GENPACT INDIA PRIVATE LIMITED versus DEPUTY COMMISSIONER OF INCOME TAX & ANR. on 22 November 2019

[2019] 17 S.C.R. 139

GENPACT INDIA PRIVATE LIMITED

v.

DEPUTY COMMISSIONER OF INCOME TAX & ANR.

(Civil Appeal No. 8945 of 2019)

NOVEMBER 22, 2019

[UDAY UMESH LALIT AND INDIRA BANERJEE, JJ.]

Income Tax Act, 1961:

ss. 246(1)(a) and 246A(1)(a) – Scope of – Held: Scope ofthe provisions cannot be confined to the issues arising out of ortouching upon assessment proceedings u/ss. 143 of 144 of IncomeTax Act – Determination u/s. 115QA of the Act would also getcovered under s. 246(1)(a).

s. 115QA – Assessment order – Liability u/s. 115QA – Deniedby assessee – Writ petition challenging assessment order – Petitiondisposed of by High Court on the ground that the same could notbe entertained due to availability of alternate remedy u/s. 246-Aof the Act – Appeal to Supreme Court – Held: An appeal ismaintainable against determination of liability u/s. 115QA – Hencepetition u/Art. 226 of the Constitution was rightly not entertained.

Practice and Procedure :

Petition u/Art. 226 of the Constitution – Preliminary objectionas to its maintainability – Notice issued without rejectingpreliminary objection which was later made absolute – Aftercompletion of pleadings, petition disposed of as not entertainableon the ground of availability of alternative remedy – Plea thatpreliminary issues are decided at the threshold and once that stageis crossed, High Court could not have considered the preliminaryissue – Held: In the present case preliminary issue was not dealtwith and disposed of and the same was still at large – Therefore,there is no infirmity in the approach adopted by the High Court indeciding the preliminary issue.

Dismissing the appeal, the Court

HELD:1.1 The kinds of orders or situations that arereferred to in Section 246(1) (a) of the Income Tax Act, 1961

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Aare:- (i) An order against the assessee, where the assesseedenies his liability to be assessed under this Act, or (ii) Anintimation under sub-section (1) or sub-section (1B) of Section143 where the assessee objects to the making of adjustments,or (iii) Any order of assessment under sub-section (3) of Section143 or Section 144, where the assessee objects:- to the amountBof income assessed, or to the amount of tax determined, or tothe amount of loss computed, or to the status under which he isassessed. The contingencies detailed in (ii) and (iii) hereinabovearise out of assessment proceedings under Section 143 orSection 144 of the Act but the first contingency is a standaloneCpostulate and is not dependant purely on the assessmentproceedings either under Section 143 or Section 144 of the Act.The expression “denies his liability to be assessed” is quitecomprehensive to take within its fold every case where theassessee denies his liability to be assessed under the Act. [Para11] [157-H; 158-A-D]D

Commissioner of Income Tax, U.P., Lucknow v. Kanpur Coal Syndicate AIR (1965) SC 325 : [1964] SCR 85– relied on.

1.2 Section 115QA of the Act stipulates that in case of buyEback of shares referred to in the provisions of said Section, thecompany shall be liable to pay additional income tax at the rateof 20% on the distributed income. Any determination in thatbehalf, be it regarding quantification of the liability or the questionwhether such company is liable or not would be matters comingFwithin the ambit of the first postulate referred to hereinabove.Similar is the situation with respect to provisions of Section246A(1)(a) where again out of certain situations contemplated,one of them is “an order against the assessee, where theassessee denies his liability to be assessed under this Act”. Thecomputation and extent of liability is determined under theGprovisions of Section 115QA of the Act. Such determinationunder the Act would squarely get covered under said expression.There is no reason why the scope of the such expression berestricted and confined to issues arising out of or touching uponassessment proceedings either under Section 143 or Section 144Hof the Act. [Para 12] [158-E-G]

1.3 If the expression in Section 246(1)(a) or in Section246A(1)(a) is considered as relatable to the liability of anassessee to be assessed under Section 143(3) there would beno appellate remedy in case of any determination under Section115QA. The issues may arise not just confined to the questionwhether the company is liable at all but may also relate to otherfacets including the extent of liability and also with regard tocomputation. If the dispute is taken up in proceedings such asa petition under Article 226 of the Constitution, which normallywould not be entertained in case of any disputed questions offact or concerning factual aspects of the matter. The assesseemay thus, not only lose a remedy of having the matter consideredon factual facets of the matter but would also stand deprived ofregular channels of challenges available to it under the hierarchyof fora available under the Act. Therefore, an appeal would bemaintainable against the determination of liability under Section115QA of the Act. [Paras 13 and 14] [158-H; 159-A-D]

2. There is no infirmity in the approach adopted by theHigh Court in refusing to entertain the Writ Petition. Thesubmission that once the threshold was crossed despite thepreliminary objection being raised, the High Court ought not tohave considered the issue regarding alternate remedy, may notbe correct. The first order dated 25.01.2017 passed by the HighCourt did record the preliminary objection but was prima facieof the view that the transactions defined in Section 115QA wereinitially confined only to those covered by Section 77A of theCompanies Act. Therefore, without rejecting the preliminaryobjection, notice was issued in the matter. The subsequent orderundoubtedly made the earlier interim order absolute. However,the preliminary objection having not been dealt with anddisposed of, the matter was still at large. [Para 16] [161-G; 162-A-B]

Commissioner of Income Tax and others v. ChhabilDass Agarwal (2014) 1 SCC 603 ; Authorised Officer,State Bank of Travancore & Anr. v. Mathew K.C.(2018) 3 SCC 85 : [2018] 1 SCR 233 ; State of U.P.v. U.P. Rajya Khanij Vikas Nigam Sangharsh Samitiand Others (2008) 12 SCC 675 : [2008] 7 SCR 536– relied on.

