IN HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 7909/2019 & CM Appl. No. 32777/2019 (interim relief) M/S DABUR INVEST CORP Petitioner Through: Mr. M.P. Rastogi, Mr. Rohit Jain, Mr. K.N.Ahuja, Mr. Aniket D. Agrawal, Ms. Kannopriya Gupta &Mr.Manu K. Giri, Advocates versus ADDL. COMMISSIONER OF INCOME TAX & ANR. Respondents Through: Mr. Raghvendra Singh, Sr. Standing counsel & Mr. Vipul Agrawal, Junior standing counsel CORAM: JUSTICE S. MURALIDHAR JUSTICE TALWANT SINGH ORDER 31.07.2019 Dr. S. Muralidhar, J.: 1. This is petition by M/s Dabur Invest Corp, questioning order dated 15th January, 2019 passed by Additional Commissioner of Income Tax Special Range-16 (Respondent No.1) under Section 281-B of Income Tax Act, 1961 ( Act ) ordering assets of Petitioner mentioned in order to be kept under provisional attachment for period of six months. challenge is also to order dated 19th June, 2019 passed by Respondent No. 1 declining to stay demand and release bank accounts and other assets from attachment. W.P.(C) 7909/2019 Page 1 of 13 2. Petitioner, partnership firm, entered into joint venture agreement on 7th August, 2001 with M/s Commercial Union International Holdings Ltd. ( CUIH ), company incorporated in England and Wales for co- promoting joint venture company. Petitioner was to subscribe 74% total paid up equity capital of JV company and CUIH had to subscribe balance 26%. JV company was to be promoted as private limited company for carrying on business of insurance, subject to statutory and regulatory approvals. 3. In terms of agreement refundable option price was receivable by Petitioner. This was permitted by Reserve Bank of India. On this basis, company known as Aviva Life Insurance Company India Limited ( Aviva ) was promoted by JV parties. In terms of Clause 16 of agreement, on payment of option price Petitioner granted CUIH rights during ten-year period to acquire such number of shares held by Petitioner to enable shareholding of CUIH to be maximum as permitted in law. sale consideration received by Petitioner, pursuant to such exercise of CUIH option or Petitioner s option would also be at market value per share. 4. Under Clause 16.9, after ten-year period if divestment of shares was to take place, CUIH would continue to pay option price on Petitioner s shares and rights/option of CUIH to require Petitioner to sell shares to CUIH would remain in force. According to Petitioner, in terms of change in Government policy, FIPB permitted CUIH by letter dated 18th March, 2016 to increase shareholding in Aviva from 26% to W.P.(C) 7909/2019 Page 2 of 13 49% by way of transfer of 23% shareholding then held by Petitioner for market value of Rs.940 crores subject to condition that investment would be made out of remittance of foreign exchange received through normal banking channels. Apart from FIPB approval for increase in shareholding of Aviva, company also got approval from IRDA. Petitioner states that in Assessment Year (AY) 2017-2018 it disclosed long-term capital gain on sale of 23% stake in Aviva. 5. Petitioner states that returns filed for AYs 2005-06, 2006-07, 2008-09, 2011-2012, 2013-2014 and 2014-2015 were picked up for scrutiny and assessments were completed under Section 143 (3) of Act. Petitioner states that along with returns, copies of Annual Accounts were filed. In notes on accounts, Petitioner had disclosed about JV and had also disclosed that interest paid on borrowed funds for acquisition of shares had been capitalized and included in cost of investment. In notes, disclosure was also made about receipt of option money from CUIH. It was stated that adjustments would be made at time of reduction of shareholding in Aviva. 6. Petitioner states that during course of assessment proceedings, Assessing Officer (AO) raised query about JV. Copies of JV agreements were made available to AO from time to time. For first time, while framing assessment for AY 2015-2016, by order dated 31st December, 2017 AO, who succeeded earlier AO, was of view that Petitioner s business is of investment and that because option price had been received by Petitioner year after year annually, it was W.P.(C) 7909/2019 Page 3 of 13 business income. As far as AYs 2013-2014 and 2014-2015 are concerned, Principal Commissioner of Income Tax (PCIT) (Respondent No.2) invoked jurisdiction under Section 263 of Act and directed AO to tax receipt of refundable option money in those years. 