Delhi Financial Corporation vs Additional Commissioner of Income Tax

A.K. Sikri, J.—Rule D.B.

With the consent of the parties, matter is taken up for final disposal today itself. A short question for consideration is raised in the present petition.

The petitioner is a statutory body framed under State Financial Corporation Act and comes under the administrative control of the Government of NCT of Delhi. It is thus a State Public Sector Corporation. It filed its return for the assessment year 1997-98, which was assessed u/s 143(3) of the Income Tax Act. The assessment order was passed on 11-2-2000 raising a demand of Rs. 72,00,000. The petitioner filed an appeal there against to the CIT(A), which was allowed partially. However, thereafter on 6-8-2002, notice u/s 148 of the Act was issued to the petitioner for reopening the aforesaid assessment and re-assessment order was passed on 26-3-2004. At the same time, proceedings u/s 271(1)(c) were also initiated. The petitioner preferred an appeal before the CIT(A), which was partially allowed vide orders dated 25-10-2004. Against that order, the petitioner filed further appeal before the Income Tax Appellate Tribunal (hereinafter referred to as ''the Tribunal'') - Vide order dated 31-7-2008, the Tribunal refused to entertain this appeal on the ground that approval of the Committee of Secretaries of the Department (CoD) had not been obtained and while dismissing the appeal, the Tribunal gave liberty to the petitioner to seek revival of the said appeal in case the approval of CoD is granted at a future date. The petitioner, in these circumstances, made a request dated 12-11-2008 to the Deputy Secretary CoD for fixing a meeting for hearing to enable it to obtain approval. By a further communication dated 10-12-2008, the Deputy Secretary of the CoD informed the petitioner that since the petitioner is a public sector undertaking of the State Government and not a Central Government undertaking, as per the judgment of the Supreme Court, CoD approval is not required.

In these circumstances, the petitioner moved an application for revival of the appeal before the Tribunal. This application for revival has, however, been dismissed by the ITAT vide its order dated 29-5-2009 again reiterating that such an approval is required.

The question that falls for determination in the present case is as to whether such CoD approval is required or not. If it is required, CoD is under obligation to consider the request of the petitioner for approval inasmuch as because of non-grant of CoD approval, the appeal of the petitioner has been dismissed by the Tribunal. On the other hand, if such an approval, is not required, the Tribunal is under obligation to hear the appeal without any such approval.

We are, however, of the opinion that such an approval is needed and COD has the jurisdiction to entertain the request even in respect of State owned public sector enterprises. This aspect has been authoritatively determined by the Supreme Court in the case of Oil and Natural Gas Corporation Ltd. Vs. City and Indust. Dev. Corpn., Maharashtra and Others, . The similar issue came up before this Court in ITA No. 696/2008 and relying upon the aforesaid judgment of the Supreme Court, it was held as under:

The present appeal concerns a dispute between the Central Government, through the Department of Revenue, and a State Government Public Sector Undertaking.

We may note that the issue with regard to disputes and differences between Central Government and State Government entities is also required to be referred to a committee for approval before litigation comes to Court. This has been made clear by the Supreme Court in the case of Oil and Natural Gas Corporation Ltd. Vs. City and Indust. Dev. Corpn., Maharashtra and Others, The Supreme Court has specifically directed as under:

Considering the nature of the controversy which is recurring feature we direct that a committee be formed to sort out the differences between the Central Government and the State entities. The composition of such committee shall be as follows:

(1) The Cabinet Secretary of the Union;

(2) Chief Secretary of the State;

(3) Secretaries of the concerned departments of Union and the State;

(4) Chief Executive Officers of the concerned undertakings.

From the above, it is clear that the matters concerning disputes between Central Government and State Government entities are also to be cleared by the committee as directed to be constituted by the Supreme Court. We accordingly direct the appellant to approach the Cabinet Secretary who is the head of the said committee for a clearance before approaching this Court. In case the clearance is granted by the committee, the appellant/revenue would be at liberty to file a fresh appeal within 15 days of receiving the clearance. The appeal stands disposed of accordingly.

Ms. Avnish Ahlawat, learned Counsel appearing for the petitioner also submits that the proceedings initiated against the petitioner u/s 271(1)(c) be stayed in the meantime. Her submission is that as of today the petitioner is rendered remediless inasmuch as the appeal of the petitioner is not entertained by the Tribunal for want of approval by the COD and on the other hand, COD had taken the stand that such approval is not required. We find merit in the aforesaid submission of the learned Counsel for the petitioner. In these circumstances, we are of the opinion that proceedings u/s 271(1)(c) may continue and final order can also be passed by the Assessing Officer. However, for recovery of any amount in the said penalty proceedings, no coercive steps shall be taken during the pendency of the proceedings or for recovery of the amount after passing of the order, till the decision of the COD for the approval. In case the approval is granted, the effect of that would be the revival of the appeal and in that eventuality, the stay should continue till the decision of the appeal of the petitioner by the Tribunal.

In these circumstances, this writ petition is disposed of with liberty to the petitioner to move another application along with the copy of this order for grant of COD approval within 15 days and the COD shall take decision thereon within three months thereafter. No order as to cost.

Dasti to the Counsel for both the parties.