Digitally Minal signed by Minal V. Parab V. Date: 2020.10.01 Parab 13:48:45 +0530 4_WPST5837_20.doc IN HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION (ST.) NO.5837 OF 2020 Vijaykumar Satramdas Lakhani Petitioner Vs. Central Board of Direct Taxes and another Respondents Ms. Ritika Agarwal a/w. Mr. Salman Balbale for Petitioner. Mr. Suresh Kumar for Respondents. CORAM : UJJAL BHUYAN & ABHAY AHUJA, JJ. DATE : SEPTEMBER 29, 2020 ORAL ORDER : (Per Ujjal Bhuyan, J.) Heard Ms. Ritika Agarwal, learned counsel for petitioner and Mr. Suresh Kumar, learned counsel for respondents. 2. By filing this petition under Article 226 of Constitution of India, petitioner has assailed legality and validity of order dated 03.04.2020 issued by first respondent under section 119 of Income Tax Act, 1961 as well as for quashing of decision of respondent No.2 dated 08.06.2020 rejecting application of petitioner for certificate under section 197 of Income Tax Act, 1961 (briefly Act hereinafter). 3. According to petitioner, he is partner in M/s. Lakhani Realty LLP. During previous year 2019-2020 corresponding to assessment year 2020-2021 petitioner earned salary income amounting to Rs.24,00,000.00 from limited liability partnership on which there is tax deduction at source (TDS). Petitioner incurred loss under head income from house property amounting to Rs.59,666.00. It is stated that petitioner had earned interest income from M/s. Lakhani Builders Private Limited amounting to Rs.4,82,80,790.00 besides other interest income of Rs.4,39,357.00. It is further stated that petitioner had also 1/14 4_WPST5837_20.doc paid interest amounting to Rs.4,86,55,285.00. Thus, after adjustment interest income is Rs.64,862.00. 4. On 26.02.2020, petitioner filed application in Form No.13 requesting respondent No.2 to issue certificate for non-deduction of tax under section 197 of Act on interest income received from M/s. Lakhani Builders Private Limited. Be it stated that respondent No.2 is competent authority under Act to verify application of petitioner for non-deduction of TDS and grant of certificate under section 197 of Act. 4.1. In connection with application, petitioner filed various details before respondent No.2 on 04.03.2020. Additional details were called for by respondent No.2, which were submitted by petitioner on 18.03.2020. 5. In meanwhile, because of outbreak of COVID-19 pandemic, Government of India declared lockdown in country with effect from 25.03.2020 by exercising powers under Disaster Management Act, 2005 and Epidemic Diseases Act, 1897. Initially lockdown was for 21 days. 5.1. Government of Maharashtra also issued notification dated 25.03.2020 imposing lockdown in entire state with effect from 25.03.2020 till 14.04.2020. 6. Petitioner has stated that as per central government order and state government notification imposing lockdown, any person found violating lockdown measures was liable to be proceeded against under Disaster Management Act, 2005 besides various penal provisions of Indian Penal Code. 7. lockdown was extended by Government of India upto 03.05.2020 vide order dated 15.04.2020 and by Government of 2/14 4_WPST5837_20.doc Maharashtra till 30.04.2020 vide notification dated 13.04.2020. 8. In view of unprecedented situation, Ministry of Law and Justice, Government of India issued ordinance called Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (briefly Ordinance hereinafter). As per section 3 of said Ordinance any time-limit specified in or prescribed or notified under any of Specified Acts, such as Income Tax Act 1961, falling within period from 20.03.2020 to 29.06.2020 or such other date after 29.06.2020 as may be specified by central government would stand extended to 30.06.2020 or to such other date after 30.06.2020 as may be notified by central government. 9. According to petitioner ignoring said Ordinance, respondent No.1 i.e., Central Board of Direct Taxes (CBDT) issued order dated 03.04.2020 under section 119 of Act as per which in case of pending applications for lower or nil rate of deduction of TDS under sections 195 and 197 of Act or applications filed by buyers / licensees / lessees under section 206-C(9) of Act, applicant shall intimate vide email concerned assessing officer about pendency of such application for financial year 2019-2020 whereafter assessing officer shall dispose off application by 27.04.2020 and communicate decision to applicant regarding issuance / rejection of certificate vide email. 9.1. Following such order dated 03.04.2020, respondent No.2 issued notice dated 10.04.2020 calling upon petitioner to submit certain additional details. It is stated that petitioner could not reply to said notice as second phase of lockdown was in place and his movements were restricted. This was also because details sought for were kept in office of petitioner which is separate from his residence. 9.2. When petitioner logged in to TDS Reconciliation Analysis 3/14 4_WPST5837_20.doc and Correction Enabling System (TRACES) on 30.07.2020, he found that status of his application was shown as rejected . 10. Aggrieved, present writ petition has been filed seeking reliefs as indicated above. 