* IN HIGH COURT OF DELHI AT NEW DELHI Decided on: 29.03.2017 + W.P.(C) 2539/2017, C.M. APPL.10957-10958/2017 M/S. TELENOR (INDIA) COMMUNICATIONS PRIVATE LIMITED (EARLIER KNOWN AS M/S. TELEWINGS COMMUNICATIONS SERVICES PRIVATE LIMITED Petitioner Through: Sh. Balbir Singh, Sr. Advocate with Sh. Prakash Kumar, Ms. Rubal Maini and Ms. Rashmi Singh, Advocates. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 25(1), NEW DELHI AND ORS. Respondents Through: Sh. Sanjay Jain, ASG with Sh. Rahul Chaudhary, Sr. Standing Counsel, Ms. Lakshmi Gurung, Jr. Standing Counsel, Ms. Rhea Verma and Sh. Kartik Rai, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI MR. JUSTICE S. RAVINDRA BHAT % 1. petitioner s grievance is that this court s order in W.P.(C) 1874/2017 (decided on 1st March, 2017) has not been given effect to. It contends that Assessing Officer (hereafter AO , one of respondents arrayed in these writ proceedings) whilst seemingly giving effect to directions in that order, has deprived it of previous relief given by him. 2. petitioner had sought benefit of stay of recovery of demands for Assessment Year (AY) 2014-15, to tune of ` 4,18,13,06,110/- subject to its depositing ` 62,71,95,920/-. petitioner had relied on instructions of W.P.(C) 2539/2017 Page 1 of 13 Central Board of Direct Taxes embodied in its Office Memorandum (OM) dated 29.02.2016, to say that it was entitled to facility of stay of demand in excess of 15% in exceptions spelt out in Para 4B(b),which reads as under:- "(b) assessing officer is of view that nature of addition resulting in disputed demand is such that payment of lump sum amount lower than 15% is warranted (e.g. in case when addition on same issue has ken confirmed by appellate authorities in earlier years or decision of Supreme Court or jurisdictional High Court is in favour of assessees, etc.) - assessing officer shall refer matter to administrative Pr.CIT/CIT, who after considering all relevant facts shall decide quantum/proportion of demand to be paid by assessee as lump sum payment for granting stay of balance demand." 3. In its writ petition, petitioner had previously contended that AO had not considered top line credit adjustment which petitioner was previously reflecting in its books towards substantial services rendered till end of any financial year but for which contractual and legal liability to render services in respect of unutilized consideration subsisted. It was then argued that this amounted to substantial sum of about ` 220 crores. It was further argued, besides, that license fee adjustment on account of telecom policy in wake of Supreme Court's judgment in 2G Spectrum's case, amount set off i.e. ` 600 crores out of unutilized license fee for issuance of new Spectrum License in terms of policy. revenue's treatment of that amount as 'capital' is contested. petitioner also complained that AO had not taken into account refund standing to credit of petitioner to tune of about ` 27 crores. W.P.(C) 2539/2017 Page 2 of 13 4. After considering parties submissions, this court had disposed of petition, in terms of following operative order: 8. We have considered submissions of parties. impugned order dated 22.02.2017, undoubtedly, has given effect to OM, relied upon by petitioner in sense that demand has been stayed subject to substantial relief of 85%. However, circular - as noticed earlier and highlighted by petitioner also carved out expenditure in regard to certain "covered matters" or in regard to other contentious issues, condition of 15% pre-deposit can be relaxed. petitioner contentions in this regard are three fold. impugned order does not disclose whether AO had occasion to consider or examine these issues. In these circumstances, Court is of opinion that AO should consider and make order under Section 220(6) of Act specifically dealing with three arguments urged by petitioner and reflected in this order. AO shall pass appropriate orders in this regard, after giving such necessary opportunity to petitioner as he deems expedient in circumstances, with approval of competent officer i.e. concerned Principal CIT/Commissioner of Income Tax (Appeals), within two weeks from today. 9. In meanwhile, on instructions from concerned Assessing Officer Mr. Mandeep Panwar, who is present in Court, revenue would not take any coercive measures to enforce outstanding demand till such order is made. 10. writ petition along with pending application stands disposed off in above terms. 5. After remand by this court, AO made fresh order ( impugned order ) on 14th March 2017. In this, AO considered issue of stay virtually afresh and stated as follows: It is important to note that above stated paragraph of O.M. dated 26.02.2014 is not applicable in instance case of W.P.