TATA STEEL LIMITED THROUGH ITS HEAD ACCOUNTS CUM AUTHORIZED SIGNATORY KUMAR SUNIL V. THE UNION OF INDIA THROUGH THE PRINCIPAL COMMISSIONER OF INCOME TAX

WPC/1303/2018

AI Insights

Tata Steel Limited filed a writ petition challenging the garnishee orders and demand notice issued by the Income Tax Department. The petitioner argued that the orders were passed without adequate notice and opportunity to respond, violating the principles of natural justice. The court examined the procedural fairness of the actions taken by the tax authorities, particularly focusing on the issuance of a show cause notice with insufficient time for response, followed by immediate adverse actions including garnishee orders. The court referenced several Supreme Court judgments to emphasize the importance of adhering to natural justice in administrative actions, especially those with civil consequences.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 748332 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 19-07-2018
• Assessment Year: misc
• Other Referred Cases: Canara Bank & Another v. Debasis Das & Others, Prakash Ratan Sinha v. State of Bihar & Others, Satwati Deswal v. State of Haryana & others, Dharampal Satyapal Limited v. Deputy Commissioner of Central Excise, Gauhati & others
• Laws Referred To: Companies Act, 2013
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: DEEPAK ROSHAN
• Assessee Lawyers: SUMEET GADODIA; SHILPI JOHN; RANJEET KUSHWAHA
• Keywords: Audi alteram partem; Demand notice; Garnishee Orders; Natural Justice; Show cause notice
• Section: 147; 148; 143(3); 153A; 68

Judgement Text

" IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 1303 of 2018 with I.A. No. 2266 of 2018 ----- Tata Steel Limited (A Company within the meaning of the Companies Act, 2013) having its Registered Office at Bombay House, 24 Homi Mody Street, Mumbai 400001; having its Colliery at West Bokaro Colliery, situated at Ghatotand, P.O. and P.S. Ghatotand, District Ramgarh, PIN 825314 (Jharkhand); through its Head (Accounts)-cum-Authorized Signatory namely, Kumar Sunil, aged about 53 years, son of Shri R.P. Sharma, resident of Central Site, West Bokaro, P.O. and P.S. Ghatotand, District Ramgarh, PIN 825314, (Jharkhand). ... …. Petitioner Versus 1. The Union of India, through the Principal Commissioner of Income Tax (TDS Circle), 3rd Floor, C.R. Building, 5A-Main Road, Ranchi, P.O.-G.P.O., P.S. Hindpiri, District Ranchi 834001. 2. Deputy Commissioner of Income Tax (TDS Circle), 3rd Floor, C.R. Building, 5A-Main Road, Ranchi, P.O.-G.P.O., P.S. Hindpiri, District Ranchi 834001. 3. Joint Commissioner of Income Tax (TDS Circle), 3rd Floor, C.R. Building, 5A-Main Road, Ranchi, P.O.-G.P.O., P.S. Hindpiri, District Ranchi 834001. 4. The Principal Commissioner of Income Tax (TDS Circle), 3rd Floor, C.R. Building, 5A-Main Road, Ranchi, P.O.-G.P.O., P.S. Hindpiri, District Ranchi 834001. …. … Respondents 5. State Bank of India through the Branch Manager, Ghatotand Branch, P.O. & P.S. Ghatotand, Jharkhand. 6. HDFC Bank through the Branch Manager, Bistupur Branch, Jamshedpur, P.O. & P.S. Bistupur, Jharkhand. …. Proforma Respondents ----- CORAM: HON’BLE THE ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE AMITAV K. GUPTA For the Petitioner : M/s Sumeet Gadodia, Shilpi John & Ranjeet Kushwaha, Advocates For the Respondents : Mr. Deepak Roshan, Sr. Standing Counsel --------- 2 06/Dated: 19th July, 2018 Oral order: Per D.N. Patel, A.C.J.: 1. This writ petition has been preferred challenging the garnishee orders dated 07.03.2018 and 08.03.2018 respectively, which are at Annexure-13 and 14 to the memo of this petition, as also the demand notice dated 26th February, 2018, which is at Annexure-10/1 to the memo of this petition. 2. Having heard counsels for both the sides and looking to the facts and circumstances of the case, it appears that show cause notice was issued to this petitioner by the respondent-Deputy Commissioner of Income Tax, Ranchi, on 19.02.2018 which was received by this petitioner on 20th February, 2018. The said show cause notice is at Annexure-8 to the writ petition. Only three days’ time was given to the Assessee to reply this show cause notice. 3. Having received the said show cause notice, the petitioner vide letter dated 23rd February, 2018 requested the respondents for giving reasonable time, so that it may file reply to the said show cause notice. But, without passing any order upon this request letter of the Assessee, hurriedly on 26th February, 2018 an ex-parte order was passed by the respondents, which is at Annexure-10 to the memo of this petition. On the same day i.e. on 26th February, 2018 itself, the demand notice was also issued to the petitioner. Against this order dated 26th February, 2018 (Annexure-10), appeal has been preferred before the Commissioner (Appeals). 