* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 29.03.2017
+ W.P.(C) 2539/2017, C.M. APPL.10957-10958/2017
M/S. TELENOR (INDIA) COMMUNICATIONS PRIVATE
LIMITED (EARLIER KNOWN AS M/S. TELEWINGS
COMMUNICATIONS SERVICES PRIVATE LIMITED
..... Petitioner
Through: Sh. Balbir Singh, Sr. Advocate with Sh.
Prakash Kumar, Ms. Rubal Maini and Ms. Rashmi
Singh, Advocates.
Versus
ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 25(1),
NEW DELHI AND ORS. ..... Respondents
Through: Sh. Sanjay Jain, ASG with Sh. Rahul
Chaudhary, Sr. Standing Counsel, Ms. Lakshmi
Gurung, Jr. Standing Counsel, Ms. Rhea Verma
and Sh. Kartik Rai, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
MR. JUSTICE S. RAVINDRA BHAT
%
1. The petitioner's grievance is that this court's order in W.P.(C)
1874/2017 (decided on 1st March, 2017) has not been given effect to. It
contends that the Assessing Officer (hereafter "AO", one of the respondents
arrayed in these writ proceedings) whilst seemingly giving effect to the
directions in that order, has deprived it of the previous relief given by him.
2. The petitioner had sought benefit of stay of recovery of demands for
Assessment Year (AY) 2014-15, to the tune of ` 4,18,13,06,110/- subject to
its depositing ` 62,71,95,920/-. The petitioner had relied on instructions of
W.P.(C) 2539/2017 Page 1 of 13
the Central Board of Direct Taxes embodied in its Office Memorandum
(OM) dated 29.02.2016, to say that it was entitled to the facility of stay of
demand in excess of 15% in the exceptions spelt out in Para 4B(b),which
reads as under:-
"(b) the assessing officer is of the view that the nature of
addition resulting in the disputed demand is such that payment
of a lump sum amount lower than 15% is warranted (e.g. in a
case when addition on the same issue has ken confirmed by
appellate authorities in earlier years or the decision of the
Supreme Court or jurisdictional High Court is in favour of the
assessees, etc.) - the assessing officer shall refer the matter to
the administrative Pr.CIT/CIT, who after considering all
relevant facts shall decide the quantum/proportion of demand
to be paid by the assessee as lump sum payment for granting a
stay of the balance demand."
3. In its writ petition, the petitioner had previously contended that the
AO had not considered the top line credit adjustment which the petitioner
was previously reflecting in its books towards substantial services rendered
till the end of any financial year but for which the contractual and legal
liability to render services in respect of the unutilized consideration
subsisted. It was then argued that this amounted to a substantial sum of about
` 220 crores. It was further argued, besides, that the license fee adjustment
on account of the telecom policy in the wake of the Supreme Court's
judgment in 2G Spectrum's case, the amount set off i.e. ` 600 crores out of
the unutilized license fee for the issuance of a new Spectrum License in
terms of the policy. The revenue's treatment of that amount as 'capital' is
contested. The petitioner also complained that the AO had not taken into
account the refund standing to the credit of the petitioner to the tune of about
` 27 crores.
W.P.(C) 2539/2017 Page 2 of 13
4. After considering the parties' submissions, this court had disposed of
the petition, in terms of the following operative order:
"8. We have considered the submissions of the parties. The
impugned order dated 22.02.2017, undoubtedly, has given
effect to the OM, relied upon by the petitioner in the sense that
the demand has been stayed subject to substantial relief of 85%.
However, the circular - as noticed earlier and highlighted by
the petitioner also carved out an expenditure in regard to
certain "covered matters" or in regard to other contentious
issues, the condition of 15% pre-deposit can be relaxed. The
petitioner contentions in this regard are three fold. The
impugned order does not disclose whether the AO had an
occasion to consider or examine these issues. In these
circumstances, the Court is of the opinion that the AO should
consider and make an order under Section 220(6) of the Act
specifically dealing with the three arguments urged by the
petitioner and reflected in this order. The AO shall pass
appropriate orders in this regard, after giving such necessary
opportunity to the petitioner as he deems expedient in the
circumstances, with the approval of the competent officer i.e.
the concerned Principal CIT/Commissioner of Income Tax
(Appeals), within two weeks from today.
