2024 (2) TMI 1370 - HC - Income Tax

Application u/s 197 for issuance of a Lower Deduction of Tax Certificate - bone of contention of petitioner is that the petitioner intended to submit an online document dated 1st April, 2023 and said document was not loaded because message was too large - Criticism is founded upon Rule 28-AA of the Income Tax Rules - HELD THAT - Delhi High Court in the case of Cloudtail India Private Limited 2021 (8) TMI 1408 - DELHI HIGH COURT opined that Rule 28AA is a statutory and mandatory provision. The revenue is under a statutory obligation to act in accordance with the mandate of Rule 28-AA. Even otherwise, this is trite that if a statute prescribes a thing to be done in a particular manner, it has to be done in the same manner and other methods are forbidden. See Baru Ram v. Prasanni 1958 (9) TMI 85 - SUPREME COURT , Dhanajaya Reddy v. State of Karnataka 2001 (3) TMI 1020 - SUPREME COURT and judgment of this Court 2011 (2) TMI 1628 - MADHYA PRADESH HIGH COURT Satyanjay Tripathi v. Banarsi Devi . A plain reading of Rule 28-AA makes it clear that the 'satisfaction' needs to be recorded/determined by A.O. after taking into consideration the four factors mentioned in sub-rule (2) of Rule 28-AA. Thus, it is not the subjective satisfaction of A.O., but an objective satisfaction which must be based on Clauses (i), (ii), (iii) and (iv) of sub-rule (2) of Rule 28-AA. If impugned order Annexure P-5 and more particularly Annexure P-7 is examined, it shows that all those four factors have not been taken into account. Pertinently, the factum of receiving Annexure P-3 and P-8 is not in dispute in the instant case. Since impugned orders are passed in clear violation of Rule 28-AA, we are constrained to hold that decision making process adopted by the respondents runs contrary to the requirement of law, i.e. Rule 28-AA. The scope of judicial review in a writ petition is limited. Ordinarily, the Court is not obliged to examine the correctness of the decision. Instead, the Court is obliged to examine the correctness of the decision making process. At the cost of repetition, in our opinion, the decision making process is faulty and impugned order Annexure P-5 and P-7 are passed without considering the relevant factors ingrained in Clause (i), (ii), (iii) and (iv) of sub-rule (2) of Rule 28-AA. Resultantly, both the impugned orders Annexure P-5 and P-7 are set aside. The matter is remitted back to respondent No. 2, who shall consider the claim of petitioner in accordance with law and pass a fresh detailed/speaking order thereupon within 30 days from the date of communication of this order.

Summary

Issues involved: Application under Section 197 of the Income Tax Act for Lower Deduction of Tax Certificate; Challenge to orders Annexure P-5 and P-7.

Summary:
1. The petitioner sought a Lower Deduction of Tax Certificate under Section 197 of the Income Tax Act. The contention was that an online document dated 1st April, 2023 was not submitted due to technical issues, but a communication on April 3, 2023 was made on the Traces Portal. The impugned order Annexure P-5 was challenged for being passed without considering the document submitted.

2. Criticism of Annexure P-7 was based on Rule 28-AA of the Income Tax Rules, arguing that the rejection was improper as the respondent had no authority to delve into the aspect of net profit, which is the jurisdiction of the Assessing Officer. The petitioner cited judgments highlighting the ignorance of Rule 28-AA in the decision-making process.

3. The respondents defended the impugned orders, stating that the net profit ratio was a valid consideration for issuing the certificate. They argued that the satisfaction of the Assessing Officer is crucial in determining the tax liability, including the net profit ratio.

4. The Court noted conflicting claims regarding the submission of documents on April 1st and 3rd, 2023. Since it was a disputed question of fact, the Court refrained from making findings based on these documents.

5. Referring to Rule 28-AA, the Court emphasized its mandatory nature and the need for the Assessing Officer to consider specific factors before issuing a certificate for lower tax deduction. The Court found that the impugned orders did not adhere to Rule 28-AA, leading to a faulty decision-making process.

6. Consequently, the Court set aside orders Annexure P-5 and P-7, remitting the matter back to the respondent to reconsider the petitioner's claim in accordance with the law within 30 days. The Court clarified that its decision did not express any opinion on the case's merits.