4. It further appears from the facts of the case that on 07.03.2018 (Annexure-13) and on 08.03.2018 (Annexure-14) garnishee orders were also passed, because respondents have got specific target to recover the tax amount. There cannot be an achievement of target, in breach of law. Reasonable time ought to have been given to the Assessee to give reply to the show cause notice and at least, within the time limit of preferring appeal, no such garnishee order ought to have been passed by the respondents. Such speed the respondents must show in their own work for recovery of tax in the matters, which are already concluded. 5. Meanwhile the order dated 26th February, 2018 (Annexure- 10/1) has also been issued curtailing the period of payment of the demand. 3 6. Thus, it appears that in a hot haste the respondents have decided the show cause notice and without waiting for the appeal period, garnishee orders have been issued and the period of payment of demand has also been curtailed. This much speed was not necessary in the facts of the present case. Moreover, the basic order at Annexure-10 dated 26th February, 2018 has been passed without giving adequate opportunity of being heard to the petitioner and, thus, there is a breach of principles of natural justice. Whenever there is breach of principles of natural justice, writ is tenable. 7. It has been held by the Hon’ble Supreme Court in the case of Canara Bank & Another v. Debasis Das & Others reported in (2003) 4 SCC 557 especially in paragraph no. 15 as under: “15. The adherence to principles of natural justice as recognized by all civilized States is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue. These principles are well settled. The first and foremost principle is what is commonly known as audi alteram partem rule. It says that no one should be condemned unheard. Notice is the first limb of this principle. It must be precise and unambiguous. It should apprise the party determinatively of the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair play. The concept has gained significance and shades with time. When the historic document was made at Runnymede in 1215, the first statutory recognition of this principle found its way into the “Magna Carta”. The classic exposition of Sir Edward Coke of natural justice requires to “vocate, interrogate and adjudicate”. In the celebrated case of Cooper v. Wandsworth Board of Works the principle was thus stated: (ER p. 420) “[E]ven God himself did not pass sentence upon Adam before he was called upon to make his defence. ‘Adam’ (says God), ‘where art thou? Hast thou not eaten of the tree whereof, I commanded thee that thou shouldest not eat?’ ” Since then the principle has been chiselled, honed and refined, enriching its content. Judicial treatment has added light and luminosity to the concept, like polishing of a diamond. (Emphasis supplied). 8. It has been held by the Hon’ble Supreme Court in the case of Prakash Ratan Sinha v. State of Bihar & Others reported in (2009) 14 SCC 690 especially in paragraph no. 14 as under: 4 “14. Corollary principles emanating from these cases are as to what particular rule of natural justice should apply to a given case must depend to an extent on the facts and circumstances of that case and that it is only where there is nothing in the statute to actually prohibit the giving of an opportunity of being heard and on the other hand, the nature of the statutory duty imposed on the decision maker itself implies an obligation to hear before deciding. These cases have also observed, whenever an action of public body results in civil consequences for the person against whom the action is directed, the duty to act fairly can be presumed and in such a case, the administrative authority must give a proper opportunity of hearing to the affected person (Emphasis supplied). 9. It has been held by the Hon’ble Supreme Court in the case of Satwati Deswal v. State of Haryana & others reported in (2010) 1 SCC 126 especially in paragraph no. 5 as under: “5. In our view, the High Court had fallen in grave error in rejecting the writ petition on the aforesaid ground. First, such an order of termination was passed without issuing any show-cause notice to the appellant and without initiating any disciplinary proceedings by the authorities and without affording any opportunity of hearing. It is well settled that a writ petition can be held to be maintainable even if an alternative remedy is available to an aggrieved party where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right; or if there had been a violation of a principle of natural justice; or where vires of the Act were in question.” (Emphasis supplied). 