IN HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 5577/2018 and CM APPL. 21731/2018 (stay) GE ENERGY PARTS INC Petitioner Through Mr. Sachit Jolly & Mr. Aarush Bhatia, Advocates Versus DEPUTY COMMISSIONER OF INCOME-TAX & ANR. Respondents Through Mr. Ruchir Bhatia, Senior standing counsel for Revenue W.P.(C) 5580/2018 and CM APPL. 21735/2018 (stay) M/s. NUOVO PIGNONE Petitioner Through Mr. Sachit Jolly & Mr. Aarush Bhatia, Advocates Versus DEPUTY COMMISSIONER OF INCOME-TAX & ANR. Respondents Through Mr. Sagar Suri, Standing counsel & Ms. Lakshmi Gurung, Senior standing counsel for Income Tax Department W.P.(C) 5603/2018 and CM APPL. 21868/2018 (stay) M/s. GE JAPAN LTD. Petitioner Through Mr. Sachit Jolly & Mr. Aarush Bhatia, Advocates Versus W.P.(C) 5577/2018 & other connected matters Page 1 of 16 COMMISSIONER OF INCOME TAX-1 & ANR. Respondents Through Mr. Sagar Suri, Standing counsel & Ms. Lakshmi Gurung, Senior standing counsel for Income Tax Department + W.P.(C) 5633/2018 and CM APPL. 21995/2018 (stay) M/s. GE ENGINE SERVICES DISTRIBUTION LLC ..... Petitioner Through Mr. Sachit Jolly & Mr. Aarush Bhatia, Advocates Versus DEPUTY COMMISSIONER OF INCOME-TAX & ANR. ..... Respondents Through Mr. Ruchir Bhatia, Senior Standing counsel for Revenue CORAM: JUSTICE S. MURALIDHAR JUSTICE TALWANT SINGH ORDER % 20.08.2019 Dr. S. Muralidhar, J.: 1. These are four petitions arising out of common set of facts and they raise similar issues. They are accordingly being disposed of by this common judgment. 2. In all these petitions challenge is laid to penalty orders dated 26 th April, 2018 passed by Deputy Commissioner of Income Tax, Circle 1 (3) (1), International Taxation, New Delhi (Respondent No.1) under Section 271(1) W.P.(C) 5577/2018 & other connected matters Page 2 of 16 (c) of Income Tax Act, 1961 (Act) levying penalty at 100% of tax sought to be evaded. 3. For sake of convenience facts in WP(C) No. 5577/2018 are discussed in detail. Petitioner M/s GE Energy Parts Inc. (GEPI) is company incorporated in United States of America (USA). It is also tax resident of USA. GEPI is engaged in business of manufacture and offshore sale of highly sophisticated equipment such as gas turbine parts and sub-assemblies. GEPI states that it sells its products offshore on principal to principal basis to customers all over world, including those in India. It is stated that title to goods sold to Indian customers passes from GEPI outside India. 4. On 2nd March, 2007 survey under Section 133 of Act was conducted at Liaison Office of General Electric International Operations Company Inc. ( GEIOC ) at New Delhi. Based on above survey, by order dated 27th March, 2018 Assessing Officer (AO) initiated re- assessment proceedings of GEPI for Assessment Years (AYs) 2002-03 to 2006-07 by issuing notices under Section 148 of Act. Subsequently by order dated 30th December, 2008 AO completed assessment proceedings under Section 147 read with 143 (3) of Act holding that GEPI had fixed place of Permanent Establishment (PE) and dependent agent PE ( DAPE ) in India. AO deemed 10% of value of supplies made to clients in India as profits arising out from such supplies and attributed 35% of such profit to GEPI s PE in India. In essence, AO attributed 3.5% of total value of supplies made by GEPI to customers in W.P.(C) 5577/2018 & other connected matters Page 3 of 16 India, as income of GEPI. Simultaneously AO also initiated penalty proceedings against GEPI under Section 271(1) (c) of Act for aforementioned AYs. 5. Aggrieved by above assessment order dated 30th December 2018, GEPI filed separate appeals before Commissioner of Income Tax (Appeals) [CIT (A)]. By order dated 30th September, 2010 CIT (A) upheld order of AO in so far initiation of proceedings under Section 147/148 of Act, existence of PE and attribution of income were concerned. However, appeal was allowed on issue of levy of interest under Section 234 B of Act. 6. For AY 2007-2008 return of GEPI was selected for scrutiny. AO passed draft order which was challenged before Dispute Resolution Panel (DRP). draft assessment order was upheld by DRP and subsequently, final assessment order for AY 2007-2008 was passed by AO on 13th October, 2010. AO initiated penalty proceedings under Section 271(1) (c) for said AY as well. 7. Aggrieved by orders of CIT (A) and DRP, GEPI preferred appeals before ITAT. By order dated 27th January, 2017 following its decision of even date in case of GE Energy Parts (GEEP) for AY 2001- 2002, ITAT disposed of appeals filed by GEPI upholding order of AO and CIT (A) except lowering rate of attribution of profit from 35% to 26%. W.P.