(C) 2539/2017 Page 3 of 13 assessee. assessee failed to provide any instance where addition on this issue has been deleted by appellate authorities in their own case or decision of Supreme Court or jurisdictional Hon'ble High Court is in favour of assessee. But assessee has quoted that in case of M/s. Shyam Telelinks Ltd. 2013 (31 Taxman.Com. 239) issue has been favorably covered by Hon'ble Delhi ITAT. issue related to unearned revenue remains contentious. Therefore, resulted demand on this issue shall remain unenforceable till disposal of appeal at first appellate authority. ************* ************* In light of above discussion, depreciation as claimed by assessee on increased cost of spectrum will remain non- enforceable till disposal of appeal at first appellate authority. (iii) Consideration of refund available for future years. Vide letter dated 10.03.2017 assessee submitted that following:- That Hon'ble High Court in its has directed that while passing fresh stay order, your goodself should consider & refund, as per return of income filed, aggregating to INR 27,93,09,100/- (A. Y.2016-17 INR 12,70,24,560/- and A.Y.2015-16 INR 15,22,84,540/-) due to company. In this regard it is pertinent to mention section 143(1D) which clearly says that following:- "Notwithstanding anything contained with sub section 1 processing of return shall not be necessarily, where notice has been issued to assessee under sub section (2)". W.P.(C) 2539/2017 Page 4 of 13 4. In light of above discussion processing of ITR for A.Y.2015-16 cannot be done as notice u/s 143(2) has already been issued to assessee. Vide notice dated 22.04.2016. ForA.Y.2016-17 CPC has not forwarded necessary ticket for processing of ITR. Hence, above mentioned refund cannot be taken under consideration for passing order u/s220(6) of Income Tax Act, 1961. 5. balance of addition to total income returned of assessee; particularly addition relating to capital gains is based on assessee own submission that amount is indeed in nature of capital receipts. There is no contrary decision of Hon'ble ITAT, Hon'ble High Court or Hon'ble Supreme Court. Neither this issue has been subject matter of considerations of earlier years in assessee own case. In view of above and for detailed reason recorded in assessment order additions will in all likelihood will stand test of judicial scrutiny. Accordingly, I do not find any reason for stay of demand attributable to addition on account of this issue. 6. Without prejudice to above it has also been reported in Media that they are in advance stage of negotiation with M/s.Bharti Airtel Ltd. for merger of assessee. 7. In view of above facts future existence and finances of assessee M/s. Telenor (India) Communication Pvt. Ltd. is highly uncertain. Hence, risk of recovery has increased. Therefore, to safe guard interest of revenue and in view of para 4(b)(a) of office memorandum issued by CBDT dated 29.02.2016. assessee is directed to make entire payment of adjusted demand of Rs. 2,30,24,19,520/- *********** ***************** W.P.(C) 2539/2017 Page 5 of 13 8. Total enforceable tax liability comes to Rs. 2,30,24,19,520/- in this refund claimed by assessee though not entitled comes to Rs.27.22Cr. even if this amount of refund is considered total adjusted tax liability comes to Rs.203 Cr, which is enforceable. Hence, assessee is directed to pay this amount in three equal installments on or before following dates . 6. petitioner is aggrieved by above order, and states that this amounts to review of previous order, which had clearly expressed revenue s opinion that relief of upto 85% stay of demand was warranted. court had remitted question of considering whether petitioner s plea for stay beyond 15% was warranted, having regard to provisions of OM, Para 4 (B) (b). court, in its previous order, dated 1st March, 2017 too felt that there was substantial merit in this regard and consequently directed AO to examine matter in light of facts to say whether and if so, to what extent such relief could be given. This, however, did not mean that AO was to be given complete relief, nor could it say that it was entitled to it as matter of right. It is submitted that AO exceeded scope of remand, inasmuch as impugned order has resulted in unfairly depriving benefit of previous order, which had required assessee paying only ` 62 crores. However, impugned order requires pre-deposit of ` 203 crores after adjusting ` 27 crores refund. 7. learned Additional Solicitor General (ASG) urged this court not to interfere with impugned order, which has examined each of issues that petitioner had grievance with, on account of additions made by AO, on its merits, to determine prima facie strength of case in appeal. mere fact that demand was based on high pitch assessment did not mean that assessees who are to pay tax due after valid assessment, are W.P.(C) 2539/2017 Page 6 of 13 to expect stay automatically, if demand is high. No doubt OM allows such discretion, but that has to be used judiciously. Having regard to overall circumstances of case, AO was justified in saying that important issues which assessee had complained of in its appeal justified demand for ` 220 crores; after adjusting ` 27 crores assessee had to pay ` 203 crores in three easy installments. ASG cautioned that this court s powers under Article 226 are circumscribed; unless there is illegality or procedural irregularity or unfairness in order, discretion used, - at least in facts of this case, cannot be faulted with, or reviewed on its merits. It was submitted that this court should not strictly construe OM as though it were statute, but consider whether broadly revenue adopts reasonable approach in its interpretation. As long as such reasonable and judicious approach is discernable, court should not interfere with discretion to grant or refuse, or grant conditional interim relief. 