Mansarovar Commercial Pvt. Ltd Versus Commissioner of Income Tax, Delhi

Mansarovar Commercial Pvt. Ltd Versus Commissioner of Income Tax, Delhi  

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5769 OF 2022
Mansarovar Commercial Pvt. Ltd. …Appellant
Versus
Commissioner of Income Tax, Delhi …Respondent
WITH
CIVIL APPEAL NO. 5773 OF 2022
CIVIL APPEAL NO. 5772 OF 2022
CIVIL APPEAL NO. 5771 OF 2022
CIVIL APPEAL NO. 5770 OF 2022
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the
impugned common judgment and order dated 22.02.2016
passed by the High Court of Delhi at New Delhi in Income
CA 5769/2022 Etc. Page 1 of 67
Tax Appeal Nos. 162/2002, 164/2002, 165/2002,
167/2002 & 168/2002, by which the High Court has
allowed the said appeals preferred by the Revenue and
has quashed and set aside the common order dated 08th
January, 2002 passed by the Income Tax Appellate
Tribunal, New Delhi (for short, ‘ITAT’) for Assessment
Years 1987-88, 1988-89 and 1989-90 and restored the
orders passed by the Assessing Officer, upheld by the
Commissioner of Income Tax (Appeals) (for short,
‘CIT(A)), the respective assessees have preferred the
present appeals.
Facts:
2. The facts leading to the present appeals in nutshell
are as under:
The respective assessees, namely, Mansarovar
Commercial Private Limited, Sovereign Commercial
Private Limited, Swastik Commercial Private Limited,
Trishul Commercial Private Limited and Pasupati Nath
Commercial Private Limited were incorporated under the
Registration of Companies (Sikkim) Act, 1961. Each of
the assessee companies claim to be carrying on the
CA 5769/2022 Etc. Page 2 of 67
business of commercial agents in cardamon and other
agricultural products.
2.1 Sikkim became part of India in April, 1975. The
Constitution (Thirty Sixth Amendment) Act, 1975 inserted
Article 371-F into the Constitution of India, in terms of
which not all the laws of India were extended to the new
State of Sikkim. Under Article 371-F (k) all laws in force
immediately before the appointed day, i.e., 26th April,
1975, in the territories comprising the State of Sikkim or
any part thereof were to continue to be in force therein
until amended or repealed by a competent legislature or
other competent authority. The Income Tax Act, 1961
(hereinafter referred to as the ‘Act’) was not made
straightway applicable to the State of Sikkim. Till such
extension of the Act to Sikkim by a notification issued
under Article 371-F(n), income tax was to be charged and
collected under the Sikkim State Income-tax Manual,
1948 (for short, ‘Sikkim Manual, 1948’). The recovery of
tax was under the scheme of the Sikkim (Collection of
Taxes and Prevention of Evasion of Payment of Taxes)
Act, 1987.
2.2 By a notification No. S.O. 1028E dated 7th
November, 1988 issued under Article 371-F(n) of the
Constitution, the Act, the Wealth Tax Act, 1957 and the
CA 5769/2022 Etc. Page 3 of 67
Gift Tax Act, 1958 were extended to the State of Sikkim.
In terms of para 2 of the said notification, the Central
Government appointed, by Notification S.O. 148E dated
23rd February, 1989, the 1st of April, 1989 as the date on
which the Act would come into force in the State of Sikkim
in relation to the previous year relevant to the Assessment
Year commencing on the 1st day of April, 1989. However
subsequently, by virtue of Section 26 of the Finance Act,
1989 the Act was made applicable to the State of Sikkim
from the previous year relevant to the Assessment Year
commencing from 1st April, 1990, thereby extending the
date of applicability of the Act by one year from the date
specified in the notification dated 23rd February, 1989.
