SOCIEDADE DE FOMENTO INDUSTRIAL PVT. LTD., vs. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1 AND 2 ORS.,

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WP/185/2015HC BombayHCBM05000565201508 May 2015Bench: HON'BLE SHRI JUSTICE M. S. SANKLECHA,F. M. REIS6 pages
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What did the High Court hold?

The High Court found the petitioner justified in its grievance regarding the Revenue's failure to disclose all facts in its affidavit filed on December 24, 2014. The Court expected the Revenue to be fair in its dealings with the assessee and the Court, making observations that the Revenue should bear in mind for the future. In light of the petitioner's willingness to provide a Bank Guarantee for 100% of the attached refund amount (Rs. 105,95,04,390/-) to the satisfaction of the Commissioner of Income Tax, the Court directed the Revenue to vacate the attachment of the refunds. The Bank Guarantee is to be kept alive until the final disposal of reassessment notices for assessment years 2008-2009 to 2011-2012, and for eight weeks thereafter. Upon furnishing the Bank Guarantee, the Revenue is to hand over the refund amounts to the petitioner within one week.

What were the facts?

The petitioner, Sociedade de Fomento Industrial Pvt. Ltd., filed three writ petitions challenging orders dated December 19, 2014, issued under Section 281B of the Income Tax Act, 1961. These orders attached refunds due to the petitioner for assessment years 2007-2008, 2008-09, and 2009-2010, totaling Rs. 105,95,04,390/-. The petitioner argued that the revenue failed to disclose material facts in an earlier affidavit filed on December 24, 2014, regarding these attachment proceedings, despite assuring the court that effect was being given to a Tribunal order. The petitioner claimed grave liquidity problems and offered to replace the attached refunds with immovable properties or, subsequently, a bank guarantee for the full amount to allay the revenue's fears regarding reassessment proceedings for assessment years 2008-09 to 2011-2012.

What were the issues?

1. Whether the Revenue's failure to disclose the commencement of attachment proceedings in its affidavit filed on December 24, 2014, constitutes a lack of fairness and transparency in dealing with the assessee and the Court, as contemplated under Section 281B of the Income Tax Act, 1961? Assessee's Contention: The petitioner argued that the Revenue's conduct was unfair and lacked transparency by not disclosing the attachment proceedings in its affidavit, which could have led to an earlier resolution. The petitioner highlighted its liquidity issues and willingness to provide alternative security. Revenue's Contention: The Revenue, through its counsel, stated it had no objection to the Revenue being secured by a Bank Guarantee.

Which sections of the Income-tax Act were involved?

Section 281B

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO. 178 OF 2015 WITH WRIT PETITION NO. 185 OF 2015 WITH WRIT PETITIN NO.221 OF 2015 WRIT PETITION NO. 178 OF 2015 Sociedade de Fomento Industrial Pvt. Ltd., Vila Flores Da Silva, Erasmo Carvalho Street, Margao, Goa – 403601. ….. Petitioner V e r s u s 1. The Assistant Commissioner of Income-Tax, Circle -1, 3rd Floor, Blessing Pioneer Complex, Opp. District & session Court, Margao-Goa. 2. The Commissioner of Income-Tax, Aayakar Bhavan, EDC Commercial, Complex, Patto Plaza, Panaji-Goa. 3. The Union of India, Through the Secretary, Department of Revenue, Ministry of Finance, Government of India, North Block, New Delhi-110 001. …. Respondents WRIT PETITION NO. 185 OF 2015 Sociedade de Fomento Industrial Pvt. Ltd., Vila Flores Da Silva, Erasmo Carvalho Street, Margao, Goa – 403601. ….. Petitioner V e r s u s

2 1. The Assistant Commissioner of Income-Tax, Circle -1, 3rd Floor, Blessing Pioneer Complex, Opp. District & session Court, Margao-Goa. 2. The Commissioner of Income-Tax, Aayakar Bhavan, EDC Commercial, Complex, Patto Plaza, Panaji-Goa. 3. The Union of India, Through the Secretary, Department of Revenue, Ministry of Finance, Government of India, North Block, New Delhi-110 001. …. Respondents

