Calcom Cement India Ltd. V. Union of India and Chief Commissioner of Income Tax and Assistant Commissioner of Income Tax

WP(C)/5629/2019

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In this case, Calcom Cement India Ltd. challenged notices issued by the Income Tax Department under Section 226(3) of the Income Tax Act, 1961, which directed them to pay a sum of approximately 54.34 crore to M/s Saroj Sunrise Pvt. Ltd. The payment was allegedly due to an income tax demand against M/s Saroj Sunrise Pvt. Ltd., for which Calcom Cement was found to owe a corresponding amount as per their financial statements. The petitioner argued that there was an ongoing dispute with M/s Saroj Sunrise Pvt. Ltd., pending before an Arbitration Tribunal, and thus, the Income Tax Department should not have invoked Section 226(3) until the dispute was resolved. The court, after hearing both parties, set aside the notices but allowed the Income Tax Authority to reissue them if necessary after the arbitration concluded.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 803733 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 11-12-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S C KEYAL
• Assessee Lawyers: A SARAF
• Keywords: Arbitration; Financial Dispute; Income tax demand; Section 226(3)
• Section: 226(3)

Judgement Text

"Page No.# 1/3 GAHC010185692019 THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : WP(C) 5629/2019 1:CALCOM CEMENT INDIA LTD. A COMPANY REGD. UNDER THE COMPANIES ACT, 1956 HAVING ITS REGD. OFFICE AT 3RD AND 4TH FLOOR, ANIL PLAZA II, ABC, G.S.ROAD, GHY-5, ASSAM AND IN THE PRESENT PROCEEDINGS REP. BY SRI SUNIL AGGARWAL,, THE EXECUTIVE DIRECTOR OF THE PETITIONER COMPANY VERSUS 1:UNION OF INDIA AND 2 ORS. REP. BY THE SECY. TO THE GOVT. OF INDIA, MINISTRY OF FINANCE, DEPTT. OF REVENUE, NORTH BLOCK, NEW DELHI- 110005 2:CHIEF COMMISSIONER OF INCOME TAX AAYAKAR BHAWAN G.S.ROAD CHRISTIAN BASTI GHY-5 3:ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-2 GHY AAYAKAR BHAWAN 5TH FLOOR G.S.ROAD CHRISTIAN BASTI GHY- Advocate for the Petitioner : DR. A SARAF Advocate for the Respondent : ASSTT.S.G.I. Page No.# 2/3 BEFORE HON'BLE MR. JUSTICE N. KOTISWAR SINGH ORDER 11.12.2019 Heard Dr. A. Saraf, learned Senior counsel for the petitioner. Also heard Mr. S.C. Keyal, learned Assistant Solicitor General of India, appearing for the respondents. 2. In this petition, the petitioner has challenged the notices dated 26.03.2019 and 31.07.2019 issued under Section 226(3) of the Income Tax Act, 1961, by which it has been alleged that a sum of ` 54,34,11,016/- is due from one M/s Saroj Sunrise Pvt. Ltd. to the Tax authorities on account of payment of income tax demand and on perusal of the financial statement of the aforesaid firm, it is found that as on 01.04.2018 a total amount of ` 17,54,65,133/- was liable to be paid by the petitioner to the said M/s Saroj Sunrise Pvt. Ltd. and accordingly, as required under Section 226(3) of the Income Tax Act, 1961, the petitioner has been directed to pay to the Income Tax Department forthwith any amount due to the petitioner or held by the petitioner for or on account of the said assessee, namely, M/s Saroj Sunrise Pvt. Ltd. up to the amount of arrears mentioned above. 3. The case of the petitioner is that in fact there is a dispute between the petitioner and said M/s Saroj Sunrise Pvt. Ltd., which is now pending before a three members Arbitration Tribunal in Arbitration Case No.2/2017 and as such till there is final resolution of the dispute as regards the liability of the respective parties, the Income Authority could not have invoked Section 226(3) of the Income Tax Act, 1961. 4. The said fact have been reiterated in the affidavit-in-reply filed by the petitioner in Page No.# 3/3 paragraph 17, in which it has been mentioned that the Income Authorities cannot take a decision when both the petitioner and the said M/s Saroj Sunrise Pvt. Ltd. are in arbitration and directing the petitioner to make payment of the amount allegedly due to the said M/s Saroj Sunrise Pvt. Ltd. before finalisation of the arbitration may not be proper. 5. It has been further stated that in case the Arbitral Tribunal rejects the claim of the petitioner and holds that the petitioner is liable to pay to M/s Saroj Sunrise Pvt. Ltd. any amount and such award attains finality, the petitioner would pay the said amount to the Department. 6. Mr. S.C. Keyal, learned Assistant Solicitor General of India appearing for the Department submits that in view of the aforesaid categorical statement made by the petitioner in the affidavit-in-opposition, the present petition can be closed directing the petitioner to pay such amount within the aforesaid limit, if held payable by the Arbitral Tribunal in favour of M/s Saroj Sunrise Pvt. Ltd. In other words, if the Arbitral Tribunal finds that any amount is to be paid by the petitioner to the aforesaid M/s Saroj Sunrise Pvt. Ltd. to the extent of the liability as mentioned in the impugned notices, the petitioner will pay the same, after the said arbitration has attained finality. 7. In view of the above direction, the impugned notices dated 26.03.2019 and 31.07.2019 are set aside with liberty to the Income Tax Authority to issue a fresh notice in the event the said obligation is not discharged in terms of the above order. Comparing Assistant Sd/- N. Kotiswar Singh JUDGE "