INDO ASAHI GLASS -CO. LTD. VS INCOME TAX OFFICER
2004 P T D 2105
[254 I T R 210]
[Supreme Court of India]
Present: B. N. Kirpal, K. G. Balakrishnan and P. Venkatarama Reddi, JJ
INDO ASAHI GLASS ‑CO. LTD. and another
Versus
INCOME TAX OFFICER and others
Civil Appeal No. 2040 of 1997, decided on /01/.
th
September, 2001 (Appeal by special leave from the judgment and order, dated September 17, 1996 of the Calcutta High Court in F.M.A.T. No.2278 of 1996).
Income tax---------
‑‑‑‑Deduction of tax at source‑‑‑Salary‑‑‑Foreigner working in India with assessee under collaboration agreement‑‑‑Payment by foreign company of salary‑‑Failure to deduct tax at source‑‑‑Notice to assessed show cause why penalty and interest should not be levied‑‑‑High Court‑‑‑Writ petition‑‑‑No absence of jurisdiction‑‑‑Dismissal of petition ‑‑‑Proper‑‑ Indian Income Tax Act, 1961, S.201(1), (1‑A)‑‑‑Constitution of India, Art. 226.
On coming to know that salary had been paid to four Japanese employees, who were working under a collaboration agreement with the appellants in India, by a Japanese Company, the Income Tax Officer issued notice under sections 201(1) and 201(1‑A) of the Income Tax Act 1961, to show cause why penalty and interest should not be levied for failure to deduct tax at source from the salary so paid. The appellants filed a writ petition under Article 226 of the Constitution of India challenging the legality and validity of the show‑cause notice on the ground that they were not liable to deduct tax at source: in relation to payments received by foreign national in Yen in Japan. The High Court dismissed the writ petition holding that the Court would not invoke the writ jurisdiction at the stage of notice and directed the appellants to file their reply to the show‑cause notice and the Income Tax Officer to pass a final order after giving a hearing to the appellants. On appeal to the Supreme Court, it was stated that the Japanese Company had, during the pendency of the appeal before the Supreme Court, taken advantage of the Voluntary Disclosure Scheme and filed returns of income in respect of the four employees and also paid the entire amount of tax payable by them:‑‑
Held, affirming the decision of the High Court, (i) that the Supreme Court could not take up for consideration the facts for the first time;
(ii) that the High Court was right in coming to the conclusion that it was appropriate for the appellants to file their reply to the notice and take whatever defence were open to them.
(The Supreme Court, accordingly, granted ten weeks' time to the appellants to file their reply to the show‑cause notice, it being open to the appellants to place on record the subsequent facts, and directed that on the reply being filed the Income Tax Officer would take his decision after giving the appellants and opportunity of being heard).
Indo Asahi Glass Co. v. I.T.O, (1996) 222 ITR 534 affirmed.
Debi Pal, Senior Advocate Rahul Dave Anant Kumar, Ms. Priya Hingorani, and Pradeep Kumar Bakhsi, Advocates with him for Appellants.
Dr. V. Gauri Shankar, Senior Advocate, Ms. Lakhsmi Iyengar, B.V. Balaram Das and Ms. Sushma Suri. Advocates with him for Respondent.
ORDER
This appeal arises from the judgment of the Calcutta High Court see (1996) 222 ITR 534 which had dismissed the writ petition filed by the appellants wherein challenge was made to the show‑cause notice, dated May 16, 1996.
The aforesaid show‑cause notice was issued on the, allegation that salary had been paid to four employees who were working with the appellants in India. These employees were Japanese and the salary in question had been paid by a Japanese‑.Company in Japan. In addition thereto, the appellants had also paid salaries to these four employees but tax had been deducted at source. The show‑cause notice stated that what was paid to these four employees in Yen currency was also taxable under section 9 of the Income‑tax Act should have been deducted at source.
Instead of filing a reply to the show‑cause notice, the appellants chose to file a writ petition. The single Judge dismissed the writ petition on the ground that alternative remedy was available to the appellants. In appeal, the Divisional Bench took the same view. Hence, this appeal by special leave.
It is contended by Dr.Pal, on behalf of the appellants, that during the pendency of this appeal, taking advantage of the Voluntary Disclosure Scheme, Asahi Glass Co. Ltd. Japan, had filed return of income in respect of the four employees in question and had paid the entire amount of income‑tax payable in respect of what was paid to these four employees in Yen currency.
This and the other facts cannot be taken up for consideration by this Court for the first time. In our opinion, the High Court was right in coming to the conclusion that it is appropriate for the appellants to file a reply to the show‑cause notice and take whatever defence is open to them.
While affirming the decision of the High Court, we, therefore, grant ten weeks' time to the appellants to file a reply to the aforesaid show‑cause notice, dated May 16, 1996. On the reply being so filed, the Income‑tax Officer will take a decision, after giving an opportunity of hearing to the appellants. The decision should be taken within four months for the reply being so filed. It will be open to the appellants to place on record the subsequent facts the effect of which will be for the Income Tax Officer to decide.
The appeal is disposed of in the aforesaid terms. No costs.
M.B.A./1090/FCOrder accordingly