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Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8945of 2019.

From the Judgment and Order dated 19.08.2019 of the HighCourt of Delhi at New Delhi in Writ Petition (Civil) No. 686 of 2017.

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Mukul Rohatgi, S. Ganesh, Sr. Advs., Mahesh Agarwal, RishiAgrawala, Ankur Saigal, Karan Luthra, Ms. Niyati Kohli, E. C.Agrawala, Shaishin S. Divatia, Zoheb Hossain, Rajat Nair, Mrs. AnilKatiyar, Advs. for the appearing parties.

DThe Judgment of the Court was delivered by UDAY UMESH LALIT, J.

1. Leave granted.

2. This appeal arises out of the final judgment and order datedE19.08.2019 passed by the High Court of Delhi at New Delhi in WritPetition No.686 of 2017.

3. The facts leading to the filing of the present appeal, in brief,are as under:

(a) Out of opening share capital of 25,68,700 shares heldFby its sole shareholder and holding company GenpactIndia Investment, Mauritius, the appellant bought back2,50,000 shares in May 2013 at the rate of Rs.32,000/-per share for a total consideration of Rs.800 crores.

(b) On 10.05.2013, Chapter XIIDA consisting of Sections115QA, 115QB and 115QC was inserted in the IncomeTax Act, 1961 (hereinafter referred to as ‘the Act’) bythe Finance Act, 2013 which came into effect from01.06.2013. Section 115QA as it stood prior to theamendment which came into effect on 01.06.2016 wasto the following effect:

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“Section 115QA: Tax on distributed income to shareholders –

(1) Notwithstanding anything contained in any otherprovision of this Act, in addition to the income-taxchargeable in respect of the total income of a domesticcompany for any assessment year, any amount ofdistributed income by the company on buy-back of shares(not being shares listed on a recognised stock exchange)from a shareholder shall be charged to tax and suchcompany shall be liable to pay additional income-tax atthe rate of twenty per cent on the distributed income.

Explanation.—For the purposes of this section,—

(i) “buy-back” means purchase by a company of itsown shares in accordance with the provisions ofsection 77A of the Companies Act, 1956 (1 of 1956);

(ii) “distributed income” means the consideration paidby the company on buy-back of shares as reducedby the amount which was received by the companyfor issue of such shares.

(2) Notwithstanding that no income-tax is payable by adomestic company on its total income computed inaccordance with the provisions of this Act, the tax onthe distributed income under sub-section (1) shall bepayable by such company.

(3) The principal officer of the domestic company and thecompany shall be liable to pay the tax to the credit ofthe Central Government within fourteen days from thedate of payment of any consideration to the shareholderon buy-back of shares referred to in sub-section (1).

(4) The tax on the distributed income by the company shallbe treated as the final payment of tax in respect of thesaid income and no further credit therefor shall beclaimed by the company or by any other person inrespect of the amount of tax so paid.

(5) No deduction under any other provision of this Act shallbe allowed to the company or a shareholder in respect A

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of the income which has been charged to tax under sub-section (1) or the tax thereon.”

The Explanation in relation to “buy back” was, however, amendedand with effect from 01.06.2016, it reads as:- “(i) “buy-back” means purchase by a company of its own sharesin accordance with the provisions of any law for the time beingin force relating to companies;”

(c) On 10.09.2013, a scheme for arrangement wasapproved by the High Court of Delhi in Company PetitionNo.349 of 2013. Pursuant thereto, the appellant boughtback another tranche of 7,50,000 shares at the rate ofRs.35,000 per share for a total consideration of Rs.2,625crores from said Genpact India Investment, Mauritius.

(d) In the income tax return filed on 28.11.2014 by theappellant for the assessment year 2014-15, “Details oftax on distributed profits of domestic companies and itspayment” were given in “Schedule DDT” where thedetails of aforesaid transactions were given but theliability to pay any tax was denied. A notice underSection 143(2) of the Act was issued to the appellanton 03.09.2015 seeking further explanation, pursuant towhich requisite details were furnished.

(e) The matter was thereafter considered and an assessmentorder was passed by the first respondent on 31.12.2016.As many as 10 additions were made by the firstrespondent, one of them being in respect of liability underSection 115QA of the Act. Since we are concerned inthis appeal only with the issue with regard to liabilityunder Section 115QA, we need not deal with otherissues.