10. It has been held by the Hon’ble Supreme Court in the case of Dharampal Satyapal Limited v. Deputy Commissioner of Central Excise, Gauhati & others reported in (2015) 8 SCC 519 especially in paragraph nos. 23 to 28 and 35 as under: “23. Aristotle, before the era of Christ, spoke of such principles calling it as universal law. Justinian in the fifth and sixth centuries AD called it “jura naturalia” i.e. natural law. 24. The principles have a sound jurisprudential basis. Since the function of the judicial and quasi-judicial authorities is to secure justice with fairness, these principles provide a great humanising factor intended to invest law with fairness to secure justice and to prevent miscarriage of justice. The principles are extended even to those who have to take an administrative decision and who are not necessarily discharging judicial or quasi- judicial functions. They are a kind of code of fair administrative procedure. In this context, procedure is not a matter of secondary importance as it is only by procedural fairness shown in the decision-making that a decision becomes acceptable. In its proper sense, thus, natural justice would mean the natural sense of what is right and wrong. 25. This aspect of procedural fairness, namely, right to a fair hearing, would mandate what is literally known as “hearing the other side”. Prof. D.J. Galligan attempts to provide what he calls “a general theory of fair treatment” by exploring what it is that 5 legal rules requiring procedural fairness might seek to achieve. He underlines the importance of arriving at correct decisions, which is not possible without adopting the aforesaid procedural fairness, by emphasising that taking of correct decisions would demonstrate that the system is working well. On the other hand, if mistakes are committed leading to incorrect decisions, it would mean that the system is not working well and the social good is to that extent diminished. The rule of procedure is to see that the law is applied accurately and, as a consequence, that the social good is realised. For taking this view, Galligan took support from Bentham, who wrote at length about the need to follow such principles of natural justice in civil and criminal trials and insisted that the said theory developed by Bentham can be transposed to other forms of decision-making as well. This jurisprudence of advancing social good by adhering to the principles of natural justice and arriving at correct decisions is explained by Galligan in the following words: “On this approach, the value of legal procedures is judged according to their contribution to general social goals. The object is to advance certain social goals, whether through administrative processes, or through the civil or criminal trial. The law and its processes are simply instruments for achieving some social good as determined from time to time by the law-makers of the society. Each case is an instance in achieving the general goal, and a mistaken decision, whether to the benefit or the detriment of a particular person, is simply a failure to achieve the general good in that case. At this level of understanding, judgments of fairness have no place, for all that matters is whether the social good, as expressed through laws, is effectively achieved.” Galligan also takes the idea of fair treatment to a second level of understanding, namely, pursuit of common good involves the distribution of benefits and burdens, advantages and disadvantages to individuals (or groups). According to him, principles of justice are the subject-matter of fair treatment. However, that aspect need not be dilated upon. 26. Allan, on the other hand, justifies procedural fairness by following the aforesaid principles of natural justice as rooted in the rule of law leading to good governance. He supports Galligan in this respect and goes to the extent by saying that it is the same as ensuring dignity of individuals, in respect of whom or against whom the decision is taken, in the following words: “The instrumental value of procedures should not be underestimated; the accurate application of authoritative standards is, as Galligan clearly explains, an important aspect of treating someone with respect. But procedures also have intrinsic value in acknowledging a person’s right to understand his treatment, and thereby to determine his response as a conscientious citizen, willing to make reasonable sacrifices for the public good. If obedience to law ideally entails a recognition of its morally obligatory character, there must be suitable opportunities to test its moral credentials. Procedures