2.3 The case of the assessees was that each of them
was a resident of Sikkim, carrying on business in Sikkim
and not elsewhere and that till 31st March, 1990, each of
them were governed by the Sikkim Manual, 1948 and not
the Act. Therefore, the stand of the assessees was that
the income earned by them till that date was income
earned in Sikkim from the business conducted/done in
Sikkim. On the other hand, the case of the Revenue was
that the control and management of each of the assessee
companies was wholly with their auditor, M/s Rattan
Gupta & Co., Chartered Accountants, who had their
CA 5769/2022 Etc. Page 4 of 67
offices in Karol Bagh, New Delhi and therefore, were
companies’ resident in India in terms of Section 6(3) of the
Act.
2.4 A search was conducted on 15th March, 1990 at the
premises of M/s Rattan Gupta & Co., Chartered
Accountant at Daryaganj, New Delhi and during the
course of the search, books of account, cheque books,
signed blank cheques, vouchers and other income
documents of the assessees were found. The statements
of the partners, former and current, of M/s Rattan Gupta &
Co., CA were recorded.
2.5 On 10th July, 1990, following the search conducted
on 15th March, 1990 at the premises of M/s Rattan Gupta
& Co., CA at Daryaganj, New Delhi, notices were issued
by the Assistant Commissioner of Income Tax (for short,
‘ACIT’) (Investigation), Circle 7(1), New Delhi to each of
the assessees under Section 148 of the Act, in respect of
Assessment Years 1987-88, 1988-89 and 1989-90
(Assessment Years under consideration). An order was
passed on 12th July, 1990 by ACIT (Investigation), Circle
13(1), New Delhi in respect of M/s Rattan Gupta & Co.
under section 132(5) of the Act. It appears that the said
Rattan Gupta informed the assessees about notices
under section 148 of the Act issued to each of them at the
CA 5769/2022 Etc. Page 5 of 67
address of M/s Rattan Gupta & Co. at Daryaganj, New
Delhi and affixed at the said premises of M/s Rattan
Gupta & Co.
2.6 Meanwhile, each of the assessees filed return of
income in terms of the Sikkim Manual, 1948 for the
Assessment Years in question on 27th April, 1990. A
demand notice was issued to each of them in respect
thereof on 23rd July, 1990.
2.7 The respective assessees filed writ petitions in the
High Court of Sikkim, challenging the notices issued
under section 148 of the Act. The Sikkim High Court
initially passed an interim order staying further
proceedings. The said interim order was modified in
terms of which the Department was permitted to continue
with its enquiry and seek facts and information from the
Directors of the assessee companies. The assessee
companies were required to furnish the necessary
information and also to file returns and produce the books
of accounts before the Assessing Officer, New Delhi in
compliance of the notices under section 148 of the Act.
Thereafter, the Sikkim High Court dismissed the writ
petitions holding that it had no jurisdiction to entertain the
said writ petitions since no part of the cause of action had
arisen in the State of Sikkim. It was observed that as the
CA 5769/2022 Etc. Page 6 of 67
notices were issued by the ACIT (Investigation), Circle
7(1), New Delhi and served on the assessees in New
Delhi, it had no jurisdiction over the actions of that
authority. It appears that the Sikkim High Court also
observed that “mere fact that the companies have
registered offices in Sikkim does not confer jurisdiction on
this Court.”
2.8 It appears that in the meanwhile, on the basis of the
returns filed by the assessees in Sikkim, the Income and
Sales Tax Department of Government of Sikkim raised a
revised demand on 30th November, 1990, cancelling the
earlier demand raised on 30th July, 1990.
2.9 After the dismissal of the writ petitions by the Sikkim
High Court on 20th July, 1993, the assessees filed writ
petitions before the Delhi High Court being Writ Petition
Nos. 5565 to 5569 of 1993. Initially, the Delhi High Court
passed an interim order staying the proceedings.
However thereafter on 13th August, 1998, an order was
passed by the Delhi High Court directing the AO to frame
the assessment subject to outcome of the writ petitions.
2.10 That thereafter on 24th August, 1998, notices were
issued to the assessee companies under section 148 of
the ACT by ACIT, Company Circle 2, New Delhi.
