making process or prejudice is caused to a party on account of breach of natural justice. We are enjoined to exercise our writ jurisdiction. In fact non-exercise of our writ jurisdiction in appropriate cases would amount to abdication of our obligation to ensure that justice is done. Therefore the availability of an alternative remedy would not by itself bar the exercise of our writ jurisdiction, if the facts of the case so deserve. 6. In the present case, we find that a show-cause notice was issued to the petitioner on 27th Nov., 2013, calling upon the petitioner to show cause why its claim for deduction under s. 80-IA of the Act should not be disallowed. This denial of benefit under s. 80-IA of the Act was upon various grounds such as date of commencement of business and fulfilling eligibility criteria, etc. under s. 80-IA of the Act. However, the petitioner was given less than 24 hours to respond to the show-cause notice i.e. before 3.30 p.m. on 28th Nov., 2013. This denial of benefit under s. 80-IA of the Act was upon various grounds such as date of commencement of business and fulfilling eligibility criteria, etc. under s. 80-IA of the Act. However, the petitioner was given less than 24 hours to respond to the show-cause notice i.e. before 3.30 p.m. on 28th Nov., 2013. The contention of the Revenue that there was no breach of natural justice in as much as opportunity had been granted to the petitioner earlier to furnish evidence by granting them personal hearing and the petitioner had failed to furnish any evidence. This may not be so in the present facts for the reason that if the petitioner had already been given sufficient opportunity and the petitioner had failed to lead the appropriate evidence then there was no occasion for the AO to have issued the show-cause notice dt. 28th Nov., 2013 calling upon the petitioner to show cause why its claim for deduction under s. 80-IA should not be disallowed. In fact the issue of show-cause notice on 27th Nov., 2013 is itself an admission of the fact that upto the date of the issue of the notice the AO was not certain about disallowing or allowing the claim of the petitioner for deduction under s. 80-IA of the Act. We find that once the AO has called upon the petitioner to show cause why its claim for deduction under s. 80-IA of the Act should not be disallowed, then a reasonable opportunity of filing its reply should be made available to the notice of the show-cause notice i.e. petitioner. In this case, less than 24 hours period is granted to the petitioner to respond to the notice, particularly when there is no fear of the assessment getting time barred in the near future. In such circumstances, It is incumbent upon the notice issuing authority to grant reasonable opportunity to the petitioner to respond to the notice. In fact, granting of an opportunity to respond to the show-cause notice in less than 24 hours is a flaw in the decision-making process and therefore amenable to judicial review. It has been stated times without number that justice must not only be done but also appear to have been done. In fact, granting of an opportunity to respond to the show-cause notice in less than 24 hours is a flaw in the decision-making process and therefore amenable to judicial review. It has been stated times without number that justice must not only be done but also appear to have been done. The non-consideration of the petitioner's response to the notice by making it impossible to the petitioner to file its reply for the consideration of the AO does cause prejudice to the petitioner leading to palpable injustice. Thus warranting the exercise of our writ Jurisdiction. 7. On the above limited ground alone, we set aside the impugned order dt. 29th Nov., 2013 passed in breach of natural justice which is a result of a serious flaw in the decision-making process. However In the present facts, we restore the matter to the AO for fresh disposal after considering the petitioner's reply dt. 29th Nov., 2013 (which has already been submitted) and granting the petitioner a personal hearing. Therefore we have not examined the other contention of the petitioner that the impugned order is bad as it failed to follow the binding directions contained in the orders dt. 18th Sept., 2012 and 3rd April, 2013 of the Tribunal. However there can be no dispute that the AO is bound to follow the directions contained in the orders of a higher forum i.e. the Tribunal in this case which it gave while remanding the matter to the AO to pass a fresh order on de novo adjudication. 8. In view of the above, we pass the following order: (i) The impugned assessment order dt. 29th Nov., 2013 (Ext. F) for asst. yr. 2005-06 is quashed and set aside; (ii) The assessment for the asst. yr. 2005-06 is remanded to the AO with a direction to take on record the submissions along with documents in the form of a compilation submitted by the petitioner on 29th Nov., 2013 to the AO; and (iii) The petitioner will thereafter be given an opportunity of hearing by the AO before passing a fresh assessment order in accordance with law, including taking into consideration the observations made by the Tribunal In its orders dt. 18th Sept., 2012 (TEA No. 706/Chd/2010) [reported as Vodafone Essar Ltd. v. CIT (2013) 153 TTJ (Chd) 451 : (2013) 85 DTR (Chd)(Trib) 337--Ed.] and 3rd April, 2013 OTA No. 1172/Chd/2011). 9. 18th Sept., 2012 (TEA No. 706/Chd/2010) [reported as Vodafone Essar Ltd. v. CIT (2013) 153 TTJ (Chd) 451 : (2013) 85 DTR (Chd)(Trib) 337--Ed.] and 3rd April, 2013 OTA No. 1172/Chd/2011). 9. It is clarified that we have not examined the merits of the controversy between the parties including the issue whether the impugned order has been passed on the basis of the order dt. 30th March, 2010 of the CIT and on the basis of the order of assessment for the asst. yr. 2006-07. Therefore all contentions are kept open to be urged before and decided by the AO in line with the directions of the orders dt. 18th Sept., 2012 and 3rd April, 2013 of the Tribunal. 10. In order to save the time, learned counsel for the parties agree that the petitioner will appear for a personal hearing before the AO on 15th Jan., 2014 at 11.00 a.m. Petition disposed of in the above terms. No order as to costs.