11. Contention of petitioner is that issuance of order dated 03.04.2020 by respondent No.1 was not justified in view of all pervasiveness of lockdown. That apart, said order has disregarded ordinance dated 31.03.2020. Rejection of application of petitioner is without furnishing any reasons and without granting proper and adequate opportunity of hearing to petitioner. 12. Respondent No.2 has filed reply affidavit. As narrated by respondent No.2, assessee i.e., petitioner had made online application on 27.02.2020 on TRACES portal requesting for certificate under section 197 of Act @ nil % on certain income received in financial year 2019-2020 on which TDS was sought to be deducted. Though application was filed on 27.02.2020, request was forwarded to TDS Circle, Thane. Ultimately, same was received in office of respondent No.2 who is jurisdictional assessing officer on 13.03.2020. On receipt of application, questionnaire was sent to petitioner online on 16.03.2020 to substantiate claim for nil deduction. Petitioner filed reply on 18.03.2020. 12.1. Reply of petitioner was found to be not satisfactory. Accordingly, further questionnaire was issued and clarification was sought for from petitioner on 20.03.2020. Petitioner did not reply to questionnaire. 12.2. Thereafter lockdown was declared in whole country by Government of India on 25.03.2020. Application of petitioner could not be processed on TRACES by 31.03.2020. 4/14 4_WPST5837_20.doc 12.3. On 03.04.2020, CBDT issued order to effect that in those cases where assessees had filed applications for lower or nil deduction of TDS for financial year 2019-20 timely and where those applications were pending, applicants should intimate by email concerned assessing officer about pendency of such applications and if required, to submit documents and evidence. In those cases, assessing officer was directed to dispose off such applications by 27.04.2020 with communication to concerned applicants regarding issuance / rejection of certificate vide email. above order of CBDT was given wide publicity in both print and electronic media and was available on official website of income tax department with contact details of all assessing officers. 12.4. Petitioner however did not file any such application electronically by email on or before 27.04.2020, which was extended limitation date for disposal of such application. Notice of respondent No.2 dated 10.04.2020 went unresponded. Since no application was filed by petitioner, his application became infructuous. When offices were opened in first part of June, 2020, same was filed as rejected on 08.06.2020. Petitioner was intimated accordingly. 12.5. In so far Ordinance is concerned, stand taken is that second proviso to sub-section (1) of section 3 thereof clearly stipulates that action contemplated under section 3 would not include payment of any amount as referred to in sub-section (2) of section 3. Therefore, it is contended that Ordinance does not extend due date of deduction or payment of TDS. 13. Contention of respondent No.2 is that in terms of order passed by CBDT, time limit for approving or rejecting such application which was till 31.03.2020 was extended till 27.04.2020. Since petitioner failed to avail benefit of extended period till 27.04.2020, application of petitioner became barred by limitation. 5/14 4_WPST5837_20.doc 14. Petitioner has filed rejoinder affidavit wherein it is contended that petitioner has questioned rejection of his application for lower / no TDS because there was no adjudication on application; rejection was without considering materials on record; and finally, before rejecting application, no opportunity of hearing was given to petitioner. 14.1. Regarding contention of respondent No.1, it is stated that petitioner could not furnish relevant documents in terms of questionnaire of respondent No.2 because details were voluminous which were available only in his office and with his chartered accountant. In view of lockdown, petitioner could not move out of his residential premises. Filing of application by petitioner and its pendency was already known to respondent No.2. That apart, it is contended that rejection was done after 27.04.2020 on 08.06.2020 which is illegal. 15. Respondent No.2 has filed further affidavit denying contention of petitioner that questionnaire sent from his office required furnishing of bulky details. It is stated that all applications pending as on 31.03.2020 on TRACES portal became infructuous on 31.03.2020. Only on re-opening of offices after easing of lockdown in month of June, 2020, applications could be technically closed / rejected on 08.06.2020. 15.1. Elaborating further respondent No.2 has stated that application under section 197 has to be ordinarily decided by 31 st March; in this case by 31.03.2020. Due to lockdown petitioner s application could not be processed by 31.03.2020. Hence, all applications for financial year 2019-20 filed on TRACES portal became infructuous on 31.03.2020. It was in that context that CBDT issued order dated 03.04.2020 to mitigate genuine hardship of tax payers who had timely filed applications for lower / nil deduction of income tax 6/14 4_WPST5837_20.doc certificates. By said order, time was extended till 27.04.2020 for concerned assessing officers to decide such applications. Only condition laid down by said order was that applicant should inform concerned assessing officer about pendency of application. 