(C) 5577/2018 & other connected matters Page 4 of 16 8. Pursuant to above order of ITAT passed on 27th January, 2017 Respondent No.1 issued penalty Show Cause Notice ( SCN ) dated 16 th February, 2017 requesting GEPI to appear before him on 27th February, 2017 and to show cause as to why penalty should not be levied for subject AYs under Section 271(1) (c) of Act. In response to said SCN, GEPI filed reply dated 27th February, 2017 inter-alia raising objection that said notice was barred by limitation in terms of Section 275 (1) (a) of Act. In other words it was contended by GEPI that since order levying penalty was not passed within six months of receipt by Revenue of order of ITAT, penalty SCN was time barred. 9. Meanwhile, aggrieved by order dated 27th January, 2017 of ITAT, GEPI filed separate appeals for said AYs in this Court under Section 260-A of Act on 11th August, 2017. These appeals being ITA Nos. 674/2017, 675/2017, 677/2017, 629/2017, 628/2017 & 671/2017 were for AYs 2002-2003, 2003-2004, 2004-2005, 2005-2006, 2006-2007 & 2007- 2008 respectively. said appeals are stated to be pending. 10. Respondent No.1 on 22nd May, 2017 passed separate orders under Section 254/143(3) of Act for aforementioned AYs giving appeal effect to order dated 27th January, 2017 of ITAT. 11. On 19th September, 2017 Respondent No.1 issued separate penalty SCN to GEPI for AY 2001-2002 requesting them to appear before him on 26th September, 2017 to show cause as to why penalty should not be levied under Section 271(1) (c) of Act. W.P.(C) 5577/2018 & other connected matters Page 5 of 16 12. Pursuant to above SCN, Respondent No.1 on 19th September, 2017 passed penalty order stating that order dated 27 th January, 2017 passed by ITAT in quantum appeal was received by Respondent No.1 on 18th April, 2017. 13. Thereafter, Respondent No.1 again issued another penalty SCN dated 16th November, 2017 seeking to levy penalty on GEPI under Section 271(1) (c) of Act for AYs 2002-2003 to 2006-2007. 14. In response to aforementioned SCNs GEPI filed two letters dated 15th February, 2018 and 28th February, 2018 again submitting that penalty proceedings were barred by limitation. 15. Thereafter, Respondent No.1 passed impugned penalty orders dated 26 th April, 2018 for aforementioned AYs. In said orders Respondent No.1 observed that order dated 27th January, 2017 passed by ITAT had been received in his office only on 1st November, 2017. 16. GEPI filed application under Right to Information Act, 2005 (RTI) before Central Public Information Officer (CPIO) of ITAT seeking to know when copy of order dated 27 th January, 2017 was in fact served upon Revenue. In response to said application, GEPI received reply dated 17th May, 2018 from CPIO of ITAT confirming that order dated 27th January, 2017 of ITAT was served on Commissioner of Income Tax (Judicial), [CIT (J)] on 17 th April, 2017. W.P.(C) 5577/2018 & other connected matters Page 6 of 16 17. Based on above fact, GEPI filed present petition seeking aforementioned reliefs. 18. facts in companion writ petitions by other group entities/ sister concerns of GEPI are more or less similar. They are WP(C) No. 5580/2018 (M/s. Nuovo Pignone v. Deputy Commissioner of Income Tax & Anr.), WP(C) No. 5603/2018 (M/s. GE Japan Limited v. Commissioner of Income Tax-1 and Anr.) and WP(C) No. 5633/2018 (M/s. GE Engine Services Distribution LLC v. Deputy Commissioner of Income Tax & Anr.) Each of them seeks similar reliefs challenging respective penalty orders dated 26th April, 2018 passed by Respondent No.1 in their cases under Section 271(1) (c) of Act, at maximum rate of 100% of tax sought to be collected. 19. These petitions were first listed for hearing in this Court on 23 rd May, 2018 when following order was passed: Issue notice, returnable on 1.8.2018. Notice is accepted on behalf of respondents. Counter-affidavit would be filed within four weeks. Rejoinder affidavit, if any, would be filed within four weeks, after service of counter-affidavit. Learned counsel for respondents has stated that judgment of Full Bench of this Court in Commissioner of Income Tax v. Odeon Builders (P) Ltd, [2017] 393 ITR 27(Del)(FB) has been challenged, but stay order has not been passed. petitioner has referred to several decisions of Delhi High Court in which writ' courts have interfered and set aside assessment W.P.