TMI Blog2022 (12) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... of existence of a legal mandatory pre-requirement and precondition of recording of formation of opinion which is in pari materia with reasons to believe in Section 281B of the I.T.Act, it was incumbent upon the 1st respondent to arrive at his own satisfaction and not borrowed satisfaction by proper application of mind and consequently, the impugned order which is bald, vague, cryptic, laconic, unreasoned and non-speaking order deserves to be set aside, particularly having regard the undisputed fact that except for stating that he was of the opinion that it was necessary to attach the fixed deposits for the purpose of protecting the interest of the revenue, no other reasons have been assigned by the 1st respondent in the impugned order. A perusal of the impugned order will also indicate that there is no finding recorded as to why a provisional order of attachment had to be passed against the petitioner; it is significant to note that there is no finding recorded by the 1st respondent that the petitioner was a fly by night operator from whom it was not possible to recover the likely demand. The impugned order also does not state that the petitioner was either a habitual defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be just and appropriate to direct the petitioner not to make payment in the form of royalty or any other form to any entities outside India till conclusion of assessment proceedings by the respondents. However, interest of justice would also be met if the petitioner is reserved liberty to take / obtain overdrafts on the subject fixed deposits and make payments from such overdrafts from the respective banks to foreign entities in accordance with law. During the pendency of the present petition, the 1st respondent passed a draft assessment order under Section 144C(1) of the I.T. Act after concluding the proceedings. It is needless to state that the petitioner would be entitled to contest the said draft assessment order and proceedings pursuant thereto before the respondents. - WRIT PETITION No.16692 OF 2022(T-IT) - - - Dated:- 16-12-2022 - HON'BLE MR. JUSTICE S.R. KRISHNA KUMAR Petitioner (By Sri. Udaya Holla, Senior Advocate For Sri. Deepak Chopra, Sri. Aditya Vikram Bhat, Sri. Harpreet Singh Ajmani, Sri. Shravanth Arya, Ms. V. Radhika And Sri. Mithel Reddy, Advocates) Respondents (By Sri. M.B. Naragund, ASG Along With Sri. K.V. Aravind And Sri. M. Dilip, Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner contested the proceedings and filed the detailed submissions with regard to payment of royalty to the foreign entities referred to supra and the said proceedings were pending consideration and on 30.07.2022, the TPO passed an order under Section 92CA (3) of the I.T. Act for the Assessment Year 2018-19 whilst making transfer pricing adjustment. Pursuant to the said order, the Assessing Officer issued a Notice under Section 142(1) of the I.T.Act for the Assessment Year 2018-19 inter alia calling upon the petitioner to show cause, as to why payment of royalty to the foreign entity i.e., Qualcomm and Beijing Xiaomi Mobile should not be disallowed. On 10.08.2022, petitioner submitted a detailed response along with documents and contested the said Notice and proceedings. 2.3 On 11.08.2022, upon obtaining approval from the 3rd respondent, the 1st respondent passed the impugned order under Section 281B of the I.T. Act provisionally attaching the subject fixed deposits of the petitioner in a sum of INR 3,700 crores for a period of six months. Aggrieved by the impugned order, petitioner is before this Court by way of the present petition, which was preferred on 18.08.2022. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2019 which is binding upon the respondents as held by the Apex Court in the case of UCO Bank vs. CIT (1999) 237 ITR 889 (SC). (vi) The impugned order has been passed mechanically and based on borrowed satisfaction which do not meet the depth of formation of an opinion of the Assessing Officer as held by various Courts including in the Bombay High Court in the case of PCIT vs. Shodiman Investments (P) Ltd., - (2020) 422 ITR 337(Bombay). (vii) The approval granted by the 3rd respondent does not reflect application of mind and the said approval which precedes the impugned order is not a mere formality and is vitiated on this ground. In this regard, reliance is placed upon the judgment of the Apex Court in the case of Chhugamal Rajpal vs. S.P. Chaliha Others (1971) 1 SCC 453 and Delhi High Court in the case of United Electrical Company Pvt. Ltd., vs. CIT (2002) 258 ITR 317. (viii) Alternatively, it is submitted that the approval of the 3rd respondent is restricted only to royalty payments which constitute 20% of the attached deposits and accordingly, it is necessary to set aside the attachment order in relation to the remaining 80% of the subject fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned order which makes out sufficient reasons as to why it was necessary to provisionally attach the fixed deposits for the purpose of protecting the interest of the revenue. (vii) Learned ASG would reiterate the various contentions urged in the written submissions and contend that in the light of the specific contention of the respondents that the TPO and Investigation Wing have found that the royalty paid by the petitioner was only a mode adopted by it to divert profits outside India, setting aside the impugned order would have the effect of permitting the petitioner to divert profits under the guise of royalty to foreign entities outside India which is detrimental not only to the revenue but also to the country and as such, the impugned order does not warrant interference in the present petition. Reliance is placed on the following judgments: - (i) Smt. Gangamma Others vs. K. Hanumantha Reddy Others RFA 100058/2017 Dated 23.03.2022; (ii) C.S. Puttaraju vs. State of Karnataka Others Crl.P.No.5305/2021 dated 31.01.2022; 8. I have given my anxious consideration to the rival submissions and perused the material on record. 9. Before adverti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in F.No. 281B/XIOMI India/ Pr.CIT(C)/2022-23 dated: 11.08.2022. This order of provisional attachment is valid for a period of six months from the date of the order. 10. A perusal of the impugned order will indicate that except for stating that there is likely addition of the amount mentioned in the order, no reasons, much less valid or cogent reasons are assigned by the 1st respondent as to how and why he has formed an opinion that it was necessary to provisionally attach the fixed deposits of the petitioner for the purpose of protecting the interest of the revenue. The requirements and parameters preceding passing of a provisional attachment order came up for consideration before the Apex Court in the case of Radha Krishan Industries case (supra), wherein it was held as under:- 48. On the other hand, when the proper officer is of the opinion that the amount which has been paid under sub-section (5) falls short of the amount which is actually payable, a notice under sub-section (1) is to issue for the amount which falls short of what is actually payable. Sub-section (8) contains a stipulation that where a person who is chargeable with tax under sub-section (1) pays the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory preconditions by the Commissioner. While conditioning the exercise of the power on the formation of an opinion by the Commissioner that for the purpose of protecting the interest of the government revenue, it is necessary so to do , it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. 