9. In the meanwhile, on instructions from the concerned
Assessing Officer Mr. Mandeep Panwar, who is present in
Court, the revenue would not take any coercive measures to
enforce the outstanding demand till such order is made.
10. The writ petition along with pending application stands
disposed off in the above terms."
5. After the remand by this court, the AO made a fresh order ("the
impugned order") on 14th March 2017. In this, the AO considered the issue
of stay virtually afresh and stated as follows:
"It is important to note that the above stated paragraph of O.M.
dated 26.02.2014 is not applicable in the instance case of
W.P.(C) 2539/2017 Page 3 of 13
assessee. The assessee failed to provide any instance where
addition on this issue has been deleted by appellate authorities
in their own case or the decision of Supreme Court or
jurisdictional Hon'ble High Court is in favour of the assessee.
But the assessee has quoted that in the case of M/s. Shyam
Telelinks Ltd. 2013 (31 Taxman.Com. 239) the issue has been
favorably covered by the Hon'ble Delhi ITAT. The issue related
to unearned revenue remains contentious. Therefore, the
resulted demand on this issue shall remain unenforceable till
the disposal of appeal at the first appellate authority.
************* *************
In light of above discussion, depreciation as claimed by
assessee on increased cost of spectrum will remain non-
enforceable till disposal of appeal at the first appellate
authority.
(iii) Consideration of refund available for the future
years.
Vide letter dated 10.03.2017 the assessee submitted that the
following:-
"That the Hon'ble High Court in its has directed that
while passing the fresh stay order, your goodself should
consider & refund, as per the return of income filed,
aggregating to INR 27,93,09,100/- (A. Y.2016-17 INR
12,70,24,560/- and A.Y.2015-16 INR 15,22,84,540/-) due
to the company."
In this regard it is pertinent to mention section 143(1D)
which clearly says that the following:-
"Notwithstanding anything contained with sub section 1 the
processing of a return shall not be necessarily, where a
notice has been issued to the assessee under sub section
(2)".
W.P.(C) 2539/2017 Page 4 of 13
4. In light of above discussion the processing of ITR for the
A.Y.2015-16 cannot be done as notice u/s 143(2) has
already been issued to the assessee. Vide notice dated
22.04.2016. ForA.Y.2016-17 the CPC has not forwarded
the necessary ticket for processing of ITR. Hence, the
above mentioned refund cannot be taken under
consideration for passing order u/s220(6) of the Income
Tax Act, 1961.
5. The balance of the addition to the total income returned
of the assessee; particularly the addition relating to capital
gains is based on assessee own submission that the amount
is indeed in nature of capital receipts. There is no contrary
decision of the Hon'ble ITAT, Hon'ble High Court or
Hon'ble Supreme Court. Neither this issue has been subject
matter of considerations of earlier years in assessee own
case. In view of the above and for the detailed reason
recorded in the assessment order the additions will in all
likelihood will stand the test of judicial scrutiny.
Accordingly, I do not find any reason for stay of demand
attributable to the addition on account of this issue.
6. Without prejudice to the above it has also been reported in
Media that they are in advance stage of negotiation with
M/s.Bharti Airtel Ltd. for merger of the assessee.
7. In view of the above facts the future existence and the
finances of the assessee M/s. Telenor (India) Communication
Pvt. Ltd. is highly uncertain. Hence, the risk of recovery has
increased. Therefore, to safe guard the interest of revenue
and in view of para 4(b)(a) of office memorandum issued by
CBDT dated 29.02.2016. The assessee is directed to make
entire payment of adjusted demand of Rs. 2,30,24,19,520/-
*********** *****************
W.P.(C) 2539/2017 Page 5 of 13
8. Total enforceable tax liability comes to Rs. 2,30,24,19,520/-
in this refund claimed by the assessee though not entitled comes
to Rs.27.22Cr. even if this amount of refund is considered the
total adjusted tax liability comes to Rs.203 Cr, which is
enforceable. Hence, the assessee is directed to pay this amount
in three equal installments on or before the following dates...."