16. Ms. Agarwal, learned counsel for petitioner submits that issuance of order dated 03.04.2020 by respondent No.1 is contrary to Ordinance. When Ordinance had extended all limitations across board till 30.06.2020, there could not have been any justifiable reason for respondent No.1 to curtail extension of limitation period only till 27.04.2020. Respondent No.2 rejected application of petitioner without considering materials furnished by petitioner and without affording reasonable opportunity of hearing. Calling for further details from applicants and placing burden upon them to intimate jurisdictional assessing officer about pendency of their applications under section 197 of Act during lockdown was not at all justified. Petitioner cannot be penalised for non-compliance because of lockdown. She therefore submits that such decision may be interfered with and respondent No.2 may be directed to consider afresh application of petitioner for issuance of certificate under section 197 of Act on basis of materials on record and after hearing petitioner. 17. Per contra, Mr. Suresh Kumar submits that petitioner had initially made application before income tax authorities at Thane though respondent No.2 is jurisdictional assessing officer. Ultimately, application was received in office of respondent No.2 on 13.03.2020. Though petitioner had replied to initial queries of respondent No.2, same was found to be not satisfactory by respondent No.2. When limitation had expired on 31.03.2020, application of petitioner was pending. In meanwhile, lockdown was imposed in entire country. To mitigate genuine hardship of tax payers desirous of obtaining certificate under section 197, CBDT had stepped in and by order dated 03.04.2020 had extended limitation till 27.04.2020 for taking 7/14 4_WPST5837_20.doc decision on such application, only requirement being that applicants should inform jurisdictional assessing officer about pendency of their applications. In this connection, respondent No.2 had issued notice to petitioner on 10.04.2020. But petitioner did not respond to said notice. In such circumstances, respondent No.2 had no other option but to reject application of petitioner. When offices re-opened following relaxation of lockdown in first week of June, 2020, petitioner was informed about rejection of his application. He therefore submits that no illegality has been committed by respondent No.2 and consequently, no case for interference has been made out. 18. Submissions made by learned counsel for parties have received due consideration of Court. 19. At outset, we may advert to section 197 of Act which provides for certificate for deduction at lower rate. As per sub-section (1) of section 197, where in case of any income of any person or sum payable to any person income tax is required to be deducted at time of credit or as case may be, at time of payment at rates in force under provisions of section 192, etc., assessing officer is satisfied that total income of recipient justifies deduction of income tax at any lower rates or no deduction of income tax, as case may be, assessing officer shall on application made by assessee in this behalf give to him such certificate as may be appropriate. 19.1. As per sub-section (2), where any such certificate is given, person responsible for paying income shall, until such certificate is cancelled by assessing officer, deduct income tax at rates specified in such certificates or deduct no tax, as case may. 20. procedure for applying for certificate under section 197 and for grant of such certificate is provided in rules 28 and 28-AA of 8/14 4_WPST5837_20.doc Income Tax Rules, 1962. Rule 28 says that such application shall be made in Form No.13 electronically and rule 28-AA says that on such application being made if assessing officer is satisfied that existing and estimated tax liability of person justifies deduction of tax at lower rate or no deduction of tax, as case may be, assessing officer shall issue certificate in terms of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax. Sub-rule (2) mentions factors which are required to be taken into consideration while determining existing and estimated liability by assessing officer. 21. Having noted broad statutory framework regarding issuance of certificate for TDS either at lower rate or at nil rate, we may advert to facts of present case, though admittedly, there is no dispute as such on facts. Petitioner s application for certificate under section 197(1) was pending as on 31.03.2020. In meanwhile, lockdown was declared through out country. To mitigate hardship of tax payers, CBDT came up with order dated 03.04.2020 extending time limit for taking decision on such applications till 27.04.2020, only requirement being that concerned applicant should inform jurisdictional assessing officer about pendency of any application. Though respondent No.2 had issued notice to petitioner on 10.04.2020, petitioner did not or could not respond to same. extended time-limit having expired on 27.04.2020, petitioner s application was rejected as having been rendered infructuous. Decision to that effect could be recorded only on 08.06.2020 when offices reopened. 