DXN Herbal Manufacturing India (P) Ltd. vs ITO and Others

K. Mohan Ram, J.

When WP Nos. 9539 and 9540 of 2006 came up for admission today, Mrs. P.S. Pushya Sitaraman, learned senior counsel standing counsel for the Income Tax Department took notice for the respondents 1 and 2 herein.

Learned senior standing counsel submitted that WP No. 8619 of 2006 filed by the sixth respondent in WP Nos. 9539 and 9540 of 2006 is also connected with the above two writ petitions and in that writ petition, she had entered appearance and the same is also listed as Item No. 66 and all the writ petitions may be taken up for hearing.

Considering the narrow scope of the issue involved in all the three writ petitions, the learned senior counsel Mr. V. Ramachandran and learned senior standing counsel for Income Tax Department submitted that the writ petitions may be taken up for final disposal and accordingly, the writ petitions are taken up for final disposal.

The short facts that are necessary for disposal of these writ petitions as culled out from the affidavits filed in support of the writ petitions are as follows:

The case of the petitioner in these writ petitions is that in respect of the assessment year 2003-04, the petitioner filed return of income on 28-11-2003 claiming, relief u/s 80-IB. Since the income taxable u/s 143(3) was less than the book profit, the petitioner offered the book profit for assessment u/s 115JB. The first respondent made an assessment by order dated 10-2-2006 disallowing the claim of relief u/s 80-IB. The income was computed u/s 143(3) instead of section 115JB.

In respect of the assessment year 2004-05, the petitioner has filed its return of income on 21-10-2004. In the aforesaid return of income, the petitioner has claimed deduction u/s 80-IB of the Income Tax Act, insofar as the income derived by the petitioner relates to an undertaking manufacturing goods. Since the petitioner''s total income subject to deduction under Chapter VI-A of the Income Tax Act was below the statutory percentage, the petitioner was liable to tax on the basis of its book profits u/s 115JB and, accordingly, the petitioner has offered to be assessed on its book profits of Rs. 5,83,15,386. The return was processed u/s 143(1) and thereafter it was taken up for scrutiny u/s 143(2). The respondent completed the assessment u/s 143(3) on 10-2-2006. According to the computation of the respondent, the petitioner''s total income determined u/s 143(3) was above the statutory percentage applicable for section 115JB. The assessing authority determined the taxable income u/s 143(3) and raised a demand based thereon.

Being aggrieved by the abovesaid two assessments proceedings, the petitioner has filed appeals before the second respondent and the said appeals are still pending. According to the petitioner, after filing the appeals, the petitioner approached the first respondent u/s 220 of the Income Tax Act seeking not to be treated as an assessee-in-default and the said request was rejected. Therefore, the petitioner has filed applications before the second respondent seeking stay of collection of the disputed demand. Since the second respondent has neither taken up the said applications for hearing nor passed any orders thereon and in the meantime the first respondent has rejected the petitioner''s request for not being treated as an assessee-in-default but was threatened with recovery proceedings, the above writ petitions have been filed.

WP No. 8619 of 2006 :

The sixth respondent in WP Nos. 9539 and 9540 of 2006 is the petitioner in WP No. 8619 of 2006. The case of the petitioner in this writ petition is that in the course of its business operations, the petitioner has had regular transactions with the assessee M/s DXN Herbal Manufacturing (India) (P) Ltd. (petitioner in WP Nos. 9539 and 9540 of 2006). According to the petitioner, the amounts covered by such transactions are payable by them to the assessee M/s DXN Herbal Manufacturing (India) (P) Ltd., only in accordance with the normal commercial practice after the petitioner effects sales of the products even thereafter periodically. The petitioner was shocked to receive notice from the first respondent herein purporting to be u/s 226(3) of the Income Tax Act stating that a sum of Rs. 5,28,85,711 is due from M/s DXN Herbal Manufacturing (India) (P) Ltd. on account of Income Tax. The petitioner was required to pay to the first respondent forthwith any amount due from them or held by them for or on account of the said assessee upto the amount of arrears shown. The petitioner was also warned not to discharge any liability to the assessee after receipt of the notice.

According to the petitioner, they were informed by the petitioner in WP Nos. 9539 and 9540 of 2006 that the assessment had been made on them for the assessment years 2003-04 and 2004-05 and against the assessment order the appeals are pending before the Commissioner (Appeals)-VIII, Chennai (the second respondent in WP Nos. 9639 and 9540 of 2006).

In this writ petition, the petitioner has prayed for a writ of certiorari calling for the records in PAN/GIR No. AABCD4141M/16-D dated 20-3-2006 of the first respondent and to quash the same. The main contention in this writ petition is that notice u/s 226(3) is stated to relate to M/s DXN Herbal Manufacturing (India) (P) Ltd., and a copy thereof is endorsed to them and section 226(3) of the Income Tax Act requires that a copy of the notice shall be forwarded to the assessee at the last known address. But the same having not been done in this case, it would amount to violation of the statutory provisions. Further it is the case of the petitioner that no amount is due and payable by the petitioner to the said assessee either forthwith or as required by the respondent.

Heard both sides.

Learned senior standing counsel for the Income Tax Department submitted that no counter- affidavit is being filed by the revenue in view of the stand taken by the revenue. Learned senior standing counsel further submits that without going into the merits of the case appropriate direction may be issued to the appellate authority, namely the Commissioner (Appeals)-VIII, Chennai-34, to dispose of the stay applications said to have been filed by the petitioner in WP Nos. 9539 and 9540 of 2006 and if such direction is given it will take care of the issue involved in WP No. 8619 of 2006 also. Learned senior counsel Mr. V. Ramachandran also agreed for the same.

Learned senior standing counsel for the Income Tax Department submits that since a huge amount, viz., Rs. 5,28,85,711 is due from the assessee M/s. DXN Herbal Manufacturing (India) (P) Ltd., the assessee should be directed to deposit at least 20 per cent of the demand raised on them. Mr. V. Ramachandran, learned senior counsel for the assessee submitted that already a sum of Rs. 25,00,000 (Rupees twenty five lakhs only) has been realised/recovered by the Income Tax Officer and no further conditions may be imposed. But considering the huge amount of tax and interest demanded by the revenue from the assessee, I am of view that the assessee should be directed to make some substantial payment. Accordingly, the petitioner namely M/s. DXN Herbal Manufacturing (India) (P) Ltd. shall pay a sum of Rs. 25,00,000 (Rupees twenty five lakhs only) within a week from today and a further sum of Rs. 50,00,000 (Rupees fifty lakhs only) within three weeks from today. The second respondent namely Commissioner (Appeals)-VIII, Chennai-VIII, shall dispose of the stay petitions filed in the appeals filed by M/s. DXN Herbal Manufacturing (India) (P) Ltd., within a period four weeks from today. It is further directed that in the meantime the first respondent namely, the Income Tax Officer, Ward-I(i), D.P. Thottam, Muthialpet, Pondicherry-605 003, shall not take any coercive action in respect of the demand raised against the petitioner in WP Nos. 9539 and 9540 of 2006.

In view of the fact that the abovesaid directions passed in WP Nos. 9539 and 9540 of 2006 will also safeguard the interest of the petitioner in WP No. 8619 of 2006, no further direction need be passed in WP No. 8619 of 2006.

With the above directions, the writ petitions are disposed of. No costs, Consequently, connected WPMP Nos. 10562 to 10565 of 2006 and 9584 and 9585 of 2006 are closed.