6. The petitioner is aggrieved by the above order, and states that this
amounts to a review of the previous order, which had clearly expressed the
revenue's opinion that relief of upto 85% stay of demand was warranted. The
court had remitted the question of considering whether the petitioner's plea
for stay beyond 15% was warranted, having regard to the provisions of the
OM, Para 4 (B) (b). The court, in its previous order, dated 1st March, 2017
too felt that there was substantial merit in this regard and consequently
directed the AO to examine the matter in the light of facts to say whether and
if so, to what extent such relief could be given. This, however, did not mean
that the AO was to be given complete relief, nor could it say that it was
entitled to it as a matter of right. It is submitted that the AO exceeded the
scope of remand, inasmuch as the impugned order has resulted in unfairly
depriving the benefit of the previous order, which had required the assessee
paying only ` 62 crores. However, the impugned order requires a pre-deposit
of ` 203 crores after adjusting ` 27 crores refund.
7. The learned Additional Solicitor General (ASG) urged this court not to
interfere with the impugned order, which has examined each of the issues
that the petitioner had a grievance with, on account of additions made by the
AO, on its merits, to determine the prima facie strength of the case in appeal.
The mere fact that the demand was based on a high pitch assessment did not
mean that assessees who are to pay the tax due after a valid assessment, are
W.P.(C) 2539/2017 Page 6 of 13
to expect stay automatically, if the demand is high. No doubt the OM allows
such discretion, but that has to be used judiciously. Having regard to the
overall circumstances of the case, the AO was justified in saying that the
important issues which the assessee had complained of in its appeal justified
a demand for ` 220 crores; after adjusting ` 27 crores the assessee had to
pay ` 203 crores in three easy installments. The ASG cautioned that this
court's powers under Article 226 are circumscribed; unless there is illegality
or procedural irregularity or unfairness in the order, the discretion used, - at
least in the facts of this case, cannot be faulted with, or reviewed on its
merits. It was submitted that this court should not strictly construe the OM as
though it were a statute, but consider whether broadly the revenue adopts a
reasonable approach in its interpretation. As long as such a reasonable and
judicious approach is discernable, the court should not interfere with the
discretion to grant or refuse, or grant conditional interim relief.
8. There is, in the opinion of this court, considerable merit in the
petitioners' grievance that after the remit by this court, in its order of 1 st
March, 2017, the AO had to confine the focus of his inquiry only and only to
whether to grant relief in excess of 85% exemption from compliance with
the demand to pay tax. Now, the court cannot go into the merits of the
matter, since the appeal is pending before the Appellate Commissioner.
However, what is apparent is that when the AO made his first order, he was
decidedly of the opinion that the petitioner/assessee was entitled to the
facility of paying 15% of the amounted demanded, to secure a stay of
demand during pendency of its appeal. He granted that relief. The petitioner
wanted more, and contended that the AO had overlooked three points and
could well have invoked the power to grant relief in excess of 85%, i.e could
W.P.(C) 2539/2017 Page 7 of 13
have even completely absolved it of the liability to pay anything towards the
tax demand, since its case fell within the provision in the concerned circular.
9. The Central Board of Direct Taxes (CBDT) had previously issued
instruction No. 1914 dated 02.12.1993. This was clarified by later
instructions dated 21.03.1996. The instruction contains the guidelines issued
by the Board regarding the procedure to be followed for recovery of the
outstanding demand including the procedure for grant of stay of demand.
Further instructions titled Office Memorandum (F.No.404/72/93-ITCC)
dated 29.02.2016 were issued in order to streamline the process of grant of
stay. It is necessary to set out the entire Office Memorandum for this matter
turns essentially on our interpretation of it. It reads as follows:-
"Office Memorandum F.No.404/72/93-ITCC], Dated
29-2-2016
Instruction No. 1914 dated 21-3-1996 contains guidelines
issued by the Board regarding procedure to be followed for
recovery of outstanding demand, including procedure for grant
of stay of demand.
2. In part 'C' of the Instruction, it has been prescribed that a
demand will be stayed only if there are valid reasons for doing
so and that mere filing of an appeal against the assessment
order will not be a sufficient reason to stay the recovery of
demand. It has been further prescribed that while granting stay,
the field officers may require the assessee to offer a suitable
security (bank guarantee, etc.) and/ or require the assessee to
pay a reasonable amount in lump sum or in instalments.