(C) 5577/2018 & other connected matters Page 7 of 16 orders as barred by limitation, notwithstanding alternative statutory remedy. Till next date of hearing, no coercive steps for recovery would be taken on account of additions made. Without prejudice to rights and contentions of petitioner, petitioner would file appeals before Commissioner of Income Tax (Appeals). This observation/direction is being made, as learned counsel for petitioner has stated that statutory appeals have not been preferred. However, appeals would not be taken up for hearing till next date of hearing. Dasti. 20. aforementioned interim orders continue till date. 21. In response to notice issued in petitions, counter affidavit has been filed in each of petitions by Respondents. In counter affidavit filed in WP(C) No. 5577/2018, it is contended inter alia that efficacious statutory remedy is available to each of Petitioners against impugned penalty orders. Reference is made to decision in CIT v. Chhabil Dass Agarwal (2014) 1 SCC 603. 22. As regards plea that penalty orders are beyond period of six months from end of month in which order was received by CIT (A) in terms of Section 275 (1) (a) of Act, it is contended that limitation expired only on 30th May, 2018 since according to Respondents, order of ITAT was received by jurisdictional CIT W.P.(C) 5577/2018 & other connected matters Page 8 of 16 i.e. CIT International Taxation-1 only on 1st November, 2017. 23. It is pointed out by Respondents that reliance by Petitioners on decision of Full Bench of this Court in Commissioner of Income Tax v. Odeon Builders Private Limited (supra) is misplaced since that decision was in context of limitation for filing appeal under Section 260A (2) (a) of Act i.e. filing appeal in this Court against order of ITAT. However, in present case dispute regarding limitation was referable to Section 275 of Act and was in different context viz., levy of penalty. It is submitted that penalty order can be passed by jurisdictional AO which in this case is CIT, International Taxation [CIT (IT)]. Therefore, it is contended that such till time CIT (IT) receives copy of order of ITAT, period of limitation for initiating penalty proceedings does not commence. More or less same plea has been taken by Respondents in each of other petitions. 24. This Court has heard submissions of Mr. Sachit Jolly, learned counsel for Petitioners, Mr. Sagar Suri, learned standing counsel for Income Tax Department and Ms. Laxmi Gurung, learned senior standing counsel for Revenue. 25. consideration of above submissions has to begin with examination of Section 275(1) of Act which reads as under: Bar of limitation for imposing penalties. 275. (1) No order imposing penalty under this Chapter shall be passed W.P.(C) 5577/2018 & other connected matters Page 9 of 16 (a) in case where relevant assessment or other order is subject-matter of appeal to Commissioner (Appeals) under section 246 or section 246A or appeal to Appellate Tribunal under section 253, after expiry of financial year in which proceedings, in course of which action for imposition of penalty has been initiated, are completed, or six months from end of month in which order of Commissioner (Appeals) or, as case may be, Appellate Tribunal is received by Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later : Provided that in case where relevant assessment or other order is subject-matter of appeal to Commissioner (Appeals) under section 246 or section 246A, and Commissioner (Appeals) passes order on or after 1st day of June, 2003 disposing of such appeal, order imposing penalty shall be passed before expiry of financial year in which proceedings, in course of which action for imposition of penalty has been initiated, are completed, or within one year from end of financial year in which order of Commissioner (Appeals) is received by Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later; (b) in case where relevant assessment or other order is subject-matter of revision under section 263 or section 264, after expiry of six months from end of month in which such order of revision is passed; (c) in any other case, after expiry of financial year in which proceedings, in course of which action for imposition of penalty has been initiated, are completed, or six months from end of month in which action for imposition of penalty is initiated, whichever period expires later. W.P.