may also be thought to have intrinsic value insofar as they constitute a fair balance between the demands of accuracy and other social needs: where the moral harm entailed by erroneous decisions is reasonably assessed and fairly distributed, procedures 6 express society’s commitment to equal concern and respect for all.” 27. It, thus, cannot be denied that the principles of natural justice are grounded in procedural fairness which ensures taking of correct decisions and procedural fairness is fundamentally an instrumental good, in the sense that procedure should be designed to ensure accurate or appropriate outcomes. In fact, procedural fairness is valuable in both instrumental and non- instrumental terms. 28. It is on the aforesaid jurisprudential premise that the fundamental principles of natural justice, including audi alteram partem, have developed. It is for this reason that the courts have consistently insisted that such procedural fairness has to be adhered to before a decision is made and infraction thereof has led to the quashing of decisions taken. In many statutes, provisions are made ensuring that a notice is given to a person against whom an order is likely to be passed before a decision is made, but there may be instances where though an authority is vested with the powers to pass such orders, which affect the liberty or property of an individual but the statute may not contain a provision for prior hearing. But what is important to be noted is that the applicability of principles of natural justice is not dependent upon any statutory provision. The principle has to be mandatorily applied irrespective of the fact as to whether there is any such statutory provision or not. 35. From the aforesaid discussion, it becomes clear that the opportunity to provide hearing before making any decision was considered to be a basic requirement in the court proceeding. Later on, this principle was applied to other quasi-judicial authorities and other tribunals and ultimately it is now clearly laid down that even in the administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking a decision is necessary. It was, thus, observed in A.K. Kraipak case that if the purpose of rules of natural justice is to prevent miscarriage of justice, one fails to see how these rules should not be made available to administrative inquiries. In Maneka Gandhi v. Union of India also the application of principle of natural justice was extended to the administrative action of the State and its authorities. It is, thus, clear that before taking an action, service of notice and giving of hearing to the noticee is required. In Maharashtra State Financial Corpn. v. Suvarna Board Mills, this aspect was explained in the following manner: (SCC p. 568, para 3) “3. It has been contended before us by the learned counsel for the appellant that principles of natural justice were satisfied before taking action under Section 29, assuming that it was necessary to do so. Let it be seen whether it was so. It is well settled that natural justice cannot be placed in a straitjacket; its rules are not embodied and they do vary from case to case and from one fact-situation to another. All that has to be seen is that no adverse civil consequences are allowed to ensue before one is put on notice that the consequence would follow if he would not take care of the lapse, because of which the action as made known is contemplated. No particular form of notice is the demand of law. All will depend on facts and circumstances of the case.” (Emphasis supplied). 7 11. As a cumulative effect of the aforesaid facts, reasons and judicial pronouncements, we hereby, quash and set aside the order at Annexure-10 dated 26th February, 2018, order at Annexure-10/1 dated 26th February, 2018, order at Annexure-13 dated 07.03.2018, order at Annexure-14 dated 18.03.2018. This writ petition is allowed and disposed of. 12. We hereby, remand the matter to respondent no.2 with a direction to receive the reply of the show cause notice given by this petitioner within a period of four weeks from today and thereafter, show cause notice dated 19th February, 2018 which was received by this petitioner dated 20th February, 2018 shall be adjudicated upon after giving adequate opportunity of being heard to this petitioner. 13. It is now high time for the Commissioner of Income Tax Department to record remarks, in the confidential report of such types of officers, who are giving three days’ time to reply to the show cause notice and this way, they are increasing the work of the Court. 14. In view of the final disposal of the main petition, I.A. No 2266 of 2018 also stands disposed of. (D.N. Patel, A.C.J.) (Amitav K. Gupta, J.) VK "