3. It has been reported that the field authorities often insist on
payment of a very high proportion of the disputed demand
before granting stay of the balance demand. This often results
in hardship for the taxpayers seeking stay of demand.
W.P.(C) 2539/2017 Page 8 of 13
4. In order to streamline the process of grant of stay and
standardize the quantum of lump sum payment required to be
made by the assessee as a pre-condition for stay of demand
disputed before CIT (A), the following modified guidelines are
being issued in partial modification of Instruction No. 1914:
A) In a case where the outstanding demand is disputed before
CIT (A), the assessing officer shall grant stay of demand till
disposal of first appeal on payment of 15% of the disputed
demand, unless the case falls in the category discussed in para
(B) here under.
(B) In a situation where,
(a) the assessing officer is of the view that the nature of
addition resulting in the disputed demand is such that payment
of a lump sum amount higher than 15% is warranted (e.g. in a
case where addition on the same issue has been confirmed by
appellate authorities in earlier years or the decision of the
Supreme Court or jurisdictional High Court is in favour of
Revenue or addition is based on credible evidence collected in
a search or survey operation, etc.) or,
(b) the assessing officer is of the view that the nature of
addition resulting in the disputed demand is such that payment
of a lump sum amount lower than 15% is warranted (e.g. in a
case where addition on the same issue has been deleted by
appellate authorities in earlier years or the decision of the
Supreme Court or jurisdictional High Court is in favour of the
assessee, etc.), the assessing officer shall refer the matter to the
administrative Pr. CIT/CIT, who after considering all relevant
facts shall decide the quantum/proportion of demand to be paid
by the assessee as lump sum payment for granting a stay of the
balance demand.
(C) In a case where stay of demand is granted by the assessing
officer on payment of 15% of the disputed demand and the
assessee is still aggrieved, he may approach the jurisdictional
W.P.(C) 2539/2017 Page 9 of 13
administrative Pr. CIT/CIT for a review of the decision of the
assessing officer.
(D) The assessing officer shall dispose of a stay petition within
2 weeks of filing of the petition. If a reference has been made to
Pr. CIT/CIT under para 4 (B) above or a review petition has
been filed by the assessee under para 4 (C) above, the same
shall also be disposed of by the Pr. CIT/CIT within 2 weeks of
the assessing officer making such reference or the assessee
filing such review, as the case may be.
(E) In granting stay, the Assessing Officer may impose such
conditions as he may think fit. He may, inter alia,-
(i) require an undertaking from the assessee that he will
cooperate in the early disposal of appeal failing which the stay
order will be cancelled;
(ii) reserve the right to review the order passed after expiry of
reasonable period (say 6 months) or if the assessee has not co-
operated in the early disposal of appeal, or where a subsequent
pronouncement by a higher appellate authority or court alters
the above situations;
(iii) reserve the right to adjust refunds arising, if any, against
the demand, to the extent of the amount required for granting
stay and subject to the provisions of section 245."
10. No doubt, the AO has a discretion of referring the matter to the CIT if
he is of the opinion that the assessee's case in any given matter, deserves
consideration for relief beyond the mandated 15% pre-deposit: evident from
the phrase "the assessing officer is of the view that the nature of addition
resulting in the disputed demand is such that payment of a lump sum amount
lower than 15% is warranted (e.g. in a case where addition on the same
issue has been deleted by appellate authorities in earlier years or the
decision of the Supreme Court or jurisdictional High Court is in favour of
the assessee, etc.)" . In the present case, no doubt the AO did not in the first
W.P.(C) 2539/2017 Page 10 of 13
instance so refer the matter to the higher official; however, this court' s order
had clearly stated that the issue with respect to such relief should be
reconsidered. If the AO felt constrained by the terms of the circular, he could
have sought a clarification; at worst, he could have referred the matter to the
Commissioner, if he thought that he did not have the power to grant such
relief. What he could not have done was to revisit the entire issue as to
whether the relief to the extent of 85% waiver of demand deposit could be
given. This is for the reason that the previous order, whereby that relief was
given, clearly took note of the relevant facts and granted the benefit to the
assessee, as can be seen from the following extract (of the AO's previous
order dated 22.02.2017):
"Considering the facts and circumstances of the case and
CBDT's instruction dated 22-2-2016 which modified the
existing instruction no. 1914 dated 21-03-1996 to provide that
where an appeal against the assessment order is pending with
the first appellate authority the AO shall grant the stay of
demand till the disposal of appeal, if the assessee has deposited
15% of outstanding demand. In your case the demand for the
A.Y. 2014- 15 of Rs.4,18,13,06,110/- will be stayed till the
disposal of appeal by CTT(A) subject to payment of 15% of the
demand i.e. Rs.62,71,95,920/-.