(f) As regards the issue in question, the submissionsadvanced on behalf of the appellant-assessee were notedas under:

“Vide Letter dated 28.12.2016, the assessee hassubmitted that the buy back of shares has been done in

pursuance of scheme of arrangement under Section 391of the Companies Act, 1956 approved by Hon’ble HighCourt of Delhi and in such manner that the same is nota buy back in terms of the Section 115QA of the Act.”

g) The matter was dealt with by the first respondent asunder:

“The submission of the assessee was considered butwas not found acceptable as it has no substance.Before discussing the facts of the case and argumentin support of the revenue it is also important tounderstand the background of the Section 115QA.Section 115QA was inserted by Finance Act, 2013 tocounter the tax avoidance practice mainly adopted byIndian subsidiaries to distribute income to shareholdersto Mauritius based Holding company under the garb ofBuyback of shares. Under Income Tax Act, buybackof shares is taxable u/s 46A in the hands ofshareholders. However, taking the benefit of Article 13of India-Mauritius DTAA, which provides for capitalgain arising on transfer of shares of Mauritius residenttaxable in that country and under Mauritius tax lawscapital gain is totally exempt, entire transaction used toescape the tax net. Thus to plug this loop hole in thestatute, Section 115QA is introduced to provide thatwhere shares are bought back at a price higher thanthe price at which those shares were issued then,balance amount will be treated as distribution of incometo shareholder and Tax@20% will be payable by theCompany. Section 115QA is applicable only to domesticunlisted companies.

The provisions of Section 115QA have been introducedas part of Chapter XIIA as an anti-avoidance measureas also with an intent to widen the tax base in India.The explanatory Memorandum made it clear that theobject is to curb tax avoidant practice of unlistedcompanies resorting to buy-back of shares in lieu ofpayment of income to shareholders and which is taxable A

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in India. Buy back tax is attracted on amountsdistributed by the company on buy-back of its ownshares.

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Section 115QA overrides all the sections of the Act andit is a separate charging section which taxes amountdistributed on buy back of shares.”

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Rejecting the submission advanced on behalf of the appellant,the first respondent thus held that over and above nine heads underCwhich additions were made, the appellant-assessee was also liable topay tax at the rate of 20% in terms of Section 115QA of the Act inrespect of distributed income of Rs.2,625 crores.

h. It may be mentioned that insofar as those nine additionsmade by the aforesaid assessment order by the firstrespondent are concerned, an appeal was filed by theappellant. We have been apprised that the appeal wasdecided in favour of the appellant but further challengeat the instance of the Revenue is under consideration.

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As regards the issue concerning tax under Section 115QA, theappellant filed Writ Petition (Civil) No.686 of 2017 in the High CourtEsubmitting, inter alia, that the order passed by the first respondent waswithout jurisdiction as buy back of shares in the instant case was inpursuance of the scheme of arrangement approved by the High Court.

i) The matter came up before the High Court on25.01.2017 when a preliminary objection was raised thatFalternate and efficacious remedy of filing an appeal wasavailable. While issuing notice it was observed by theHigh Court:

“Prima facie, in this Court’s opinion, the non-obstanteclause in Section 115QA of the Act restricts the natureof the levy to the transactions defined by the provisionitself. The transactions defined are those covered bySection 77A of the Companies Act. Significantly, theParliamentary intent to cover all manners of shareacquisition by the Company of its own shares, is evidentfrom a subsequent amendment to Section 115QA of the G

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Act, when it explained the meaning of ‘buy-back’ in theFirst Explanation by not alluding merely to Section 77Aof the Companies Act but all other provisions of law.That this provision was not given retrospective effect,in this Court’s opinion, further strengthens thepetitioner’s submissions.

In view of these prima facie reasons, the Court is ofthe opinion that the impugned demand to the tune it seeksto recover levy under Section 115QA of the Act shouldnot be enforced till the next date of hearing. It is sodirected.

List on 28.03.2017.”

j) The matter thereafter came up on 30.08.2017 when theinterim order dated 25.01.2017 was made absolute.

k) When the matter was taken up after completion ofpleadings, it was submitted on behalf of the Revenuethat since the remedy of appeal was available to theappellant, the Writ Petition may not be entertained. Onthe other hand, it was submitted by the appellant thatthe demand raised under Section 115QA could not beconsidered as forming part of the assessment orderpassed by the first respondent and it must be somethingseparate from the order of assessment. The submissionwas, however, rejected by the High Court observing asunder:

“At the outset, the Court would first like to deal withthe submissions of Mr. Ganesh that the impugneddemand raised under Section 115QA of the Act shouldnot be construed as forming part of the impugnedassessment order and that it is something separate fromit. While it is true that the demand under Section 115QAof the Act would be in addition to the total income, thefact of the matter is that in the present case it formsan integral part of the impugned assessment order underSection 143(3) of the Act. Reading the assessmentorder as a whole, it is plain to the Court that this demandunder Section 115QA of the Act is in addition to demands A

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under other issues, all of which form part of theimpugned assessment order. In fact, paragraph 11 ofthe impugned assessment order, which gives thecomputation of the total taxable income, includes thedemands raised under all heads and it includes thedemand under Section 115QA of the Act. Therefore, itis not possible for this Court to read this part of the orderseparate from the rest of the assessment order.”

l) On the issue whether the Writ Petition be entertainedin the face of availability of an alternate remedy, theHigh Court considered relevant case law touching uponthe issue and observed:

“23. The question regarding the interpretation of Section115QA of the Act, as it stood at the relevant time, candefinitely be gone into by the CIT (A). Further, thisCourt has in fact not expressed any view yet on themaintainability of the petition, although as rightly pointedout the matter was heard on this aspect earlier as well.The fact remains that the Respondent raised theobjection at the first available opportunity. Due toreasons noted hereinbefore, the issue could not bedecided till now. It would, however, not be correct tostate that this Court has impliedly overruled such anobjection and decided to hear the petition on merits.