8. There is, in opinion of this court, considerable merit in petitioners grievance that after remit by this court, in its order of 1 st March, 2017, AO had to confine focus of his inquiry only and only to whether to grant relief in excess of 85% exemption from compliance with demand to pay tax. Now, court cannot go into merits of matter, since appeal is pending before Appellate Commissioner. However, what is apparent is that when AO made his first order, he was decidedly of opinion that petitioner/assessee was entitled to facility of paying 15% of amounted demanded, to secure stay of demand during pendency of its appeal. He granted that relief. petitioner wanted more, and contended that AO had overlooked three points and could well have invoked power to grant relief in excess of 85%, i.e could W.P.(C) 2539/2017 Page 7 of 13 have even completely absolved it of liability to pay anything towards tax demand, since its case fell within provision in concerned circular. 9. Central Board of Direct Taxes (CBDT) had previously issued instruction No. 1914 dated 02.12.1993. This was clarified by later instructions dated 21.03.1996. instruction contains guidelines issued by Board regarding procedure to be followed for recovery of outstanding demand including procedure for grant of stay of demand. Further instructions titled Office Memorandum (F.No.404/72/93-ITCC) dated 29.02.2016 were issued in order to streamline process of grant of stay. It is necessary to set out entire Office Memorandum for this matter turns essentially on our interpretation of it. It reads as follows:- "Office Memorandum F.No.404/72/93-ITCC], Dated 29-2-2016 Instruction No. 1914 dated 21-3-1996 contains guidelines issued by Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand. 2. In part 'C' of Instruction, it has been prescribed that demand will be stayed only if there are valid reasons for doing so and that mere filing of appeal against assessment order will not be sufficient reason to stay recovery of demand. It has been further prescribed that while granting stay, field officers may require assessee to offer suitable security (bank guarantee, etc.) and/ or require assessee to pay reasonable amount in lump sum or in instalments. 3. It has been reported that field authorities often insist on payment of very high proportion of disputed demand before granting stay of balance demand. This often results in hardship for taxpayers seeking stay of demand. W.P.(C) 2539/2017 Page 8 of 13 4. In order to streamline process of grant of stay and standardize quantum of lump sum payment required to be made by assessee as pre-condition for stay of demand disputed before CIT (A), following modified guidelines are being issued in partial modification of Instruction No. 1914: A) In case where outstanding demand is disputed before CIT (A), assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of disputed demand, unless case falls in category discussed in para (B) here under. (B) In situation where, (a) assessing officer is of view that nature of addition resulting in disputed demand is such that payment of lump sum amount higher than 15% is warranted (e.g. in case where addition on same issue has been confirmed by appellate authorities in earlier years or decision of Supreme Court or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in search or survey operation, etc.) or, (b) assessing officer is of view that nature of addition resulting in disputed demand is such that payment of lump sum amount lower than 15% is warranted (e.g. in case where addition on same issue has been deleted by appellate authorities in earlier years or decision of Supreme Court or jurisdictional High Court is in favour of assessee, etc.), assessing officer shall refer matter to administrative Pr. CIT/CIT, who after considering all relevant facts shall decide quantum/proportion of demand to be paid by assessee as lump sum payment for granting stay of balance demand. (C) In case where stay of demand is granted by assessing officer on payment of 15% of disputed demand and assessee is still aggrieved, he may approach jurisdictional W.P.(C) 2539/2017 Page 9 of 13 administrative Pr. CIT/CIT for review of decision of assessing officer. (D) assessing officer shall dispose of stay petition within 2 weeks of filing of petition. If reference has been made to Pr. CIT/CIT under para 4 (B) above or review petition has been filed by assessee under para 4 (C) above, same shall also be disposed of by Pr. CIT/CIT within 2 weeks of assessing officer making such reference or assessee filing such review, as case may be. (E) In granting stay, Assessing Officer may impose such conditions as he may think fit. He may, inter alia,- (i) require undertaking from assessee that he will cooperate in early disposal of appeal failing which stay order will be cancelled; (ii) reserve right to review order passed after expiry of reasonable period (say 6 months) or if assessee has not co- operated in early disposal of appeal, or where subsequent pronouncement by higher appellate authority or court alters above situations; (iii) reserve right to adjust refunds arising, if any, against demand, to extent of amount required for granting stay and subject to provisions of section 245." 10. No doubt, AO has discretion of referring matter to CIT if he is of opinion that assessee s case in any given matter, deserves consideration for relief beyond mandated 15% pre-deposit: evident from phrase assessing officer is of view that nature of addition resulting in disputed demand is such that payment of lump sum amount lower than 15% is warranted (e.g. in case where addition on same issue has been deleted by appellate authorities in earlier years or decision of Supreme Court or jurisdictional High Court is in favour of assessee, etc.) . In present case, no doubt AO did not in first W.P.