This is subject to the following conditions..."
11. The order of this court did not set aside the above order of the AO and
direct him to look into the matter afresh. What it did require him to do was to
exercise discretion and consider whether further relief could be granted. The
scope of remand by a higher court or authority limits and correspondingly
circumscribes the jurisdiction of the lower authority exercising its powers.
This was explained in the Supreme Court judgment reported as Nainsingh v
Koonwarjee AIR 1997 SC 997 in the following words:
W.P.(C) 2539/2017 Page 11 of 13
"The first appellate court reversed the findings of the trial
court on those issues. It came to the conclusion that the civil
court had jurisdiction to entertain the suit. It further held that
though in view of the abolition of the jagirs, the suit properties
had vested in the State, it was for the State to get itself
impleaded if it is interested in this litigation and as the State
had not chosen to get itself impleaded, it was open to the
plaintiff to press the suit. In view of those conclusions, the
appellate court set aside the decree of the trial court and
remanded the suit to the trial court for deciding the other issues
left undecided. After the remand, the trial court negatived every
one of the contentions taken by the defendants and decreed the
suit as prayed for. In appeal that decree was confirmed. In
second appeal the High Court of Madhya Pradesh agreed with
the trial court and the appellate court on the findings given on
all issues excepting the issue relating to the effect of abolition
of the jagirs on the suit. On that issue, it came to the conclusion
that in view of the abolition of jagirs under the Jagir Abolition
Act, the plaintiff had lost his title to the suit properties and
therefore he could not get a decree for possession of the suit
properties. It rejected the contention of the plaintiff that that
issue is concluded by the decision of the appellate court made
before remand as the same had not been appealed against. It
opined that the court had inherent power to consider the
correctness of that order. It accordingly allowed the appeal and
dismissed the suit. The High Court, in our opinion, erred in
holding that the correctness of the remand order was open to
review by it. The order in question was made under rule 23,
Order 41, Civil Procedure Code. That order was appealable
under Order 43 of that Code. As the same was not appealed
against, its correctness was no more open to examination in
view of s. 105 (2) of the Code which lays down that where any
party aggrieved by an order of remand from which an appeal
lies does not appeal therefrom he shall thereafter be precluded
from disputing its correctness."
12. In view of this position, the court's view is that the AO could not have
revisited the matter, as if there were a fresh or open remand. The court
W.P.(C) 2539/2017 Page 12 of 13
notices that the AO after rejecting the assessee's claim for benefit (i.e
beyond 85% waiver) directed payment of ` 203 crores after adjusting `
27,93,09,100/- refund. This relief (of adjustment of ` 27,93,09,100/- refund)
had not been considered in the earlier order. In these circumstances, it is held
that the impugned order, to the extent it reviewed the previous order (dated
22nd February, 2017) cannot be sustained. The relief granted (i.e adjustment
of refund amount of `27,93,09,100/-) is, however, upheld. Accordingly, the
impugned order, to the extent it reviewed the previous order of 22nd February
2017 and directed payments of ` 62,71,95,920/- is set aside. However, to the
extent that it granted relief under Para (E) of the instruction (which the AO
was within his rights to grant in terms of the remand) is upheld. Therefore,
the assessee is directed to deposit the balance amount, i.e. `34,78,86,820/- (`
62,71,95,920/- minus `27,93,09,100/-) within two weeks, which would be
sufficient compliance of the orders.
13. The writ petition partially succeeds and is allowed in the above terms,
without any order as to costs.
S. RAVINDRA BHAT
(JUDGE)
NAJMI WAZIRI
(JUDGE)
MARCH 29, 2017
W.P.(C) 2539/2017 Page 13 of 13
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