24. The Court also notes in this context that theAssessee has in fact succeeded in its appeal before theCIT (A) on other issues arising out of the sameimpugned assessement order and it is the Revenue whichis now in appeal before the ITAT. There is no reasonwhy this one other issue arising from the impugnedassessment order cannot also be examined by the CIT(A).”

m) The High Court also recorded certain concessions madeon behalf of the Revenue and disposed of the WritPetition by its Judgment and Order dated 19.08.2019 withfollowing directions:

“(i) The Court declines to entertain this writ petition under Article 226 of the Constitution against theimpugned demand raised by the Revenue by way of theimpugned assessment order under Section 115QA of theAct against the Assessee.

(ii) The Assessee is granted an opportunity to file anappeal under Section 246-A of the Act before the CIT(A) to challenge the impugned assessment order onlyinsofar as it creates a demand under Section 115QA ofthe Act.

(iii) If such an appeal is filed within ten days from today,it will be considered on its own merits and a reasonedorder disposing of the appeal will be passed by the CIT(A) on all issues raised by the Assessee, not limited tothe issues raised in the present petition as well as onthe response thereto by the Revenue in accordance withlaw.

(iv) The reasoned order shall be passed by the CIT (A)not later than 31st October, 2019. It will becommunicated to the Petitioner within ten daysthereafter. For a period of two weeks after the date ofsuch communication of order, the demand under theimpugned assessment order, if it is affirmed by the CIT(A) in appeal, will not be enforced against the Assessee.

(v) The Court places on record the statement of theRevenue that it will not raise any objection before theCIT (A) as to the maintainability of such an appeal andas to the appeal being barred by limitation. The Courtalso takes on record the statement of the Revenue thatit will not enforce the demand in terms of the impugnedassessment order till the disposal of the above appeal.All of the above is subject to the Assessee filing theappeal before the CIT (A) within ten days from today.

(vi) It is made clear that this Court has not expressedany view whatsoever on the contentions of either partyon the merits of the case.”

4. Challenge to the aforesaid view taken by the High Court wasraised by way of Special Leave Petition No.20728 of 2019 filed in this A

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ACourt on 26.08.2019. Within the time limit of 10 days as afforded bythe High Court, an appeal was also preferred by the appellant “withoutprejudice” on 30.08.2019 against the “demand raised/order passed underSection 115QA”. The aforesaid Special Leave Petition came up beforethis Court on 06.09.2019, whereafter the matter was adjourned on fewoccasions and then taken up for final disposal.B

5. We heard Mr. Mukul Rohatgi and Mr. S. Ganesh, learnedSenior Advocates for the appellant and Mr. Zoheb Hossain, learnedAdvocate for the respondents.

It was submitted by the appellant that in relation to an orderCpassed under Section 115QA of the Act, no right of appeal would beavailable under the provisions of the Act and as such the premise onwhich the High Court proceeded was wrong; in any case plea ofexistence of any alternate and efficacious remedy would be consideredat the threshold when a writ petition is taken up for preliminary hearing;since the preliminary objection was taken and despite such objection,Ddiscretion was exercised by the High Court which is evident from ordersdated 25.01.2017 and 30.08.2017, the very same issue ought not to haveweighed with the High Court; that the scheme of amalgamation wasapproved by the High Court and any buy back of shares in pursuancethereof would not be covered by the provisions of Section 115QA ofEthe Act.

On the other hand it was submitted by the Revenue that anyorder determining the liability to pay tax under Section 115QA wouldbe appealable; any other view would entail tremendous prejudice to theconcerned assessees; the concessions given on behalf of the RevenueFwhich were recorded in the directions passed by the High Court, wouldcompletely take care of any inconvenience and prejudice that couldpossibly arise in the matter.

6. In its written submissions, the appellant submitted:-

I. No statutory appeal has been provided against an orderunder section 115QA after it was introduced into thestatute book with effect from 01.06.2013. A section115QA order cannot possibly be equated with anassessment order passed under section 143(3) againstwhich an appeal lies under section 246A. An orderunder section 143(3) only makes an assessment of the G

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“total income” of the assessee, as defined in section2(45) of the IT Act. The tax payable under section115QA by the company making a buy-back is a taxpayable on the payment made by the company and notthe tax payable on its “total income” and, therefore,section 115QA does not at all speak of an “assessment”,which is a term of art in the Income Tax Act, confinedto the determination of the “total income of theassessee.” The “denial of the assessee’s liability to beassessed” in section 246A is also confined to his liabilityto be assessed under section 143(3) and the same hasnothing to do with an assessee’s liability to pay tax undersection 115QA.

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II. The Division Bench which admitted the matter andgranted interim relief had unequivocally exercised itsdiscretion in case of the Petitioner to entertain the WritPetition despite the argument of alternative remedy.Further, another Division Bench also similarly exercisedit’s discretion again in favour of the Petitioner on26.07.2017 and 30.08.2017. It was therefore not openfor another Division Bench, which heard the matter on19.08.2019 to exercise it’s discretion in a fundamentallydifferent way, as compared to the two earlier DivisionBenches….