WRIT PETITIN NO.221 OF 2015 Sociedade de Fomento Industrial Pvt. Ltd., Vila Flores Da Silva, Erasmo Carvalho Street, Margao, Goa – 403601. ….. Petitioner V e r s u s 1. The Assistant Commissioner of Income-Tax, Circle -1, 3rd Floor, Blessing Pioneer Complex, Opp. District & session Court, Margao-Goa. 2. The Commissioner of Income-Tax, Aayakar Bhavan, EDC Commercial, Complex, Patto Plaza, Panaji-Goa. 3. The Union of India, Through the Secretary, Department of Revenue, Ministry of Finance, Government of India, North Block, New Delhi-110 001. …. Respondents

3 Mr. P. J. Pardiwalla, Senior Advocate with Nishant Thakkar and Ms. Vinitta Palyekar, Advocates for the Petitioners. Mrs. Asha Desai, Advocate for the Respondents. CORAM: F. M. REIS, & M. S. SANKLECHA, JJ. DATE: 8th MAY, 2015. ORAL JUDGMENT: (Per M. S. Sanklecha, J.) Rule. Returnable forthwith. 2. Mrs. Asha Desai, learned counsel for the Respondent/Revenue waives service. 3. At the request of the learned counsel the petition is taken up for final disposal. 4. All these three petitions assail three orders dated 19/12/2014 issued under Section 281B of the Income Tax Act, 1961. The first of the three impugned orders dated 19/12/2014 seeks to attach a refund of Rs.29,01,56,762/- due to the petitioner for the Assessment year 2007-2008. The second of these impugned order dated 19/12/2014 seeks to attach

4 refund of Rs.51,30,88,859/- due to the petitioner for the year 2008-09 and the third of the impugned order dated 19/12/2014 seeks to attach refund of Rs.25,62,58,769 due to the petitioner for the Assessment year 2009-2010. 5. We have heard Mr. Pardiwalla, learned Senior Counsel for the petitioner at some length yesterday in respect of the above three petitions. The petitioner had made a grievance of the manner in which the respondent has dealt with the petitioner in these proceedings and particularly the fact that the Affidavits which were filed on 24/12/2014 in response of the petitioner’s writ petition being Nos.679/2014 and 680/2014 seeking direction that the respondent gave effect to the order of the Tribunal. At that time the respondent/revenue filed an affidavit and assured the Court that effect is being given to the order of the tribunal. However, proceedings for attachment had already commenced and sanction on 12/12/2014 also obtained, from the Commissioner to the attachment of refunds due to the petitioner, yet the same was not pointed out either to the petitioner or to the Court. This issue could have otherwise been resolved at that time itself. 6. We find that the petitioner is justified in making a grievance with regard to the Respondents/Revenue's failure to disclose all facts in

5 its affidavit filed on 24/12/2014. We expect the Respondents/Revenue to be fair in its dealing with the Assessee and also to this Court. This attitude is not expected of the State. At this stage except for making the aforesaid observations which we trust that the Revenue would bear in mind and ensure this does not happen in future, we let the matter rest for the present. 7. The petitioner's grievance is that the total refund which has to be adjusted for the assessment years 2007-08 to 2009-10 amounts to Rs.1059504390/-. They are undergoing grave liquidity problems and are therefore in need of the funds which are legitimately due to them today. However, to allay the fears of the Respondent/Revenue being without any security as and when the orders on reassessment proceedings for the assessment year 2008-09 to 2011 -2012 are passed, they were willing to replace the security by making available immovable properties free from encumbrances for attachment by the Revenue. However, thereafter the petitioner submitted that they would secure the Revenue by a Bank Guarantee for 100% of the refund attached i.e. Rs.105,95,04,390/- 8.

Mrs. Asha Desai, learned counsel for the Respondent/Revenue on instructions states that she has no objection to the Revenue being secured by a Bank Guarantee.

6 9. In view of the above, as the petitioner is furnishing a Bank Guarantee of a Nationalized Bank for an amount of Rs.105,95,04,390/- to the satisfaction of the Commissioner of Income Tax, the respondents would vacate the attachment of the refund of Rs.105,95,04,390/- done under Section 281B of the Act. The Bank Guarantee furnished by the petitioner will be kept alive till the final disposal of the reassessment notices for the Assessment year 2008-2009 to 2011-2012 and for eight weeks thereafter. Once the Bank Guarantee in the above terms is furnished to the satisfaction of the Commissioner of Income Tax, Panaji, the Respondents/Revenue will hand over the three refund amounts aggregating to Rs. 105,95,04,390/- to the petitioner within one week thereafter. 10. Rule made absolute in the above terms. 11. Parties to act on an authenticated copy of this order. M. S. SANKLECHA, J. F. M. REIS, J. Ap/-

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