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* IN THE HIGH COURT OF DELHI AT NEW DELHI
19
+ W.P.(C) 3648/2014
ST MICROELECTRONICS PVT.LTD ..... Petitioner
Through Mr Ajay Vohra, Senior Advocate with
Mr Aditya Vohra, Advocate.
versus
DEPUTY COMMISSIONER OF INCOME
TAX & ORS. ..... Respondents
Through Mr Dileep Shivpuri, Senior Standing
Counsel and Mr Sanjay Kumar, Junior Standing
Counsel.
CORAM:
JUSTICE S.MURALIDHAR
JUSTICE VIBHU BAKHRU
ORDER
% 18.05.2016
Dr.S. Muralidhar, J.:
1. The challenge in this writ petition by ST Microelectronics Pvt. Ltd. is to:
(a) an assessment order dated 22nd April, 2013 passed by the
Additional Commissioner of Income Tax (,,ACIT) [Assessing Officer
(,,AO)] (Respondent No. 2 ) on 22nd April, 2013 under Section 143
(3) of the Income Tax Act, 1961 ('Act');
(b) the penalty order dated 26th June, 2013 passed under Section
271(1) (c) of the Act and
W.P.C.3648/2014 Page 1 of 13
(c) a notice dated 22nd April, 2014 issued under Section 221(1) of the
Act for the Assessment Year ('AY') 2009-10.
2. The facts in brief are that the Petitioner is engaged in the business of
development of integrated circuit design, Computer Aided Design tools and
computer software. The Petitioner was initially operating from the premises
situated at 204-206, Tolstoy House, 15, Tolstoy Marg, New Delhi till 1st
February, 2010. Thereafter the Petitioner shifted to D-28, South Extension,
Part-I, New Delhi.
3. The Petitioner states that new address was updated in the PAN database
which was duly recorded. All communications were thereafter received by
the Petitioner from the Respondents at the new address. At page 72 of the
paper book, the Petitioner has listed out all the communications received by
it at the new address beginning with a notice dated 31st August, 2010 under
Section 143(2) of the Act for AY 2009-10 and ending with a notice dated
22nd April, 2014 issued to it under Section 221 of the Act.
4. For the AY 2009-10, the Petitioner filed its return of income on 30th
September, 2009 declaring income of Rs.36,95,90,380/-. The return was
picked up for scrutiny and a notice under Section 143 (2) of the Act on 31st
August, 2010 is issued by the Deputy Commissioner of Income Tax (DCIT)
(Respondent No. 1) at the changed address of the Petitioner. A further notice
under Section 143 (2) of the Act was issued on 18th February, 2011 to the
Petitioner at its changed address. This included a questionnaire. The AO
issued notices on 1st September, 2011 and 30th January, 2013 under Section
W.P.C.3648/2014 Page 2 of 13
143 (2) of the Act to the Petitioner, again at the changed address.
5. The Transfer Pricing Officer (,,TPO) passed an order on 28th January,
2013 proposing an adjustment of Rs.49,62,10,741/- to the income of the
Petitioner for AY 2009-10. This order of the TPO was also despatched and
received by the Petitioner at the changed address. A copy of the order of the
TPO, which has been annexed to the petition, reflects the changed address of
the Petitioner.
6. The AO then passed a draft assessment order dated 18 th March, 2013
under Section 144C of the Act consistent with the addition proposed by the
TPO. The AO made further addition on account of training expenses. The
total income was thereafter assessed at Rs.87,92,52,013/-. This draft
assessment order was also sent to the Petitioner at the changed address and
was received by the Petitioner on 22nd March, 2013.
7. It is pointed out that under Section 144(C)(2) of the Act, the Assessee has
an option of filing an appeal before the Commissioner of Income Tax
(Appeals) [,,CIT(A)] against the additions as proposed in the draft order or
file objections to the variation with the Disputes Resolution Panel (,,DRP)
as well as the AO. Under Section 144(C)(2) of the Act, the Assessee has a
time period of 30 days from receipt of the draft assessment order to exercise
the above options. Where the Assessee informs the AO of the acceptance of
the variation as proposed or if no objections are received by the AO or the
DRP within 30 days of the Assessee receiving the draft order, then under
Section 144C (3), the AO has to complete the assessment on the basis of the
W.P.C.3648/2014 Page 3 of 13
draft order. The time period within which the AO has to complete the
assessment under Section 144C (3) is indicated as one month ,,from the end
of the month in which the period of filing the objections under sub section
(2) expires. If an acceptance is received from the Assessee then the final
order must be passed within one month from the date on which such
acceptance is received.