(C) 5577/2018 & other connected matters Page 10 of 16 26. It is seen that more or less same expression Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as used in Section 260A of Act finds place in Section 275(1) (a). limitation begins to run on expiry of six months from end of month in which order of ITAT is received by any of above officers. 27. There are two periods of limitation within which penalty proceedings have to be completed. One is expiry of financial year in which proceedings in course of which action for imposition of penalty has been initiated are completed. second is expiry of six months from end of month in which order of ITAT is received by above officers. Whichever period expires later becomes limitation period for issuing order of penalty. title of Section 275 reads: limitation for imposing penalties . Section 275 (1) opens with line: no order imposing penalty under this chapter shall be passed thus, indicating mandatory nature of provision. 28. It is in above context that it becomes crucial to determine when exactly order of ITAT in present case was received by CIT. In Commissioner of Income Tax v. Odeon Builders Private Limited (FB) (supra), this Court specifically addressed issue of jurisdictional Commissioner having to receive order of ITAT for period of limitation to commence. This Court disagreed with Revenue s contention in that regard. It was specifically held in Para 50 as under: It is, therefore, not possible to accept submission that till W.P.(C) 5577/2018 & other connected matters Page 11 of 16 particular jurisdictional Commissioner of Income-tax or Principal Commissioner of Income-tax has not received order of Income-tax Appellate Tribunal, period of limitation for filing appeal against that order does not commence. 29. answers to following questions by Full Bench are relevant in present context as well: 51. . Q: (i) What is correct interpretation to be placed on expression "received by Assessee or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner" in Section 260A (2) (a) of Act? Does it mean 'received' by any of named officers including Commissioner of Income-tax (Judicial)? Ans: word received occurring in Section 260A (2) (a) would mean received by any of named officers of Department, including Commissioner of Income-tax (Judicial). provision at present names four particular officers i.e. Principal Commissioner, Commissioner, Principal Chief Commissioner, and Chief Commissioner of Income Tax. These are only designations of officers who could receive copy of order. In absence of qualifying prefix concerned , receipt of copy of order of ITAT by any of those officers in Department including Commissioner of Income-tax (Judicial) will trigger period of limitation. Q: (ii) Does limitation begin to run for purposes of Section 260A (2) (a) only when certified copy of order of ITAT is received by 'concerned' Commissioner of Income- tax within whose jurisdiction case of Assessee falls notwithstanding that it may have been received by any other Commissioner of Income-tax, including Commissioner of Income-tax (Judicial) prior thereto? Is it open to Court to read word 'concerned' into Section 260A (2) (a) of Act W.P.(C) 5577/2018 & other connected matters Page 12 of 16 as prefix to any of officers of Department named therein? Ans: In Section 260A (2) of Act, words Commissioner of Income-tax, Pr Commissioner of Income-tax or Chief Commissioner of Income-tax are not prefixed or qualified by word 'concerned'. There is no warrant for Court to read into provision such qualifying word. Court rejects contention of Revenue that limitation for purposes of Section 260A (2) (a) begins to run only when certified copy of order of ITAT is received by 'concerned' Commissioner of Income-tax within whose jurisdiction case of assessee falls notwithstanding that it may have been received by any other Commissioner of Income-tax, including Commissioner of Income-tax (Judicial) prior thereto. 