22. We may now advert to Ordinance issued on 31.03.2020. As per preamble to Ordinance, same was promulgated to provide relaxation in provisions of certain acts and for matters connected therewith or incidental thereto. It was mentioned that in view of spread of pandemic causing immense loss to lives of people, it had 9/14 4_WPST5837_20.doc become imperative to relax certain provisions including extension of time-limit in taxation and other laws. Since Parliament was not in session, it was mentioned that President was satisfied that circumstances exist rendering it necessary for him to take immediate action. Therefore, in exercise of powers conferred by clause (1) of Article 123 of Constitution of India, President was pleased to promulgate Ordinance. 22.1. Section 2 of Ordinance defines Specified Act to mean amongst others, Income Tax Act, 1961. Section 3 thereof deals with relaxation of certain provisions of Specified Acts. As per sub-section (1), where any time-limit has been specified in or prescribed or notified under Specified Acts which falls during period from 20.03.2020 to 29.06.2020 or such other date after 29.06.2020 as central government may by notification specify, for completion or compliance of such action such as completion of any proceeding or passing of any order or issuance of any notice, etc., or for filing of any appeal, reply or application or furnishing of any report, document, return, statement or such other record under provisions of Specified Acts and where completion or compliance of such action has not been made within such time then time limit for completion or compliance of such action shall notwithstanding anything contained in Specified Acts stand extended to 30.06.2020 or such other date after 30.06.2020 as central government may by notification specify. As per second proviso, it was mentioned that such action shall not include payment of any amount as is referred to in sub-section (2). Sub-section (2) provides that where any due date has been specified or prescribed or notified under Specified Acts for payment of any amount towards tax or levy falling within period from 20.03.2020 to 29.06.2020 or such other date after 29.06.2020 as may be notified by central government and such amount has not been paid within due dates but paid on or before 30.06.2020 or any later date notified by central government, rate of interest payable for period of delay shall not exceed three-fourth 10/14 4_WPST5837_20.doc percent for every month or part thereof and no penalty and prosecution shall be sanctioned for delay in payment. 23. Before dilating on provisions contained in section 3 of Ordinance, it needs to be mentioned that Ordinance has been promulgated in exercise of powers conferred by clause (1) of Article 123 of Constitution of India. Clause (1) says that if at any time except when both Houses of Parliament are in session, President is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such ordinances as circumstances appear to him to require. Clause (2) is relevant and it says that ordinance promulgated under Article 123 shall have same force and effect as Act of Parliament. However, procedure is laid down for placing such ordinance before both Houses of Parliament. 24. It is well settled that ordinance made by President is not executive act. Power to promulgate ordinance is legislative in nature. ordinance issued by President is as much law as Act passed by Parliament. President s power of legislation by ordinance is co- extensive with power of Parliament to make legislation. 25. Reverting back to section 3 of Ordinance, we find that as per said provision, all time-limits falling within period from 20.03.2020 to 29.06.2020 stood extended to 30.06.2020 by virtue of said Ordinance though extended limitation period could be further extended by central government by notification. Coming to contention of respondent No.2 about non-applicability of Ordinance to present case, for purpose of which he has relied upon second proviso to sub-section (1) of section 3, we find that said proviso excludes payment of any amount referred to in sub-section (2) from benefit of sub-section (1). Sub-section (2) says that where any due date has been specified or prescribed or notified for payment of any amount towards tax or levy falling within period from 20.03.2020 to 11/14 4_WPST5837_20.doc 29.06.2020 or such other date after 29.06.2020 as may be notified by central government and such amount having not been paid within such date but paid subsequently on or before 30.06.2020 or such other date after 30.06.2020 as may be notified by central government, then it would carry lower rate of interest with no penalty and prosecution. In our view, said provision cannot be invoked to justify rejection of application of petitioner for issuance of certificate under sub- section (1) of