8. The point involved in this case concerns the passing of the final
assessment order by the AO and whether, in fact, it was done within the time
period stipulated under Section 144(C)(4) of the Act read with Section
144(C)(3) of the Act.
9. Adverting to the facts of the present case, the Petitioner opted to file an
appeal before the CIT(A) and therefore was awaiting the passing of the final
assessment order. In other words, the Assessee did not file an acceptance of
the variations with the AO within 30 days of receiving the draft assessment
order. Therefore, in terms of Section 144(C)(4) read with Section 144(C)(3)
of the Act with the limitation for filing objections before the DRP having
expired on 22nd April, 2013, the AO had to necessarily pass the final
assessment order by 31st May, 2013.
10. The Petitioners case is that it did not receive the final assessment order
passed by the AO at the changed address.
11. In the meanwhile, on 19th June 2013, the DCIT issued a notice to the
Petitioner under Section 221(1) of the Act seeking to impose penalty under
W.P.C.3648/2014 Page 4 of 13
Section 221(1) and recover the demand for the AY 2008-09 and 2003-04.
That notice did not mention any demand arising out of assessment order for
AY 2009-10. This notice dated 19th June 2013 was received by the Petitioner
at its changed address.
12. Subsequently, on 22nd April, 2014 the petitioner received a notice under
Section 221(1) of the Act issued by the DCIT asking the Petitioner to show
cause as to why the penalty should not be levied for non-payment of demand
for AY 2009-10. There were no entries in the column titled "date of service
of demand" and "due date of payment". This notice dated 22nd April 2014
was also received at the changed address of the Petitioner.
13. On 28th April 2014, the Petitioner wrote to the DCIT pointing out that
neither of the orders, i.e., the assessment order under Section 144 C (3) nor
the penalty order under Section 271(1)(c) was received by the Petitioner.
The Petitioner, accordingly, asked for copies of the said orders along with
proof of despatch of the same to enable the Petitioner to verify the date of
service of the said order and notice. It was thereafter that the DCIT provided
the Petitioner with the final assessment order dated 22 nd April, 2013 along
the notice of demand under Section 156 of the Act of the same date. The
petitioner was also provided with the penalty notice dated 5th June, 2013
under Section 271(1)(c) of the Act, the penalty order dated 26th June, 2013
under Section 271(1)(c) of the Act along with the notice of demand under
Section 156 of the Act and the notice dated 26th March, 2014 under Section
221(1) of the Act.
W.P.C.3648/2014 Page 5 of 13
14. In its letter dated 15th May 2014, the Petitioner pointed out to the DCIT
that the aforementioned documents were issued only at the old address of
the Petitioner even though the change of address was updated and within the
knowledge of the department and the fact that after the change of this
address every communication had been served on the Petitioner by the
Department at the changed address. The Petitioner specifically requested the
DCIT to furnish it with the following information:-
"a) In respect of documents referred to in para 1.7 above:
i) Mode of dispatch of impugned notices and orders
ii) Date of dispatch of impugned notices and orders
iii) Proof of dispatch of impugned notices and orders
iv) Proof of service of impugned notices and orders
v) If the impugned notices and orders were not served, whether
the envelope
came back 'unserved '.
vi) If yes, kindly provide copy of the envelope
b) Permission to inspect your files for assessment proceedings,
penalty proceedings, recovery proceedings etc
c) Copies of all records placed in your file including note sheet entry"
15. It is stated thereafter several attempts made by the Petitioner to inspect
the file and obtain the information were unsuccessful. It is in these
circumstances that the Petitioner has filed the present petition seeking the
reliefs aforementioned.
16. On 29th May, 2014 while directing notice in the writ petition, the Court
passed the following order in the application CM. No. 7411/2014:
"The petitioners grievance is that the respondents are
seeking to enforce tax demands and penalty for AY 2009-
W.P.C.3648/2014 Page 6 of 13
10. It is contended that the petitioner had given sufficient
intimation to the respondent/revenue about the change of
address and that the orders, alleged to have been made on
the basis of the draft assessment orders, are without
jurisdiction since no intimation was received, thus
depriving the petitioner of the right to approach the CIT
(A). Counsel contends that, likewise, the penalty order
too was sought to be finalized under Section 271 without
notice at the new address.
Respondents are directed to produce Assessing Officers
records on the next date of hearing. In the meanwhile, the
demands which are the subject matter of the present
petition are hereby stayed and shall not be enforced till
next date of hearing."