7. Based on conclusion arrived at in AY 2015-2016 by AO as well as observations/direction of PCIT for AYs 2013-2014 & 2014-2015, Respondent No.1 commenced re-assessment proceedings under Section 147 of Act for AYs 2011-2012, 2012 -2013 and 2016-2017 by issuing notice under Section 148 of Act. Pursuant thereto, AO completed assessment on income of Rs.250.07 crores, Rs.247 crores and Rs. 247.67 crores respectively against returned income of Rs. Nil, Rs. 0.08 crore and Rs. 0.45 crores respectively. Extra demands of tax in interest of sum of Rs.148.29 crores for 2011-2012, Rs.139.67 crores for 2012-2013 and Rs.103.22 crores for 2016-2017 were raised. 8. Against orders of re-assessment for AYs 2011-2012, 2012-2013 and 2016-2017 Petitioner preferred appeal before CIT (A). 9. It is pointed out that in AY 2017-2018 AO treated option money receipt (Rs.163 crores), as business receipt. AO also treated sum of Rs.940/- crores, being market value of 23% stakes sold to CUIH disclosed by Petitioner under head Long Term Capital Gains , as business receipt. Against demand of Rs.381.96 crores as tax and Rs.87.95 crores as interest for AY 2017-2018, Petitioner preferred appeal before CIT (A). W.P.(C) 7909/2019 Page 4 of 13 10. During pendency of assessments for AYs 2011-2012, 2012-2013, 2016-2017 & 2017-2018 Respondent No.1 decided to invoke powers under Section 281-B of Act by order dated 15th January, 2019 and attached all assets of Petitioner including investments made in form of shares of Aviva and all bank accounts. According to Petitioner this left no business assets with Petitioner and its business had come to complete stand still on account of said impugned order. 11. Representations against above order were made by Petitioner to Respondent No.1 in January, February and March, 2019. In petition dated 5th March, 2019, Petitioner offered encashment of FDR of Rs.163.5 crores with Standard Chartered Bank and also requested to adjust sum of Rs.152.22 crores, being 20% of demand in above years. Petitioner also sought refund of balance of Rs.11.28 crores. 12. On 29th March, 2019 Petitioner further made representation to AO for vacation of impugned order and for release of bank accounts, which had stood attached by order dated 15th January, 2019. It was pointed out that assessment had already been completed in February, 2019 and that further order passed under Section 263 of Act for AYs 2013-2014 and 2014-2015 had already been quashed by ITAT by order dated 11th March, 2019. Petitioner in same letter also objected to action under Section 226 (3) of Act by Respondent No.1 and withdrawal of Rs.164.87 crores from Standard Chartered Bank and Rs.20.16 lakh from HDFC Bank without intimation to Petitioner. W.P.(C) 7909/2019 Page 5 of 13 13. On 29th March, 2019 Petitioner filed stay application before Respondent No.1 under Section 220 (6) of Act. This was rejected by Respondent No.1 by second impugned order dated 19 th June 2019. This led to filing of present petition. 14. In meanwhile, ITAT disposed of appeals for AYs 2013-2014 and 2014-2015 by common order dated 11th March, 2019 holding that option money received in terms of JV Agreement was refundable money, linked with capital contribution made by Petitioner by investing in shares of Aviva for acquisition of controlling stakes in company. According to Petitioner, as result of above order of ITAT for AYs 2013-2014 and 2014-2015 tax paid by Petitioner in sum of Rs.79 crores (39 + 40 crores) became refundable. 15. As far as AY 2015-2016 is concerned, Petitioner filed appeal before ITAT which stayed demand for six months by order dated 2nd January, 2019. It is pointed out by Petitioner that stay granted by ITAT was conditional upon parties not seeking any adjournment in appeal. Further in W.P. (C) 4094 of 2019 filed by Revenue in this Court challenging aforementioned interim order of ITAT, this Court while declining to interfere by its order dated 30th May 2019, desired that appeal be disposed of expeditiously. It fixed 3rd June 2019 as date on which appeal would be listed before ITAT. According to Petitioner, despite said order Respondents sought adjournment before ITAT. W.P.(C) 7909/2019 Page 6 of 13 16. present petition was listed first on 23rd July, 2019 and following order was passed: 2. Notice. Notice is accepted by learned counsel for Respondents. 3. Petitioner has challenged provisional attachment order dated 15th January 2019, which by subsequent communication dated 8th July 2019 of Respondents addressed to Petitioner, has been continued notwithstanding completion of assessments for Assessment Years (AYs ) 2011-12, 2012-13, 2016-17 and 2017-18. 4. Counsel for Petitioner points out that impugned order has rejected Petitioner's application for stay pending consideration of Petitioners appeals before CIT(A) for above AYs. He has placed before Court chart showing that tax amounts already paid for said AYs constitute 26%, 39%, 46% and 48% of demand respectively. 