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TMI Blog2020 (12) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... osses amounting to Rs. 7953 crores (approximately) as on 31.03.2019, the details of which have been furnished in paragraph 5 of the writ petition. Estimated loss for the assessment year 2020-21 is Rs. 10,94,03,45,957.00. 4. For the assessment year 2018-19, petitioner was issued nil withholding rates certificates under section 197 of the Act on 04.05.2017. However, by an order dated 23.10.2017, those certificates were cancelled. Aggrieved by such cancellation petitioner had approached this Court by filing Writ Petition No.2701 of 2017 which was allowed vide order dated 25.01.2018 whereby cancellation order dated 23.10.2017 was quashed. Thereafter fresh certificates at nil rate were issued to the petitioner for the assessment year 2018-19. 5. For the assessment years 2019-20 and 2020-21, petitioner had submitted applications for tax withholding certificates at nil rate; however, certificates under section 197 of the Act were issued at rates higher than nil rate. Petitioner has stated that it did not contest such certificates due to its pending scheme of demerger. It is stated that petitioner is focused on providing various wireline voice, data and managed telecom service and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances. It is contended that for the assessment years 2019-20 and 2020-21, lower tax certificates were issued to the petitioner at similar rates but the petitioner did not object to the said rates. It is further contended that petitioner has alternative remedy of filing revision petition. Therefore, writ petition may not be entertained. 12. Mr. Thakkar, learned counsel for the petitioner submits that no reasons have been furnished by the respondents as to why instead of nil tax withholding certificates under section 197 of the Act, certificates at higher rates have been issued to the petitioner. In the absence of reasons, such an exercise would be wholly arbitrary. That apart, no order has been passed with regard to issuance of certificates under section 197 of the Act; at least no such copy was furnished to the petitioner. Further contention of learned counsel for the petitioner is that respondents have not complied with the mandate of section 197 of the Act read with Rule 28 AA of the Income Tax Rules, 1962 while issuing the impugned certificates. The factors which are statutorily required to be considered while granting such certificates have not been considered which has vit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th." 15. The procedure for issuance of certificate for deduction at lower rates or no deduction of tax from income other than dividends is laid down in Rule 28AA of the Income Tax Rules, 1962 (briefly 'the Rules' hereinafter) which is also quoted hereunder:- "Certificate for deduction at lower rates or no deduction of tax from income other than dividends. 28AA. (1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax. (2) The existing and estimated liability referred to in subrule (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 or estimated income, as the case may be, of last four previous years; (iii) existing liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 lakhs in stations like Mumbai etc. and Rs. 10 lakhs for other stations. 17. These two provisions came up for consideration before a Division Bench of this Court in Larsen and Toubro Limited Vs. Assistant Commissioner of Income Tax (TDS), 326 ITR 514. That was a case where the petitioner had filed an application under section 197 of the Act which was however rejected by the assessing officer. Request for reconsideration was turned down. Thereafter petitioner moved the Commissioner of Income Tax (TDS) in revision under section 264 of the Act. However, Commissioner rejected the revision application by holding two things. Firstly, no approval of Commissioner is necessary when the assessing officer rejects an application under section 197. Secondly, when the assessing officer rejects an application under section 197, he does not pass an 'order' as envisaged in section 264 of the Act and consequently, a revision under section 264 is not maintainable. This Court elaborately examined the provisions of section 197 of the Act and rule 28 AA of the Rules, and thereafter held as follows:- " The Commissioner is manifestly in error when he holds that the rejection of an application under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sub-section 2A, having due regard to the convenience of assessees and the interests of the Revenue specifying the cases and circumstances under which an application can be made and the conditions subject to which such a certificate may be granted is sufficient to indicate that the exercise of powers by the Assessing Officer is intended to be structured in accordance with the provisions of Section 197 and the Rules framed by the Board under subsection 2A. The Assessing Officer cannot be heard to urge that though an assessee fulfills all the requirements which are stipulated in Rule 28AA or, as the case may be, in Rule 29B, he possesses an unguided discretion to reject the application. Consequently, the Assessing Officer when he rejects an application is bound to furnish reasons which would demonstrate an application of mind by him to the circumstances which are mandated both by the Statute and by the Rules to be taken into consideration. Hence, it would be impossible to accept the view that the rejection of an application under Section 197 does not result in an order. The expression "order" for the purposes of Section 264 has a wide connotation. Sub-section (1) of Section 264 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing 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. Section 264 of the Act provides for exercise of revisional jurisdiction by the Principal Commissioner or by the Commissioner either suo-motu or on application of the assessee in the case of any order other than an order to which section 263 applies. 20. Therefore, what is deducible from the above is that before issuance of certificates under section 197 of the Act, the same must be preceded by an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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