17. Thereafter the matter has been listed before this Court on five dates, i.e.,
9th September 2014, 13th January 2015, 8th April 2015, 11th August 2015 and
9th February 2016. During this entire period the Respondents, despite
opportunities, did not file any counter affidavit and therefore the averments
in the writ petition have remained un-rebutted. The Court was constrained,
on the previous date, i.e., 9th February 2016 to close the opportunity of filing
a reply and required the records to be kept ready for perusal by the Court.
18. At this stage, it is required to note that the Petitioners specific case is
that the final assessment order was not passed on the date mentioned therein,
i.e., 22nd April, 2014 and was probably antedated in order to avoid the expiry
of the period of limitation as stipulated under Section 144(C)(4) of the Act
read with Section 144(C)(3) of the Act. The specific pleadings in this regard
are to be found in paras in the following paragraphs 13, 16 & 18 of its
W.P.C.3648/2014 Page 7 of 13
petition, the relevant portions of which read as under:
"13. Petitioner filed letter with the First Respondent clearly
stating the above mentioned facts and pointing out that the
above mentioned documents were all issued at the old address
of the Petitioner company even when the entire
communication with the Petitioner was from current address of
the company. The said documents were never received by the
Petitioner. The Petitioner also filed affidavit stating that the
said documents were never received by the company. It was
specifically pleaded that the Assessment order passed is
verbatim copy of the draft assessment order and when the draft
assessment order was issued at current address, it is difficult to
believe as to how the final Assessment order is issued at old
address. Under these circumstances it was pleaded that the
Petitioner has reason to believe that final assessment order is
not passed within the statutory limitation and further it was
again requested that the following documents may be provided
to the Petitioner:
xxx xxx xxx xxx
16. By way of present writ petition, petitioner seeks to
challenge the validity and legality of the Assessment Order
dated 22.04.2013 passed under section 143(3), the penalty
order dated 26.06.2013 passed under section 271(1)(c) and
notice issued under section 221 on the ground that the same
has been passed beyond the period of limitation as prescribed
in section 144C(4) of the Act interpolating dates and
intentionally issuing it at the old address of the Petitioner
company in order to cover up the limitation. The Respondents
are not providing the proof of dispatch and service of the said
orders and notices, in spite of asking for the same specifically.
Thus the impugned orders and notice deserved to be quashed
on this ground alone.
xxxx xxxx xxxxx
18. Thus, the final assessment order had to be passed within
one month from the end of the month in which the acceptance
W.P.C.3648/2014 Page 8 of 13
of the draft order is received or within one month when the
limitation for filing objections before DRP expired. In the
present case no such assessment order was passed by the
Respondents which is apparent from the fact that the impugned
orders and notices which are issued at the old address of the
Petitioner while all other communications were addressed to
the current address of the Petitioner which clearly evidences
that the said orders were not passed within the limitation
prescribed and now have been interpolated to cover the
deficiency by purportedly sending it to the old address. The
Petitioner has specifically asked for the proof of dispatch of
the service of the said impugned orders and notice but the
Respondents not provided the same. There is a presumption
against the Respondents that the said impugned orders and
notice have been passed after expiry of prescribed period of
limitation interpolating dates and intentionally sending it at the
wrong address. It is a settled position of law that any order
passed beyond the prescribed limitation would have to be
quashed as being time barred. What has precipitated the matter
in the present case is that the Respondents have interpolated
the orders and have tried to cover up the expiry of the
limitation by issuing an order while addressing it at the old
address of the Petitioner. This gross misuse of administrative
powers cannot be condoned and is not an appealable Act."
19. The fact of the matter is that no counter affidavit has been filed to rebut
any of the above averments, but even the record that has been produced does
not reveal any proof of despatch of the assessment order soon after it was
passed, i.e., on or after 22nd April, 2013. This is, as noted earlier, despite
several opportunities given to the Respondent.
20. The only way to effectively rebut the above assertion of the Petitioner,
particularly, in view of the absence of any other proof of despatch of the
assessment order either on the same date or soon thereafter would have been
W.P.C.3648/2014 Page 9 of 13
for the AO himself to have filed an affidavit verifying that he, in fact, passed
the final assessment order on the date mentioned in the assessment order,
i.e., 22nd April, 2013.
21. It requires also to be noticed at this stage that the entire assessment order
contains the date only in one place and that date is written by hand.
Interestingly, the notice issued to the Petitioner on the same date under
Section 274 of the Act has the date typed. In the circumstances it was
absolutely essential for the Respondents to have made the effort of
demonstrating that the final assessment order was in fact passed on 22 nd
April, 2013. However, the Respondents have failed to do so and therefore
strengthens the doubts as to whether, in fact, the final assessment order was
passed on that date.