….the objection of alternative remedy can only be raisedat the admission stage and not at the stage of finalhearing, after the completion of the pleadings…”

7. Two issues arise for consideration, one regarding availabilityof appellate remedy and the other concerning refusal to exerciseJurisdiction under Article 226 because of availability of an alternateefficacious remedy. In essence, the matter revolves around the questionwhether there is in fact an appellate remedy available, in case anydetermination is made under Section 115QA of the Act that theCompany is liable to pay “additional income tax at the rate of 20% onthe distributed income”. For the purpose of considering whether thereis any such appellate remedy, we must note the concerned Sections inthe Act dealing with appellate remedy and provisions touching upon A

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Aexercise of such right of appeal. Sections 246(1) and 246A(1) beingrelevant for the present purposes are extracted hereunder:- “246. Appealable orders - (1) Subject to the provisions of sub-section (2), any assessee aggrieved by any of the followingorders of an Assessing Officer other than the Joint Commissionermay appeal to the Deputy Commissioner (Appeals) before the1[st] day of June, 2000 against such order–

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(a) an order against the assessee, where the assesseedenies his liability to be assessed under this Act, or anintimation under sub-section (1) or sub-section (IB) ofsection 143, where the assessee objects to the makingof adjustments, or any order of assessment under sub-section (3) of section 143 or section 144, where theassesse objects to the amount of income assessed, orto the amount of tax determined, or to the amount ofloss computed, or to the status under which he isassessed; C

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(b) an order of assessment, reassessment or recomputationunder section 147 or section 150;

(c) an order under section 154 or section 155 having theeffect of enhancing the assessment or reducing a refundor an order refusing to allow the claim made by theassesssee under either of the said sections; E

(d) an order made under section 163 treating the assesseeas the agent of a non-resident; F

(e) an order under sub-section (2) or sub-section (3) ofsection 170; (f) an order under section 171; (g) any order under clause (b) of sub-section (1) or undersub-section (2) or sub-section (3) or sub-section (5) ofsection 185 in respect of any assessment for theassessment year commencing on or before the 1[st] dayof April, 1992; G

(h) any order cancelling the registration of a firm under sub-section (1) or under sub-section (2) of section 186 in H

respect of any assessment for the assessment yearcommencing on or before the 1[st] day of April, 1992;

(i) an order under section 201;

(j) an order under section 216 in respect of any assessmentfor the assessment year commencing on the 1[st] day ofApril, 1988, or any earlier assessment year; (k) an order under section 237;

(l) an order imposing a penalty under-

(i) section 221, or

(ii) section 271, section 271A, section 271B, section272A, section 272AA or section 272BB;

(iii) section 272, section 272B or section 273, as theystood immediately before the 1[st] day of April, 1989,in respect of any assessment for the assessmentyear commencing on the 1[st] day of April, 1988, orany earlier assessment years.

246A. Appealable orders before Commissioner (Appeals).– (1)Any assessee or any deductor or any collector aggrieved by anyof the following orders (whether made before or after theappointed day) may appeal to the Commissioner (Appeals)against–

(a) an order passed by a Joint Commissioner under clause

(ii) of sub-section (3) of section 115VP or an orderagainst the assessee where the assessee denies hisliability to be assessed under this Act or an intimationunder sub-section (1) or sub-section (1B) of section 143or sub-section (1) of section 200A or sub-section (1) ofsection 206CB, where the assessee or the deductor orthe collector objects to the making of adjustments, orany order of assessment under sub-section (3) of section143 except an order passed in pursuance of directionsof the Dispute Resolution Panel or an order referred toin sub-section (12) of section 144BA or section 144, tothe income assessed, or to the amount of tax determined,or to the amount of loss computed, or to the status underwhich he is assessed; A

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(aa) an order of assessment under sub-section (3) ofsection 115WE or section 115WF, where theassessee, being an employer objects to the value offringe benefits assessed; (ab) an order of assessment or reassessment undersection 115WG; (b) an order of assessment, reassessment or recomputationunder section 147 except an order passed in pursuanceof directions of the Dispute Resolution Panel or an orderreferred to in sub-section (12) of section 144BA orsection 150; (ba) an order of assessment or reassessment undersection 153A except an order passed in pursuanceof directions of the Dispute Resolution Panel or anorder referred to in sub-section (12) of section144BA; (bb) an order of assessment or reassessment under sub-section (3) of section 92CD;

(c) an order made under section 154 or section 155 havingthe effect of enhancing the assessment or reducing arefund or an order refusing to allow the claim made bythe assessee under either of the said sections except ofan order referred to in sub-section (12) of section144BA; (d) an order made under section 163 treating the assesseeas the agent of a non-resident; (e) an order made under sub-section (2) or sub-section (3)of section 170; (f) an order made under section 171;

(g) an order made under clause (b) of sub-section (1) orunder sub-section (2) or sub-section (3) or sub-section(5) of section 185 in respect of an assessment for theassessment year commencing on or before the 1[st] dayof April, 1992; (h) an order cancelling the registration of a firm under sub-section (1) or under sub-section (2) of section 186 inrespect of any assessment for the assessment yearcommencing on or before the 1[st] day of April, 1992, orany earlier assessment year; (ha) an order made under section 201; (hb) an order made under sub-section (6A) of section206C;

(i) an order made under section 237;

(j) an order imposing a penalty under–

(A) section 221; or

(B) section 271, section 271A, 271AAA, 271AAB,section 271F, section 271FB, section 272AA orsection 272BB;