50. By utilising the expression it is necessary so to do the legislature has evinced an intent that an attachment is authorised not merely because it is expedient to do so (or profitable or practicable for the Revenue to do so) but because it is necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment, the Commissioner is of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do, he may by order in writing attach provisionally any property belonging to the dealer in such manner as may be prescribed. ] of the Gujarat Value Added Tax Act, 2003, one of us (Hon'ble M.R. Shah, J.) speaking for a Division Bench of the Gujarat High Court in Vishwanath Realtor v. State of Gujarat [Vishwanath Realtor v. State of Gujarat, 2015 SCC OnLine Guj 6564] observed : (Vishwanath Realtor case [ Vishwanath Realtor v. State of Gujarat, 2015 SCC OnLine Guj 6564] , SCC OnLine Guj para 26 ) 26. Section 45 of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, the order of provisional attachment can be passed by the Commissioner when the Commissioner is of the opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary so to do. Therefore, before passing the order of provisional attachment, there mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant has paid- (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and (b) a sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed. Sub-section (7) stipulates that: 107. (7) Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed. 74. Clause (a) of sub-section (6) provides that no appeal shall be filed without the payment in full, of such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order as is admitted. In addition, under clause (b), ten per cent of the remaining amount of tax in dispute arising from the order has to be paid in relation to which the appeal has been filed. Upon the payment of the amount under sub-section (6) the recovery proceedings for the balance are deemed to be stayed. Thus, in any event, the order of provisional attachment must cease to subsist. The appellant, having filed an appeal under Section 107, is required to comply with the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial that without attaching the provisional attachment, it is not possible in the facts of the given case to protect the revenue and that the provisional attachment order is completely warranted for the purpose of protecting the Government revenue. 9. Applying the principles laid down in Radha Krishan s case (supra) to the facts of the instant case, a perusal of the impugned provisional attachment order will clearly indicate that except for merely stating that since there is a likelihood of huge tax payments to be raised on completion of assessment and that for the purpose of protecting the revenue, it is necessary to provisionally attach the fixed deposit of the petitioners, the other mandatory requirements and pre-condition as laid down by the Apex Court have neither been complied with nor fulfilled or followed prior to passing the impugned order. It is apparent that the impugned provisional attachment orders at Annexures-D, D1, D2 and D3 do not satisfy the legal requirements as laid down in Radha Krishan s case (supra) and consequently, in view of the fact that the impugned provisional orders are cryptic, unreasoned, non-speaking and laconic, the same deserve to be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording of formation of opinion which is in pari materia with reasons to believe in Section 281B of the I.T.Act, it was incumbent upon the 1st respondent to arrive at his own satisfaction and not borrowed satisfaction by proper application of mind and consequently, the impugned order which is bald, vague, cryptic, laconic, unreasoned and non-speaking order deserves to be set aside, particularly having regard the undisputed fact that except for stating that he was of the opinion that it was necessary to attach the fixed deposits for the purpose of protecting the interest of the revenue, no other reasons have been assigned by the 1st respondent in the impugned order. 16. A perusal of the impugned order will also indicate that there is no finding recorded as to why a provisional order of attachment had to be passed against the petitioner; it is significant to note that there is no finding recorded by the 1st respondent that the petitioner was a fly by night operator from whom it was not possible to recover the likely demand. The impugned order also does not state that the petitioner was either a habitual defaulter nor that he was not doing any business at all or that the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose, J. in Gordhandas Bhanji2 [Commr. of Police, Bombay v. Gordhandas Bhanji, AIR 1952 SC 16] : Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself. Orders are not like old wine becoming better as they grow older. Under these circumstances, the said contention of the respondents cannot be accepted. 19. Insofar as the various other contentions urged by the respondents with regard to the petitioner allegedly evading tax etc., are concerned, the said contentions are neither germane nor relevant for the purpose of adjudicating upon the legality, validity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .No.9182/2022 were subsequently concluded and a confirmation order dated 19.09.2022 were passed against the petitioner which is the subject matter of challenge in W.P.No19973/2022, in which, the petitioner has sought for various reliefs including challenging earlier orders passed by the FEMA authorities as well as the vires under Section 37A of the FEMA, 1999. 25. Further, in the said W.P.No.19973/2022, which is pending before this Court, no interim orders have been passed in favour of the petitioner and it is the specific contention of the respondents revenue that the petitioner has violated the order dated 05.07.2022 passed in W.P.No.9182/2022 and is diverting funds outside India. It is also an undisputed fact that the subject matter of the FEMA proceedings against the petitioner is a sum of INR 5,500 crores comprising of fixed deposits savings account etc., which have also been seized by the FEMA authorities. 26. As stated supra, this Court has not permitted the petitioner to make payment by way of royalty in any form to entities outside India in the FEMA proceedings also. Under these peculiar / special facts and circumstances obtaining in the instant case and in the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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