2021 (11) TMI 749 - HC - Income Tax

'Inter Corporate Deposits' treated to be not an ICD and a payment made regarding high seas sales in 'Indian Currency' - external commercial borrowing - whether excess of jurisdiction as the impugned order proceeds on the basis that there is a violation of 'Foreign Exchange Management Act, 1999' ('FEMA') without even issuing notice to the counter party;Statutory appeal under Section 246A - availability of alternate remedy - HELD THAT - The arguments that the norms of FEMA have not been set out with specificity or required approval details have not been set out with specificity in the impugned order are all clearly arguments in the nature of an appeal qua impugned order i.e., not arguments compelling interference in writ jurisdiction. To be noted, impugned order i.e., assessment order proceeds on the basis that Xangbo is non resident owned, non resident controlled with opaque ownership (97.99% share holding being subscribed by a Cayman Island Controlled entity, which has been allowed 'Foreign Direct Investment' (FDI) in 100% wholesale sector). All these turn heavily on facts and therefore, this is also another reason to say that these are clearly matters for legal drill in the nature of an appeal and does not warrant interference in writ jurisdiction. If there is an error in holding that FEMA norms have not been followed or that the business is not approved under FEMA, these are matters which can be corrected in an appeal. All this turns heavily on facts and on merits of the matter. Excess jurisdiction as an illustration is a case/situation where an Authority exercises jurisdiction which is not vested in it. In this case, if the respondents have levied any fine or have mulcted the writ petitioner with any of the consequences for FEMA violation under FEMA that may well qualify as a case of excess jurisdiction. The consequences under FEMA do not form subject matter of impugned order. If there is no violation of FEMA, it is well open to the writ petitioner to canvass the same in a statutory appeal. Therefore, this is not a case of excess jurisdiction. This Court is unable to accept the argument that this is a case of excess jurisdiction. As rightly contended by learned Revenue counsel, in this case, writ petitioner has not raised the point that the time granted is not reasonable, adequate or ample. On the contrary, writ petitioner has responded to the notice and the same has culminated in the impugned order. Therefore, it is made clear that this Court has not expressed any opinion or view on the merits of the matter and as to whether time granted is reasonable, ample or adequate as that does not fall for consideration in the case on hand. Suffice to say that the writ petitioner has responded and the impugned order has been made. This Court is clear in its mind that none of the exceptional circumstances, which have been culled out in DUNLOP INDIA LIMITED AND OTHER 1984 (11) TMI 63 - SUPREME COURT are attracted in the case on hand. To be noted, excess jurisdiction point urged has been negatived by this Court and the same has been delineated supra elsewhere in this order. In the light of the discussion and dispositive reasoning this Court has no difficulty in coming to the conclusion that this is a fit case to relegate the writ petitioner to file statutory appeal under Section 246A - there is no ground warranting interference in writ jurisdiction qua impugned order. Though obvious, it is made clear that if the writ petitioner chooses to take the alternate remedy route and file a statutory appeal under Section 246A of IT Act, Appellate Authority shall consider the appeal on its own merits and in accordance with law de hors any observation made in this order. Observations in this order which may have the trappings of some expression touching upon merits is for the limited purpose of disposal of captioned writ petition and therefore, if writ petitioner chooses to avail alternate remedy, statutory appeal shall be dealt with by Appellate Authority untrammelled by any observation made in this order. Though obvious, it is also made clear that alternate remedy if availed by the writ petitioner will be subject to pre deposit either direct or indirect as contended and limitation. This Court is informed that the time limit for preferring the statutory appeal is 30 days. If the writ petitioner chooses to seek exclusion of the time spent in this Court qua captioned writ petition for computing this 30 days (by resorting under Section 14 of The Limitation Act, 1963), the same can be considered by Appellate Authority on its own merits and in accordance with law. This order will neither impede nor serve as an impetus in such a legal drill.

Summary

Issues Involved:
1. Treatment of 'Inter Corporate Deposits' (ICDs) and high seas sales payment in INR.
2. Alleged excess of jurisdiction concerning FEMA violations.
3. Alleged violation of Natural Justice Principle (NJP).
4. Availability of alternate statutory remedy.

Issue-wise Detailed Analysis:

1. Treatment of 'Inter Corporate Deposits' (ICDs) and High Seas Sales Payment in INR:
The petitioner challenged the assessment order, arguing that 'Inter Corporate Deposits' (ICDs) with Xangbo Trading (India) Pvt. Ltd. were erroneously treated as non-ICD transactions and that payments made in INR for high seas sales were incorrectly classified as external commercial borrowings. The court held that these issues are matters on merit and do not warrant interference in writ jurisdiction. The assessment order concluded that the transaction with Xangbo was not in conformity with FEMA norms and that the payment in INR was not a business approved under FEMA. These arguments were deemed as matters for an appeal rather than grounds for writ jurisdiction.

2. Alleged Excess of Jurisdiction Concerning FEMA Violations:
The petitioner contended that the assessment order was based on alleged FEMA violations without issuing notice to the counterparty, constituting an excess of jurisdiction. The court disagreed, stating that the impugned order did not impose consequences under FEMA but only levied income tax within the IT Act's statutory perimeter. Any errors regarding FEMA compliance could be corrected in an appeal, and thus, this did not qualify as an excess of jurisdiction.

3. Alleged Violation of Natural Justice Principle (NJP):
The petitioner claimed a violation of NJP, arguing that the notice and draft assessment order process was flawed. The court reviewed the chronology, noting that the petitioner had responded to the notices and show cause notice within the given timeframe. The court found no evidence that the time granted was unreasonable or inadequate, as the petitioner did not raise this issue during the proceedings. Therefore, the court concluded that there was no NJP violation.

4. Availability of Alternate Statutory Remedy:
The court emphasized the principle of alternate remedy, stating that the petitioner had a statutory appeal available under Section 246A of the IT Act. The court cited several precedents, including Dunlop India, Satyawati Tondon, and K.C. Mathew cases, to highlight that writ jurisdiction should not bypass statutory remedies, especially in fiscal law matters. The court noted that none of the exceptional circumstances for bypassing the alternate remedy rule were present in this case. Consequently, the petitioner was directed to pursue the statutory appeal route, with the appellate authority considering the appeal on its merits and in accordance with the law.

Conclusion:
The court dismissed the writ petition, directing the petitioner to file a statutory appeal under Section 246A of the IT Act. The appellate authority was instructed to consider the appeal independently of the observations made in this order. The court also clarified that the time limit for filing the appeal could be computed by excluding the time spent in the writ petition proceedings, subject to the appellate authority's discretion. The writ petition and the accompanying WMP were dismissed, with no order as to costs.