5. Learned counsel for Petitioner further points out that for two of AYs i.e. 2013-14 and 2014-15, Assessee has succeeded before ITAT and Revenue's appals against order dated 11th March 2019 of ITAT are pending in this Court. He submits that for said two AYs, refund of Rs.79 crores de hors interest is due to Assessee and he is willing for adjustment of entire refund amount +interest against demand for AYs in dispute. He points out that Respondents have nevertheless proceeded to freeze all accounts of Petitioner making it impossible for it to function. 6. Learned counsel for Respondents states that he will have to seek instructions. List on 30th July 2019. 17. Mr. M.P. Rastogi, learned counsel for Petitioner, points out that attachment of all of assets of Petitioner during pendency of W.P.(C) 7909/2019 Page 7 of 13 assessment proceedings and its continuation even after completion of assessment, was totally illegal and contrary to Section 281-B of Act. power had been exercised unreasonably. It was submitted that once final assessment was framed and actual tax demand crystallised, it would serve no purpose in continuing with provisional attachment under Section 281-B of Act. This was only meant to protect interest of revenue during pendency of assessment proceedings and prior to determination of final tax demand. Reliance is also placed on decision of Punjab and Haryana High Court in Motorola Solutions India Pvt. Ltd. v. CIT (2013) 212 Taxman 35 (P&H). 18. Mr. Rastogi placed before Court document showing status of demands and recoveries made from Petitioner for AYs 2011-12, 2012-2013 and 2016-2017, 2017-2018. said table reads as under: Status of Demand & Collection Assessment Demand Demand Percentage Demand Year raised in Collected of demand collected in Assessment collected Excess of 20% (Rs. in Cr.) (Rs. in Cr.) (Rs. in Cr.) 2011-12 1,48,28,97,270 20,31,02,454 13.70% (9,34,77,000) 2012-13 1,39,66,96,560 30,00,00,000 21.48% 2,06,60,688 2016-17# 115,54,57,517 35,00,00,000 30.29% 11,89,08,497 2017-18 469,90,79,420 99,87,90,999 21.26% 5,89,75,115 Total 873,41,30,767 185,18,93,453 21.20% 10,50,67,300 19. This Court was informed by Mr. Raghvendera Singh, learned counsel for W.P.(C) 7909/2019 Page 8 of 13 Revenue that when petition was first heard on 30th July, 2019 two of accounts of Petitioner have been de-frozen. matter was then kept today for hearing. 20. Mr. Rastogi, learned counsel for Petitioner, pointed out that while two accounts had been de-frozen, remaining bank accounts of Petitioner remained frozen. Petitioner had been pushed to financially precarious situation. His submission was that Respondents having already collected over Rs.185 crores, there was no justification for them to continue to invoke powers under Section 281-B of Act. 21. above submissions have been considered. Section 281-B (1) and (2) of Act read as under: Provisional attachment to protect revenue in certain cases. 281B. (1) Where, during pendency of any proceeding for assessment of any income or for assessment or reassessment of any income which has escaped assessment, Assessing Officer is of opinion that for purpose of protecting interests of revenue it is necessary so to do, he may, with previous approval of Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, by order in writing, attach provisionally any property belonging to assessee in manner provided in Second Schedule. 2) Every such provisional attachment shall cease to have effect after expiry of period of six months from date of order made under sub-section (1): Provided that Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, W.P.(C) 7909/2019 Page 9 of 13 Principal Director General or Director General or Principal Director or Director may, for reasons to be recorded in writing, extend aforesaid period by such further period or periods as he thinks fit, so, however, that total period of extension shall not in any case exceed two years or sixty days after date of order of assessment or reassessment, whichever is later. 22. One of essential conditions stipulated in Section 281-B (1) is that Assessing officer should form opinion that provisional attachment is necessary to protect interest of Revenue. In terms of Instruction No. F. No. 404/22/2004-ITCC, circumstances in which power under Section 281-B of Act should be used were explained, as under: To safeguard against any indiscriminate use, Board desires that provisions of Section 281B should be resorted to only in cases where there is reasonable likelihood of recovery becoming difficult due to inadequacy of assets. Where there are sufficient assets to cover demand, provisions of Section 281B should not be resorted to, except under exceptional circumstances warranting same, and after strictly complying with conditions incorporated in section 281-B. 23. perusal of impugned order does not indicate that AO formed opinion about reasonable likelihood of recovery becoming difficult due to inadequacy of assets of Petitioner. Even in terms of CBDT Circular No.179 dated 30th September, 1975 setting out purpose for insertion of Section 281-B of Act, it was explained as under:- This provision has been made in order to protect interests of revenue in cases where raising of demand is likely to take time because of investigations and there is apprehension that assessee may thwart ultimate collection of that demand. 