(C) 2539/2017 Page 10 of 13 instance so refer matter to higher official; however, this court s order had clearly stated that issue with respect to such relief should be reconsidered. If AO felt constrained by terms of circular, he could have sought clarification; at worst, he could have referred matter to Commissioner, if he thought that he did not have power to grant such relief. What he could not have done was to revisit entire issue as to whether relief to extent of 85% waiver of demand deposit could be given. This is for reason that previous order, whereby that relief was given, clearly took note of relevant facts and granted benefit to assessee, as can be seen from following extract (of AO s previous order dated 22.02.2017): Considering facts and circumstances of case and CBDT's instruction dated 22-2-2016 which modified existing instruction no. 1914 dated 21-03-1996 to provide that where appeal against assessment order is pending with first appellate authority AO shall grant stay of demand till disposal of appeal, if assessee has deposited 15% of outstanding demand. In your case demand for A.Y. 2014- 15 of Rs.4,18,13,06,110/- will be stayed till disposal of appeal by CTT(A) subject to payment of 15% of demand i.e. Rs.62,71,95,920/-. This is subject to following conditions 11. order of this court did not set aside above order of AO and direct him to look into matter afresh. What it did require him to do was to exercise discretion and consider whether further relief could be granted. scope of remand by higher court or authority limits and correspondingly circumscribes jurisdiction of lower authority exercising its powers. This was explained in Supreme Court judgment reported as Nainsingh v Koonwarjee AIR 1997 SC 997 in following words: W.P.(C) 2539/2017 Page 11 of 13 first appellate court reversed findings of trial court on those issues. It came to conclusion that civil court had jurisdiction to entertain suit. It further held that though in view of abolition of jagirs, suit properties had vested in State, it was for State to get itself impleaded if it is interested in this litigation and as State had not chosen to get itself impleaded, it was open to plaintiff to press suit. In view of those conclusions, appellate court set aside decree of trial court and remanded suit to trial court for deciding other issues left undecided. After remand, trial court negatived every one of contentions taken by defendants and decreed suit as prayed for. In appeal that decree was confirmed. In second appeal High Court of Madhya Pradesh agreed with trial court and appellate court on findings given on all issues excepting issue relating to effect of abolition of jagirs on suit. On that issue, it came to conclusion that in view of abolition of jagirs under Jagir Abolition Act, plaintiff had lost his title to suit properties and therefore he could not get decree for possession of suit properties. It rejected contention of plaintiff that that issue is concluded by decision of appellate court made before remand as same had not been appealed against. It opined that court had inherent power to consider correctness of that order. It accordingly allowed appeal and dismissed suit. High Court, in our opinion, erred in holding that correctness of remand order was open to review by it. order in question was made under rule 23, Order 41, Civil Procedure Code. That order was appealable under Order 43 of that Code. As same was not appealed against, its correctness was no more open to examination in view of s. 105 (2) of Code which lays down that where any party aggrieved by order of remand from which appeal lies does not appeal therefrom he shall thereafter be precluded from disputing its correctness. 12. In view of this position, court s view is that AO could not have revisited matter, as if there were fresh or open remand. court W.P.(C) 2539/2017 Page 12 of 13 notices that AO after rejecting assessee s claim for benefit (i.e beyond 85% waiver) directed payment of ` 203 crores after adjusting ` 27,93,09,100/- refund. This relief (of adjustment of ` 27,93,09,100/- refund) had not been considered in earlier order. In these circumstances, it is held that impugned order, to extent it reviewed previous order (dated 22nd February, 2017) cannot be sustained. relief granted (i.e adjustment of refund amount of `27,93,09,100/-) is, however, upheld. Accordingly, impugned order, to extent it reviewed previous order of 22nd February 2017 and directed payments of ` 62,71,95,920/- is set aside. However, to extent that it granted relief under Para (E) of instruction (which AO was within his rights to grant in terms of remand) is upheld. Therefore, assessee is directed to deposit balance amount, i.e. `34,78,86,820/- (` 62,71,95,920/- minus `27,93,09,100/-) within two weeks, which would be sufficient compliance of orders. 13. writ petition partially succeeds and is allowed in above terms, without any order as to costs. S. RAVINDRA BHAT (JUDGE) NAJMI WAZIRI (JUDGE) MARCH 29, 2017 W.P.(C) 2539/2017 Page 13 of 13 M/s. Telenor (India) Communications Private Limited (Earlier Known As M/s. Telewings Communications Services Private Limited v. Assistant Commissioner of Income-tax, Circle 25(1), New Delhi And Or