(C) section 272, section 272B or section 273, as theystood immediately before the 1[st] day of April, 1989,in respect of any assessment for the assessmentyear commencing on the 1[st] day of April, 1988, orany earlier assessment years; (ja) an order of imposing or enhancing penalty under sub-section (1A) of section 275; (k) an order of assessment made by an Assessing Officerunder clause (c) of section 158BC, in respect of searchinitiated under Section 132 or books of account, otherdocuments or any assets requisitioned under section132A on or after the 1[st] day of January, 1997;

(l) an order imposing a penalty under sub-section (2) ofsection 158BFA; (m) an order imposing a penalty under section 271B orsection 271BB; (n) an order made by a Deputy Commissioner imposing apenalty under section 271C, section 271CA, section271D or section 271E; A

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(o) an order made by Deputy Commissioner or a DeputyDirector imposing a penalty under section 272A; (p) an order made by a Deputy Commissioner imposing apenalty under section 272AA; (q) an order imposing a penalty under Chapter XXI; B

(r) an order made by an Assessing Officer other than aDeputy Commissioner under the provisions of this Actin the case of such person or class of persons, as theBoard may, having regard to the nature of the cases,the complexities involved and other relevantconsiderations direct.

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Explanation.– For the purposes of this sub-section, where onor after the 1[st] day of October, 1998, the post of DeputyCommissioner has been redesignated as Joint Commissioner andthe post of Deputy Director has been redesignated as jointDirector, the references in this sub-section for “DeputyCommissioner” and “Deputy Director” shall be substituted by“Joint Commissioner” and “Joint Director” respectively.”

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8. One of the key expressions appearing in Section 246(1)(a) aswell as in Section 246A(1)(a) is “where the assessee denies his liabilityEto be assessed under this Act.”

9. Similar expression occurring in Section 30 of the Income Tax,1922 came up for consideration before this Court in Commissioner ofIncome Tax, U.P., Lucknow v. Kanpur Coal Syndicate[1]. The relevantpart of Section 30(1) as quoted in the decision was:- F

“30.(1) Any assessee objecting to the amount of income assessedunder Section 23 … or the amount of tax determined underSection 23 … or denying his liability to be assessed under thisAct … may appeal to the Appellate Assistant Commissioneragainst the assessment or against such refusal or order:”

GThe contention raised by the assessee was considered as under:- “The Income Tax Officer may reject its contention and mayassess the total income of the association as such and imposethe tax on it. Under Section 30 an assessee objecting to the

H1 AIR (1965) SC 325 : 1964 (53) ITR 225

amount of income assessed under Section 23 or the amount oftax determined under the said section or denying his liability tobe assessed under the Act can prefer an appeal against the orderof the Income Tax to the Appellate Assistant Commissioner. Itis said that an order made by the Income Tax Officer rejectingthe plea of an association of persons that the members thereofshall be assessed individually does not fall under one or other ofthe three heads mentioned above. What is the substance of theobjection of the assesses? The assessee denies his liability to beassessed under the Act in the circumstance of the case andpleads that the members of the association shall be assessed onlyindividually. The expression “denial of liability” is comprehensiveenough to take in not only the total denial of liability but also theliability to tax under particular circumstances. In either case thedenial is a denial of liability to be assessed under the provisionsof the Act. In one case the accessee says that he is not liable tobe assessed to tax under the Act, and in the other case theassessee denies his liability to tax under the provisions of the Actif the option given to the appropriate officer under the provisionsof the Act is judicially exercised. We, therefore, hold that suchan assessee has a right of appeal under Section 30 of the Actagainst the order of the Income Tax Officer assessing theassociation of members instead of the members thereofindividually.”

It was concluded that the expression “denial of liability” iscomprehensive enough to take in not only the total denial of liabilitybut also the liability to tax under particular circumstances.

10. The submission advanced on behalf of the appellant, however,is that “denial of the assessee’s liability to be assessed” in Section 246Ais confined to his liability to be assessed under Section 143(3) of theAct and the same has nothing to do with the liability to pay tax underSection 115QA. According to the appellant, tax payable in respect ofbuy back of shares under Section 115QA is not a tax payable on “totalincome”.

11. We may now consider kinds of orders or situations that arereferred to in Section 246(1)(a) of the Act, which are:-

(i) An order against the assessee, where the assesseedenies his liability to be assessed under this Act, or ABC

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(ii) An intimation under sub-section (1) or sub-section (1B)of Section 143 where the assessee objects to the makingof adjustments, or

(iii) Any order of assessment under sub-section (3) ofSection 143 or Section 144, where the assessee objects:- B

to the amount of income assessed, or

to the amount of tax determined, or

to the amount of loss computed, or

to the status under which he is assessed.

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The contingencies detailed in (ii) and (iii) hereinabove arise outof assessment proceedings under Section 143 or Section 144 of the Actbut the first contingency is a standalone postulate and is not dependantpurely on the assessment proceedings either under Section 143 orSection 144 of the Act. The expression “denies his liability to beDassessed” as held by this Court in Kanpur Coal Syndicate[1] is quitecomprehensive to take within its fold every case where the assesseedenies his liability to be assessed under the Act.