24. impugned order does not talk of any time being taken for W.P.(C) 7909/2019 Page 10 of 13 completion of investigation. On other hand, as explained in Motorola Solutions India Pvt. Ltd. v. CIT (supra), once assessment is complete there would be no justification for continuing with order under Section 281-B of Act. following observations in said decision explain legal position: 9. plain reading of Section 281B of Act clearly spells out that Assessing Officer is empowered to pass order for provisional attachment to protect interests of revenue in certain cases during pendency of any proceeding for assessment of any income or for assessment or reassessment of any income which has escaped assessment. However, Assessing Officer is required to form opinion that same is necessary for purposes of protecting interests of revenue. according to aforesaid provision, during pendency of any assessment proceeding or proceedings in pursuance to reassessment that in order to safeguard interests of revenue, after recording reasons for same in writing and seeking approval from concerned authority, order for provisional attachment can be passed. 11. above circular clearly envisages that where during pendency of any proceeding for assessment or reassessment of any income, raising of demand is likely to take time due to investigations and there is apprehension that assessee may thwart collection of that demand, provisional attachment can be made. This supports interpretation that it is only till actual demand is created by passing assessment order that provisional attachment order will remain in operation. Another factor which deserves to be noticed relates to first Proviso to Sub-section (1) of Section 220 of Act where Assessing officer has been given authority to reduce full period of 30 days wherever he has reasons to believe that it would be detrimental to revenue by allowing full period of 30 days to deposit demand in terms of Section 220(1) of Act. Assessing officer is required to have previous approval of Joint Commissioner in this regard. Thus, there W.P.(C) 7909/2019 Page 11 of 13 are sufficient provisions in Act to safeguard interest of revenue in case Assessing Officer has apprehension that assessee by adopting extraneous method may thwart recovery of legitimate tax dues of State. . 13. In view of above, interpretation put by learned counsel for revenue that even after passing of assessment order, provisional attachment order shall still remain in force for six months, does not merit acceptance and is, thus, rejected. 25. Learned counsel for Respondent is unable to dispute that Respondents have already collected over Rs.185 crores from Petitioner, as against total demand raised of around Rs.873.4 crores. year-wise percentage of demand collected for years 2012-13, 2016-17 and 2017-18 is over 21%. 26. In circumstances Court sees no reason why attachment order under Section 281-B of Act should be allowed to continue. Likewise, attachment of two bank accounts of Petitioner under Section 226 (3) of Act also does not appear to be justified. 27. Court accordingly sets aside impugned order dated 19 th January, 2019 passed by Respondent No. 1 under Section 281-B of Act, thereby removing attachment of Petitioner s assets mentioned therein and in particular also removing attachment of bank accounts by Respondent No.1 in exercise of powers under Section 226 (3) of Act. 28. It is pointed out by learned counsel for Revenue that aggrieved by W.P.(C) 7909/2019 Page 12 of 13 order declining to stay demand, Petitioner has approached Principal CIT by way of petition, which is pending consideration. said petition may now be disposed of expeditiously, in accordance with law. 29. For aforementioned reasons, writ petition is allowed in above terms. No orders as to costs. pending application is disposed of. 30. Order dasti under signature of Court Master. S. MURALIDHAR, J. TALWANT SINGH, J. JULY 31, 2019 mw W.P.(C) 7909/2019 Page 13 of 13 Dabur Invest Corp v. Addl. Commissioner of Income-tax & Anr