section 197 on ground of being barred by limitation. On contrary, as we have already noted earlier sub-section (1) of section 3 also provides for extension of limitation to 30.06.2020 or even beyond in case of furnishing of any reply, application, report, document, return, statement or such other record under provisions of Act which would cover case of petitioner. To make it more explicit, in that portion of sub-section (1) of section 3 preceding first proviso, it is clarified that such extension of limitation upto 30.06.2020 or even beyond would be notwithstanding anything contained in Specified Acts, in this case Income Tax Act. In other words, extension of limitation period as provided by Ordinance would have overriding effect over limitation provision contained in Income Tax Act for financial year relevant to assessment year 2020-21. 26. We may now refer to order dated 03.04.2020 passed by respondent No.1 under section 119 of Act. It says that due to outbreak of pandemic there is severe disruption in normal functioning of all sectors of economy including functioning of Income Tax Department. In such scenario, non-disposal of applications filed under sections 195, 197 and 206-C(9) of Act in timely manner may cause genuine hardship to applicants. In absence of certificates, payments may not be received. That apart, field officers were also having constraints in dealing with such applications in view of lockdown. Therefore, to mitigate hardship of assessees and buyers / licensees / lessees, directions were issued under section 119 of Act. As per paragraph 3 of order, in those cases where assessees 12/14 4_WPST5837_20.doc had timely filed applications and such applications were pending for disposal as on 03.04.2020, applicant should intimate vide email concerned assessing officer about pendency of such application furnishing evidence of filing of application. As per paragraph 4, assessing officer shall dispose off applications by 27.04.2020 and communicate to applicant regarding issuance / rejection of certificate vide email. 27. Though intention of order dated 03.04.2020 is beneficial to provide benefit to assessees who had made applications under section 197(1) of Act, in our view, same cannot be applied in manner which acts to disadvantage of applicants, particularly in view of extra-ordinary situation following outbreak of pandemic and declaration of lockdown. While timeline for taking decision on such applications was extended to 27.04.2020, additional burden was placed on applicants to inform concerned assessing officer about pendency of their application supported by documents and evidence. While many of assessees may have complied with said requirement, petitioner has failed to comply with said requirement. He has given reasons for same. According to him, because of strict imposition of lockdown, he could not venture out of his residence to retrieve required documents and information from his office as well as from office of his Chartered Accountant. In light of lockdown such explanation cannot be brushed aside or rejected as being flimsy or frivolous. This is more so in view of beneficial nature of order dated 03.04.2020. If application of petitioner was pending, same should or ought to have been reflected in system of respondent No.2 notwithstanding non-response of petitioner to notice dated 10.04.2020. On contrary, issuance of notice dated 10.04.2020 by respondent No.2 is itself indicative that he had knowledge about pendency of application of petitioner. If that be so then obligation placed on petitioner to inform respondent No.2 about pendency of application with proof stood obviated. In such 13/14 4_WPST5837_20.doc circumstances, application could not have been rejected as infructuous. In any event, when Ordinance was in place, which had effect of Act of Parliament, benefits conferred by Ordinance could not have been curtailed by order even though said order is passed by statutory authority under statute and for benefit of tax payers. 28. Considering above and having regard to extra-ordinary situation faced by country in view of pandemic and lockdown for which Ordinance had to be promulgated, simplicitor rejection of application of petitioner as having been rendered infructuous either on 31.03.2020 or on 27.04.2020 cannot be justified and is wholly unsustainable in law as well as on facts. 29. In view thereof, we set aside decision of respondent No.2 dated 08.06.2020 to reject application of petitioner and remand matter back to respondent No.2 for taking fresh decision on application of petitioner for issuance of certificate under sub- section (1) of section 197 of Act for assessment year 2020-21 on merit and in accordance with law within period of six weeks from date of receipt of copy of this order. 30. Writ petition is accordingly allowed. However, there shall be no order as to costs. 31. This order will be digitally signed by Private Secretary of this Court. All concerned will act on production by fax or email of digitally signed copy of this order. (ABHAY AHUJA, J.) (UJJAL BHUYAN, J.) Minal Parab 14/14 Vijaykumar Satramdas Lakhani v. Central Board of Direct Taxes and another