22. It also requires to be noticed that Mr Shivpuri, Senior standing Counsel
for the Respondent, on instructions clarified that the said final assessment
order, in fact, was not despatched to the Petitioner. That brings up another
issue. It is not understood why the address shown in the final assessment is
the old address of the Petitioner when in fact the Department already had
with it the changed address. All notices and orders issued to the Petitioner
from 31st August, 2010 were sent to the changed address. This further raises
doubt as to whether the final assessment order was, in fact, passed on 22nd
April 2013. Further, when the draft assessment order was sent to the
changed address of the Petitioner, there was no reason why the final
assessment order should mention the old address and not the changed
address.
W.P.C.3648/2014 Page 10 of 13
23. In the above circumstances, the inescapable conclusion is that the
Department has failed to prove even on a preponderance of probabilities that
the final assessment order was passed on the date written by hand therein
i.e., 22nd April 2013.
24. Mr Shivpuri sought to urge that the requirement of the law as far as
Section 144(C)(4) of the Act was only that the final assessment order should
be passed within one month from the end of the month in which the period
for filing of objections under Section 144(C) would expire and not that it
should be despatched and delivered to the Assessee within that date. Mr
Shivpuri, relies on the decisions in Commissioner of Income-tax, Kolkatta-
X v. Subrata Roy [2014] 45 taxmann.com 513 (Cal); Commissioner of
Income-tax v Binani Industries Ltd. [2015] 59 taxmann.com 389 (Cal) to
support the proposition that the assessment order should be taken to have
been finally passed on the date it is signed by the officer and not on the date
of despatch or service of such order on the Assessee.
25. Mr Vohra does not dispute the general proposition that an assessment
order should be taken to have been passed on the date of the assessment
order and that the date will not get postponed to the date of its service on the
Assessee. However, he urges that it is essential that the order must have
been despatched for being served on the Assessee. He placed reliance on the
decision of the Supreme Court in Collector of Central Excise, Madras v
M.M. Rubber and Co., Tamil Nadu AIR 1991 SC 2141.
W.P.C.3648/2014 Page 11 of 13
26. There is an important aspect that has been pointed out by the Supreme
Court in Collector of Central Excise, Madras v M.M. Rubber and Co.
(supra) regarding the officer who passed the order ceasing to have any
authority to change it or vary it. This can be ensured only when such order
leaves the hand of the officer making the order. In para 12 of the judgment
after discussing the earlier case law the Supreme Court observed as under:
"It may be seen therefore, that, if an authority is authorised to
exercise a power or do an act affecting the rights of parties,
he shall exercise that power within the period of limitation
prescribed therefore. The order or decision of such authority
comes into force or, becomes operative or becomes an
effective order or decision on and from the date when it is
signed by him. The date of such order or decision is the date
on which the order or decision was passed or made: that is to
say when he ceases to have any authority to tear it off and
draft a different order and when he ceases to have any locus
penitentiae. Normally that happens when the order or
decision is made public or notified in some form or when it
can be said to have left his hand. The date of communication
of the order to the party whose rights are affected is not the
relevant date for purposes of determining whether the power
has been exercised within the prescribed time."
27. Significantly, in Commissioner of Income-tax v Binani Industries Ltd.
(supra) in para 8 it was noted that once the assessment order including the
demand notice was served on the Assessee therein on 13th April 2005 by
hand there was no question of any entry in the despatch register.
28. In the instant case, when the Assessee sought to inspect the file to see
whether there was any entry in the despatch register, he was not allowed
such inspection. It now transpires that there was no such despatch register
W.P.C.3648/2014 Page 12 of 13
available which would have shown the date of despatch of the final
assessment order and proof of service of such assessment order. Therefore,
going by the ratio of the decision of the Supreme Court in Collector of
Central Excise, Madras v M.M. Rubber and Co. (supra), in the instant case
it was incumbent on the Department to demonstrate that the AO who passed
the assessment order ceased to have any control over such order and that it
left his hand soon after it was passed. The Department having failed to do
so, a presumption has to be drawn that the final assessment order was not
passed within the time period specified under Section 144(C) (4) read with
Section 144(C)(3) of the Act.
29. In that view of the matter, the impugned assessment order dated 22 nd
April, 2013 under Section 143(3) of the Act and the consequent penalty
order dated 26th June, 2013 under Section 271(1)(c) of the Act and the notice
dated 22nd April, 2014 under Section 221 of the Act are hereby quashed.
30. The writ petition is allowed in the above terms with no orders as to costs.
S.MURALIDHAR, J
VIBHU BAKHRU, J
MAY 18, 2016
pkv
W.P.C.3648/2014 Page 13 of 13
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