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TMI Blog2018 (2) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... Outstanding tax demand payable to the revenue by the petitioner - Held that:- Where the petitioner states that the issue is concluded by a decision dated 27 May 2016 of the Tribunal in its own case, then the assessing officer has to consider the same and give some modicum of reason why it is prima facie not covered by the decision of the Tribunal. This is particularly so in the back ground of the petitioner’s Appeal with respect to the demand of ₹ 6.68 Crores being heard by the CIT(A) as far back as in February 2017 and no order being passed thereon till date. Further, in the present case the impugned order does not deal with the petitioner’s contention that the demand of ₹ 28.00 Lakhs is on account of mistake in application of TRACE system nor does it deal with the Petitioner's contention that the entire demand of ₹ 6.90Crores can be adjusted against the refundable deposit of ₹ 7.30 Crores, consequent to the order dated 27 May 2016 of the Tribunal in its favour. Therefore, the impugned order dated 23 October 2017 seeking to cancel the certificate dated 5 May 2017 is a non-speaking order as it does not consider the petitioner’s submissions. - Writ Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... likely loss for the assessment year 2018 19 and the huge carried forward losses. 6. Therefore, on 27 February 2017, Petitioners applied to the Respondent No. 1 seeking an issuance of nil/lower withholding taxes under Section 197 of the Act. This was to enable the Petitioner to receive its payments from various parties which are subject to tax deduction at source, without deduction at source. In support of the above, the application pointed out that their accumulated losses carried forward as on 1 April 2014 is over ₹ 4000.00 Crores both as per MAT provisions and under the normal provisions. Further, the Petitioner had filed loss returns for Assessment Years 2015 16 and 2016 17. It was also submitted that the estimated loss for Assessment Year 2017 18 is approx. ₹ 1000.00 Crores. Thus, there will be no assessable profit under the Act for the assessment year in 2018 19 in view of huge carry forward losses. Besides, the application points out that there was an amount of ₹ 101.53 Crores up to 10 February 2017 receivable as refund from the Revenue. It was also pointed out that the financial health of the Petitioner is such that it has taken long term debts, at hug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate dated 4 May 2017 should not be reviewed/ canceled. This was on account of outstanding demand of taxes payable. Besides, relying upon the extract of Central Action Plan 2017 18 issued by CBDT which directs the Officers to follow the instructions/certificate issued by the CBDT and also mentions of Certificates being issued where large demands are pending. The Petitioner responded by letter dated 7 September 2017 to the notice dated 30 August 2017 while reiterating its reply dated 20 August 2017 and called for withdrawal of the notice. 10. Thereafter, on 7 September 2017, a personal hearing was granted and on 23 October 2017, the impugned order was issued. By the impugned order, the certificate dated 4 May 2017 issued under Section 197 of the Act, was canceled. The impugned order holds that while issuing the certificate dated 4 May 2017 the existing demand of ₹ 6.90 Crores was as recorded in the impugned order Apparently, the demand was not considered on the basis that this demand was under a covered issue . This i.e covered issue in terms of Rule 28AA(2) of the Income Tax Rules 1961 (Rules), cannot be a subject of consideration while granting the certificate. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity referred to in sub rule (1) shall be determined by the Assessing Officer after taking into consideration the following: (I) tax payable on estimated income of the previous year relevant to the assessment year; (ii) tax payable on the assessed or returned income, as the case may be, of the last three previous years; (iii) existing liability under the Income tax Act, 1961 and Wealth tax Act, 1957; (iv) advance tax payment for the assessment year relevant to the previous year till the date of making application under sub rule (1) of rule 28; (v) tax deducted at source for the assessment year relevant to the previous year till the date of making application under sub rule (1) of rule 28; and (vi) tax collected at source for the assessment year relevant to the previous year till the date of making application under sub rule (1) of rule 28. (3) The certificate shall be valid for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period. (4) The certificate for no deduction of tax shall be valid only with regard to the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petition to exercise its extraordinary jurisdiction; (b) Cancellation of the certificate dated 4 May 2017 became necessary in view of the fact that the financial condition of the Petitioner company has further deteriorated. Thus, putting in jeopardy the recovery of any liability, which may arise against the Petitioner company on account of future assessment or otherwise. Therefore, necessitating the cancellation of the nil withholding tax certificate dated 4 May 2017; (c) The existing demand of ₹ 6.90 Crores which continued to be pending. This cannot be ignored merely because, according to the Petitioner, the demand is unsustainable and would be set aside in appeal due to the issue being considered in its favour; (d) No prejudice would be caused to the Petitioner in case the nil withholding certificate dated 4 May 2017 is withdrawn. This, for the reason that the amounts so received by the Revenue on account of withholding tax would be refunded if no tax demand is payable in future by the Petitioner. 14. Before dealing with the rival submissions on merits, we shall first deal with the preliminary objection of the Respondent to entertain this Petition. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to grant the same, if the conditions specified therein are satisfied. Thus, it is clear that the order passed under Section 197 of the Act is an order which is a quasi judicial order and must be supported by reasons. The Assessing Officer is also in terms of Section 197(2) of the Act read with Rule 28AA (3) of the Rules empowered to cancel a certificate already granted under Section 197(1) of the Act. This power of cancellation which in effect withdraws the earlier certificate to the prejudice of the Assessee would be required to stand the tests applicable to a rejection of an application made under Section 197 of the Act. It is undisputed that the cancellation of the earlier certificate will be effective only from the date, the order of cancellation is passed. 19. The Petitioner's primary grievance is that the impugned order dated 23 October 2017, canceling the certificate dated 4 May 2017 is completely without jurisdiction. It is not open to the Assessing Officer to even initiate review proceedings in the absence of any change in circumstances which existed while granting certificate dated 4 May 2017. It is not disputed that Section 197(2) of the Act empowers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsence of any change in the circumstances. However, we wanted to hear and consider the Revenue s response on the above aspect of jurisdiction. Therefore, on 23 January 2018 we expressed our prima faice view on the issue to the parties, particularly that the absence of the order leading to the grant of the certificate being given to the Petitioner, leads to an adverse inference against the Revenue i.e. all issues including Rule 28AA (2) of the Rules were considered in the order passed leading to the issuing of Certificated dated 4 May 2017. We specifically invited the attention of the Revenue to the specific observation found in para 7 of the decision of this Court in Larsen Toubro Ltd. (supra) and also to the decision of the Apex Court in Liberty Oil Mills Vs. U.O.I. 1984(3) SCC 465 which while construing the words without assigning any reasons held that it does not do away with the requirement of reasons existing for the decision, it only does away with communicating the same. In fact in this case the Section does not do away with requirement of issuing a reasoned order while issuing a Certificate under Section 197 of the Act. 22. At the request of the Revenue the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposing of an application for grant of nil or lower rate of withholding tax certificate, they must ensure that Revenue s interest are protected. However, this protection of Revenue s interest has as to be examined/weighed against the assessee s right to nil or lower rate of withholding tax as provided by Parliament in Section 197 of the Act. Therefore, the grant or refusal to grant the certificate under Section 197 of the Act has to be determined by the parameters laid down therein and Rule 28 AA of the Rules. It cannot go beyond the said provisions to decide an application. This alone would ensure uniformity of treatment of all applicants seeking the benefit of Section 197 of the Act. 24. Mr. Suresh Kumar, learned Counsel for the Revenue, states that the impugned order need not be examined at all as the cancellation of a certificate in the present case would not cause any prejudice to the Petitioner. In case, more taxes are paid then it is liable to, by virtue of tax deducted at source, then consequent to final assessment the Petitioner would be entitled to refund of excess tax paid. In support he places reliance upon the decision of the Madras High Court in Ansaldo Energia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax, dated 11 January 2018 wherein reference is made to a meeting with the group CFO that the financial health of the Company is very weak and also newspaper reports. It is now well settled that the impugned order would stand or fall by the reasons mentioned therein and the same cannot be improved by an affidavit. In any case, in the present case, the affidavit relied upon newspaper items and discussion with the group CFO that the financial health of the company is very weak. This is without giving any particulars. In any case this also supports the stand of the petitioner that its financial condition was very weak both when it made the application on 27 February 2017 for a certificate under Section 197 of the Act wherein the Petitioner points out that it had carried forward loss of over ₹ 4900.00 Crores as per the return of income filed for the year ending 31 March 2016 and now at the time when the impugned order was passed. The impugned order dated 23 October 2017 does not indicate, even remotely, what the profits are likely to be in the near future, which the revenue may not be able to recover as it would be more than the carry forward losses. In fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in its own case, then the assessing officer has to consider the same and give some modicum of reason why it is prima facie not covered by the decision of the Tribunal. This is particularly so in the back ground of the petitioner s Appeal with respect to the demand of ₹ 6.68 Crores being heard by the CIT(A) as far back as in February 2017 and no order being passed thereon till date. Further, in the present case the impugned order does not deal with the petitioner s contention that the demand of ₹ 28.00 Lakhs is on account of mistake in application of TRACE system nor does it deal with the Petitioner's contention that the entire demand of ₹ 6.90Crores can be adjusted against the refundable deposit of ₹ 7.30 Crores, consequent to the order dated 27 May 2016 of the Tribunal in its favour. 31. Therefore, the impugned order dated 23 October 2017 seeking to cancel the certificate dated 5 May 2017 is a non-speaking order as it does not consider the petitioner s submissions. Therefore, the basis/ ground (b) of the impugned order is not sustainable in the above facts and renders the order bad. 32. In the above view the impugned order dated 23 October ..... X X X X Extracts X X X X X X X X Extracts X X X X
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