2018 (2) TMI 1286 - HC - Income Tax

Certificate issued u/s 197 - seeks to cancel/ modify the certificate on the ground that the outstanding demand of ₹ 41.86 Crores was not considered at the time of granting the certificate - Held that - Impugned order dated 23rd October, 2017 has been issued with the concurrence of the Commissioner of Income Tax (TDS). Thus, in the above facts, there is no efficacious alternative remedy available as held by us on similar facts in our order dated 16/25th January, 2018 in M/s. Tata Teleservices (Maharashtra) Limited (2018 (2) TMI 192 - BOMBAY HIGH COURT). In this case, as in Tata Teleservices (Maharashtra) Limited (supra), an order canceling a certificate issued under Section 197 of the Act, was passed on the ground that the aspect of pending demand has not been considered in the context of Rule 28AA of the Income Tax Rules, 1961 while granting the certificate under Section 197 of the Act. This, without furnishing a copy of the reasons recorded at the time of issuing the certificate under Section 197 of the Act. This non furnishing of copy of the reasons recorded was held by us to be a flaw in the decision making process. Thus, making the impugned order unsustainable. Impugned order passed by Respondent No.2, which sets aside and/or withdraws / modifies the earlier certificate issued under Section 197 of the Act, is quashed and set aside.

Summary

Issues:
Challenge to order withdrawing Certificate under Section 197 of Income Tax Act, 1961.

Analysis:
1. The petition challenged the order dated 23 October 2017 withdrawing the Certificate dated 18 May 2017 under Section 197 of the Income Tax Act, 1961. The Certificate directed specific tax deductions for different payment scenarios under Sections 194A, 194C, and 194J of the Act.

2. The court adjourned the hearing multiple times at the Revenue's request. The issue was found to be identical to another case, Writ Petition No. 2701 of 2017, which was allowed after hearing the parties. The court noted that no significant changes justified the withdrawal of the Certificate.

3. The impugned order sought to cancel the Certificate based on an outstanding demand not considered during its issuance. The court found no alternative remedy available and referenced a previous judgment on a similar issue.

4. The court highlighted flaws in the decision-making process, including canceling the Certificate without providing reasons recorded during its issuance. The absence of this information was deemed a critical error, rendering the impugned order unsustainable.

5. Detailed reasons from a previous judgment were provided, emphasizing the importance of recording reasons and following due process before canceling a Certificate issued under Section 197 of the Act.

6. The Revenue did not dispute the similarities in the present case to the previous judgment, leading to the conclusion that the impugned order canceling the Certificate was quashed and set aside.

7. The court clarified that other contentions raised in the petition were not considered for disposal, and the petition was disposed of without any order as to costs.