12. Section 115QA of the Act stipulates that in case of buy backof shares referred to in the provisions of said Section, the companyEshall be liable to pay additional income tax at the rate of 20% on thedistributed income. Any determination in that behalf, be it regardingquantification of the liability or the question whether such company isliable or not would be matters coming within the ambit of the firstpostulate referred to hereinabove. Similar is the situation with respectto provisions of Section 246A(1)(a) where again out of certain situationsFcontemplated, one of them is “an order against the assessee, wherethe assessee denies his liability to be assessed under this Act”. Thecomputation and extent of liability is determined under the provisionsof Section 115QA of the Act. Such determination under the Act wouldsquarely get covered under said expression. There is no reason whyGthe scope of the such expression be restricted and confined to issuesarising out of or touching upon assessment proceedings either underSection 143 or Section 144 of the Act.

13. If the submission of the appellant is accepted and theconcerned expression as stated hereinabove in Section 246(1)(a) or inHSection 246A(1)(a) is to be considered as relatable to the liability of an assessee to be assessed under Section 143(3) as contended, there wouldbe no appellate remedy in case of any determination under Section115QA. The issues may arise not just confined to the question whetherthe company is liable at all but may also relate to other facets includingthe extent of liability and also with regard to computation. If thesubmission is accepted, every time the dispute will be required to betaken up in proceedings such as a petition under Article 226 of theConstitution, which normally would not be entertained in case of anydisputed questions of fact or concerning factual aspects of the matter.The assessee may thus, not only lose a remedy of having the matterconsidered on factual facets of the matter but would also stand deprivedof regular channels of challenges available to it under the hierarchy offora available under the Act.

14. We, therefore, reject the submissions advanced by theappellant and hold that an appeal would be maintainable against thedetermination of liability under Section 115QA of the Act.

15. We now turn to the question whether the High Court wasjustified in refusing to entertain the writ petition because of availabilityof adequate appellate remedy. The law on the point is very clear andwas summarised in Commissioner of Income Tax and others v.Chhabil Dass Agarwal[2] as under:- “11. Before discussing the fact proposition, we would notice theprinciple of law as laid down by this Court. It is settled law thatnon-entertainment of petitions under writ jurisdiction by the HighCourt when an efficacious alternative remedy is available is arule of self-imposed limitation. It is essentially a rule of policy,convenience and discretion rather than a rule of law. Undoubtedly,it is within the discretion of the High Court to grant relief underArticle 226 despite the existence of an alternative remedy.However, the High Court must not interfere if there is anadequate efficacious alternative remedy available to the petitionerand he has approached the High Court without availing the sameunless he has made out an exceptional case warranting suchinterference or there exist sufficient grounds to invoke theextraordinary jurisdiction under Article 226. (See State of U.P.v. Mohd. Nooh[3], Titaghur Paper Mills Co. Ltd. v. State of 2 (2014) 1 SCC 603

3 AIR 1958 SC 86

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AOrissa[4], Harbanslal Sahnia v. Indian Oil Corpn. Ltd.[5] andState of H.P. v. Gujarat Ambuja Cement Ltd.[6])

12. The Constitution Benches of this Court in K.S. Rashid andSon v. Income Tax Investigation Commission[7], Sangram Singhv. Election Tribunal[8], Union of India v. T.R. Varma[9], State ofBU.P. v. Mohd. Nooh[3] and K.S. Venkataraman and Co. (P) Ltd.v. State of Madras[10] have held that though Article 226 confersvery wide powers in the matter of issuing writs on the High Court,the remedy of writ is absolutely discretionary in character. If theHigh Court is satisfied that the aggrieved party can have anadequate or suitable relief elsewhere, it can refuse to exerciseCits jurisdiction. The Court, in extraordinary circumstances, mayexercise the power if it comes to the conclusion that there hasbeen a breach of the principles of natural justice or the procedurerequired for decision has not been adopted. [See N.T. VeluswamiThevar v. G. Raja Nainar[11], Municipal Council, Khurai v.DKamal Kumar[12], Siliguri Municipality v. Amalendu Das[13], S.T.Muthusami v. K. Natarajan[14], Rajasthan SRTC v. KrishnaKant[15], Kerala SEB v. Kurien E. Kalathil[16], A. VenkatasubbiahNaidu v. S. Chellappan[17], L.L. Sudhakar Reddy v. State ofA.P.[18], Shri Sant Sadguru Janardan Swami (MoingiriMaharaj) Sahakari Dugdha Utpadak Sanstha v. State ofEMaharashtra[19], Pratap Singh v. State of Haryana[20] and GKNDriveshafts (India) Ltd. v. ITO[21].]