30. It is seen in present case that SCN was issued to Assessee on 16th February, 2017 itself by AO under Section 271 (1) (c) of Act and this could not have happened if AO was not already aware of order of ITAT. appeal effect order passed on 22nd May, 2017 could not have been issued without copy of order of ITAT. Therefore, in any event, six-month period of limitation in terms of Section 275 (1) (a) of Act would begin to run from 22nd May, 2017. 31. On other hand, it is sought to be contended by Revenue that jurisdictional CIT i.e. CIT (IT) received copy of order only on 1st November, 2017 and therefore, period of limitation for purposes of Section 275 (1) (a) of Act did not begin till then. In support of this submission, reference is made to communication dated 1 st November, 2017 addressed by ITO, Judicial-II, to CIT (IT) simply enclosing copy of order of ITAT dated 27 th January, 2017. letter states that W.P.(C) 5577/2018 & other connected matters Page 13 of 16 ITO Judicial II received order only on 31st October 2017. It bears date stamp of 1st November, 2017 of office of CIT (IT) to show that it was received by CIT (IT) on that date. 32. claim that ITO, Judicial-II received copy of order dated 27th January 2017 of ITAT only on 31st October, 2017 contradicts fact that appeal effect was given to ITAT order by order dated 22nd May, 2017 itself which clearly meant that ITAT order was already available on that date. Further in replies received by Petitioner in response to application filed by it under RTI, CPIO has clearly stated that said order of Hon ble ITAT was dispatched by Registry of ITAT on 11th April, 2017 and received by office of CIT (Judicial) on 17th April, 2017. proof of service has also been enclosed to that letter. These facts have not been denied by Respondents. This Court is, therefore, unable to accept plea of ITO, Judicial-II that copy of order of ITAT was received only on 31 st October, 2017 and could, therefore, be sent to CIT (IT) only on 1st November, 2017. 33. If officer of Department is allowed to choose date on which copy of order which has to be given effect to or acted upon is sent to officer concerned, it will defeat very purpose for which legislature has stipulated definite time limits in various provisions of Act for authorities to perform their statutory tasks in time bound manner. In other words, mandatory period of limitation under Section 275 (1) (a) of Act cannot be sought to be defeated by delaying dispatch of relevant order of ITAT to concerned jurisdictional CIT. What is relevant is W.P.(C) 5577/2018 & other connected matters Page 14 of 16 when CIT (Judicial) representing Department before ITAT received order, which in any event is generally made available in public domain soon after order is pronounced. This is purport of decision of Full Bench of this Court in Commissioner of Income Tax v. Odeon Builders Private Limited (FB) (supra), ratio decidendi of which will apply to case on hand as well since language of Section 260 (1) and Section 275 (1) (a) of Act is identical. 34. result of above discussion is that impugned orders of penalty dated 26th April 2018 were issued far beyond six-month period of limitation in terms of Section 275 (1) (a) of Act and were, therefore, invalid. On date that said orders were issued, i.e. 26th April, 2018 they were without jurisdiction. 35. Consequently, this Court negatives objection of Respondents to maintainability of present writ petitions. In Commissioner of Income Tax v. Chhabil Das Agrawal (supra), Supreme Court took note of fact that normally existence of alternative remedy should discourage writ petitions under Article 226 of Constitution being entertained. However, as explained by Supreme Court in Whirlpool Corporation v. Registrar of Trademarks (1998) 8 SCC 1 there are exceptions to this rule one of which is that order under challenge is itself without jurisdiction. In present case impugned orders are, for reasons explained, clearly without jurisdiction. 36. For aforementioned reasons, writ petitions are allowed and W.P.(C) 5577/2018 & other connected matters Page 15 of 16 impugned orders dated 26th April, 2018 are hereby set aside. pending applications are disposed of. S. MURALIDHAR, J. TALWANT SINGH, J. AUGUST 20, 2019 mw W.P.(C) 5577/2018 & other connected matters Page 16 of 16 GE Energy Parts Inc v. Deputy Commissioner of Income-tax & Anr