2017 (5) TMI 979 - HC - Income Tax

Advance ruling application under Section 245Q - the assessment proceedings in respect of the petitioner were concluded pursuant to the income tax return filed - whether the Advance Ruling Authority to decide the application on merits once it is admitted and it could not have been dismissed for default? - Held that - There cannot be any second opinion on the aspect that the purpose of the Advance Ruling Authority is to have certainty about the liability to pay tax and to avoid further litigation, but at the same time, if by conduct of the petitioner, it was not desirous to invoke such power, but was rather keen to have the assessment proceedings go on and also to have conclusion of the assessment proceedings and by conduct, the petitioner has not objected to the assessment proceedings, we do not find that the purpose of advance ruling mechanism can be stretched to the extent of diluting the voluntary conduct on the part of the petitioner as sought to be canvassed. Hence, the said contention cannot be accepted. Further, in the present case, as reproduced hereinabove, the Advance Ruling Authority itself when found that it cannot sit in appeal over the order of the Assessing Authority while deciding the matter, it has disposed of the application as having become infructuous. Such a view cannot be said to be as unreasonable, which may call for interference.Petition dismissed.

Summary

Issues:
Petition seeking to quash order passed by Authority for Advance Rulings (Income Tax) on the grounds of becoming infructuous.

Analysis:
The petitioner filed a petition seeking to quash an order passed by the Authority for Advance Rulings (Income Tax) dated 05.08.2015, claiming that the application made by the petitioner under Section 245Q of the Income Tax Act, 1961, was disposed of as infructuous. The petitioner argued that once an application is admitted, the Authority is obligated to render a decision on merits, even if assessment proceedings have concluded. The petitioner requested the Court to direct the Authority to decide on merits. On the other hand, the respondent contended that since assessment proceedings had been completed and the petitioner did not object during the process, pursuing the advance ruling application was unnecessary. The respondent highlighted that the petitioner participated in the assessment proceedings without objection, allowing the Assessing Officer to pass the assessment order. The respondent emphasized that if either party was dissatisfied with the assessment order, appropriate proceedings before a higher forum should be followed.

The Court observed that the petitioner voluntarily participated in the assessment proceedings without raising objections, allowing the Assessing Officer to pass the assessment order. The Court noted that once a litigant accepts a particular authority's jurisdiction without resistance, they cannot simultaneously pursue proceedings that have become infructuous. The petitioner's conduct in surrendering to the Assessing Officer's jurisdiction without objections led to the Authority's decision to dispose of the application as infructuous, which the Court found reasonable and not arbitrary.

The petitioner argued that the purpose of the Advance Ruling Authority is to provide certainty about tax liability and avoid litigation, but the Court emphasized that the petitioner's conduct indicated a desire for assessment proceedings to continue, undermining the purpose of advance rulings. The Court rejected the petitioner's contention, stating that the advance ruling mechanism cannot dilute the voluntary conduct of the petitioner. The petitioner also cited a previous decision to support their claim that the application should be decided on merits once admitted. However, the Court clarified that each case's circumstances must be considered, and the Advance Ruling Authority cannot be compelled to decide on merits in all situations.

In conclusion, the Court found that the petitioner's conduct, coupled with the reasonable decision of the Advance Ruling Authority, did not warrant interference. The Court dismissed the petition, deeming it meritless based on the peculiar conduct of the petitioner and the reasonableness of the Authority's decision.