4 (1983) 2 SCC 433 : 1983 SCC (Tax) 1315 (2003) 2 SCC 1076 (2005) 6 SCC 499F7 AIR 1954 SC 2078 AIR 1955 SC 4259 AIR 1957 SC 88210 AIR 1966 SC 108911 AIR 1959 SC 42212 AIR 1965 SC 1321 : (1965) 2 SCR 65313 (1984) 2 SCC 436 : 1984 SCC (Tax) 133G14 (1988) 1 SCC 57215 (1995) 5 SCC 75 : 1995 SCC (L&S) 1207 : (1955) 31 ATC 11016 (2000) 6 SCC 29317 (2000) 7 SCC 69518 (2001) 6 SCC 63419 (2001) 8 SCC 50920 (2002) 7 SCC 484 : 2002 SCC L&S) 1207 : (1995) 31 ATC 110H21 (2003) 1 SCC 72

…

15. Thus, while it can be said that this Court has recognised someexceptions to the rule of alternative remedy i.e. where thestatutory authority has not acted in accordance with theprovisions of the enactment in question, or in defiance of thefundamental principles of judicial procedure, or has resorted toinvoke the provisions which are repealed, or when an order hasbeen passed in total violation of the principles of natural justice,the proposition laid down in Thansingh Nathmal case[22], TitaghurPaper Mills case[4] and other similar judgments that the HighCourt will not entertain a petition under Article 226 of theConstitution if an effective alternative remedy is available to theaggrieved person or the statute under which the actioncomplained of has been taken itself contains a mechanism forredressal of grievance still holds the field. Therefore, when astatutory forum is created by law for redressal of grievances, awrit petition should not be entertained ignoring the statutorydispensation.”

Recently, in Authorised Officer, State Bank of Travancore &Anr. v. Mathew K.C.[23], the principles laid down in Chhabil DassAgarwal[2] were reiterated as under:

“The discretionary jurisdiction under Article 226 is not absolutebut has to be exercised judiciously in the given facts of a caseand in accordance with law. The normal rule is that a writpetition under Article 226 of the Constitution ought not to beentertained if alternate statutory remedies are available, exceptin cases falling within the well-defined exceptions as observedin CIT v. Chhabil Dass Agarwal[2] …”

16. We do not, therefore, find any infirmity in the approachadopted by the High Court in refusing to entertain the Writ Petition.The submission that once the threshold was crossed despite thepreliminary objection being raised, the High Court ought not to haveconsidered the issue regarding alternate remedy, may not be correct.The first order dated 25.01.2017 passed by the High Court did recordthe preliminary objection but was prima facie of the view that the 22 AIR 1964 SC 141923 (2018) 3 SCC 85

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Atransactions defined in Section 115QA were initially confined only tothose covered by Section 77A of the Companies Act. Therefore,without rejecting the preliminary objection, notice was issued in thematter. The subsequent order undoubtedly made the earlier interimorder absolute. However, the preliminary objection having not beendealt with and disposed of, the matter was still at large.B

In State of U.P. v. U.P. Rajya Khanij Vikas Nigam SangharshSamiti and others[24]this Court dealt with an issue whether afteradmission, the Writ Petition could not be dismissed on the ground ofalternate remedy. The submission was considered by this Court asunder:C

“38. With respect to the learned Judge, it is neither the legalposition nor such a proposition has been laid down in SureshChandra Tewari[25] that once a petition is admitted, it cannot bedismissed on the ground of alternative remedy. It is no doubtcorrect that in the headnote of All India Reporter (p. 331), it isDstated that “petition cannot be rejected on the ground ofavailability of alternative remedy of filing appeal”. But it has notbeen so held in the actual decision of the Court. The relevantpara 2 of the decision reads thus: (Suresh Chandra Tewari case,AIR p. 331)

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“2. At the time of hearing of this petition a threshold question,as to its maintainability was raised on the ground that theimpugned order was an appealable one and, therefore, beforeapproaching this Court the petitioner should have approached theappellate authority. Though there is much substance in theFabove contention, we do not feel inclined to reject thispetition on the ground of alternative remedy having regardto the fact that the petition has been entertained and aninterim order passed.”

(emphasis supplied)

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Even otherwise, the learned Judge was not right in law. True itis that issuance of rule nisi or passing of interim orders is a relevantconsideration for not dismissing a petition if it appears to the High Courtthat the matter could be decided by a writ court. It has been so held 24 (2008) 12 SCC 675

25 AIR 1992 All 331 (Suresh Chandra Tewari vs. District Supply Officer)

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even by this Court in several cases that even if alternative remedy isavailable, it cannot be held that a writ petition is not maintainable. Inour judgment, however, it cannot be laid down as a proposition of lawthat once a petition is admitted, it could never be dismissed on the groundof alternative remedy. If such bald contention is upheld, even this Courtcannot order dismissal of a writ petition which ought not to have beenentertained by the High Court under Article 226 of the Constitution inview of availability of alternative and equally efficacious remedy to theaggrieved party, once the High Court has entertained a writ petitionalbeit wrongly and granted the relief to the petitioner.

17. We do not, therefore, find any error in the approach of andconclusion arrived at by the High Court. It is relevant to mention thatthe concessions given on behalf of the Revenue as recorded in thedirections issued by the High Court also take care of matters ofprejudice, if any. Consequently, the appellant, as a matter of fact, willhave a fuller, adequate and efficacious remedy by way of appeal beforethe appellate authority.

18. Certain issues raised during the course of hearing touchingupon the aspects whether the appellant is liable under Section 115QAof the Act or whether the transaction of buy back of shares in thepresent matter would come within the statutory contours of said Section115QA or not, are issues which will be gone into at the appropriatestages by the concerned authorities; and as such we have refrainedfrom dealing with those issues.

19. In the circumstances we find that the judgment and orderunder appeal does not call for any interference. This appeal is, therefore,dismissed. No costs.

20. Needless to say that the appeal preferred by the appellanton 30.08.2019 shall now be proceeded with in accordance with law.

Kalpana K. Tripathy

Appeal dismissed.

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