CA 5769/2022 Etc. Page 7 of 67
2.11 That on 09th October, 1998, separate assessment
orders were passed by the ACIT, Company Circle 2(2),
New Delhi for each of the Assessment Years in question.
The Assessing Officer concluded that each of the
assessees were “intentionally trying to take advantage of
the prevailing laws at Sikkim by routing money through
Sikkim and ploughing back in India.” The Assessing
Officer also rejected the objections raised by the
assessees as to the jurisdiction. The Assessing Officer
made additions to the income of the assessees for the
aforesaid three Assessment Years in question under
different heads of income, namely, (i) income from
commission (ii) unsecured loan from Dengzong Charitable
Trust (iii) interest accrued/paid on the unsecured loans
and (iv) provision for income tax (which was disallowed).
Separate penalty proceedings were initiated under
sections 271(1)(a). 271(1)(c), 273/274 and 271-B of the
Act.
2.12 The assessees then preferred appeals before the
CIT(A). Subsequently on 08th December, 2000, the writ
petitions filed by the assessees came to be dismissed by
the High Court as the respective assessees moved the
Appellate Authority prescribed under the statute. The
appeals preferred by the assessees before the CIT(A)
CA 5769/2022 Etc. Page 8 of 67
came to be dismissed vide order(s) dated 30th March,
2001.
2.13 Feeling aggrieved by the order(s) passed by the
CIT(A) dismissing the appeals, the respective assessees
preferred appeals before the ITAT. The ITAT observed
and held that notices under Section 148 of the Act could
not have been served on Mr. Rattan Gupta as the said Mr.
Rattan Gupta cannot be said to be a “Principal Officer” of
the assessees within the meaning of section 2(35)(a) of
the Act and the AO did not serve any notices of his
intention of treating Mr. Rattan Gupta as the “Principal
Officer” for the purposes of section 2(35)(b) of the Act. On
the refusal of Mr. Rattan Gupta to receive notices, ITAT
observed and opined that if Mr. Rattan Gupta refused to
receive such notices, he was justified in doing so and his
refusal did not authorise the AO to resort to substituted
service within the meaning of Rule 20 of Order V of CPC.
The order(s) passed by the ITAT allowing the appeals
preferred by the assessees was/were the subject matter
of appeals before the High Court at the instance of the
Revenue.
2.14 The High Court framed the following questions of
law:
“1. Whether the Tribunal was right in holding that the ACIT
exceeded his jurisdiction in issuing notices under section 148
CA 5769/2022 Etc. Page 9 of 67
of the Act and the notices were not served in accordance
with law?
2. Whether the order made by the ITAT is perverse based
on conjectures and surmises and ignorance of evidence and
material and has relied upon incorrect facts?
3. Whether the income of the assessee is taxable in India?”
At the instance of the Assessees, an additional question
was also framed as under by the same order:
4. Whether the ITAT was right in law in holding that the
assessee is not a resident of India within the meaning of
Section 6(3)(ii) of the Income Tax Act, 1961 and whether the
said finding of the ITAT is not also vitiated and perverse as it
ignores relevant admissible evidence and materials and
relies upon incorrect facts and has not given due
consideration to several important materials and evidence
relevant for determination of residence of the assessee.”

2.15 By the impugned common judgment and order, the
High Court has answered all the questions in favour of the
Revenue and against the assessees and consequently
has allowed the appeals preferred by the Revenue. The
High Court in the impugned judgment and order has dealt
with and considered the following main issues and both
the parties were heard on the said issues.
1. Objection to the jurisdiction by the ACIT, Circle 7(1), New
Delhi who issued notices to the assessees under Section 148 of
the Act;
2. Control and management in New Delhi;
3. No income accrued or was earned in Sikkim;
4. Service of notice;
CA 5769/2022 Etc. Page 10 of 67
5. Limitation for issuance of notice under section 147 of the Act;
6. Merits of the reopening of the assessments; and
7. Interest
By the impugned common judgment and order, the
High Court has summarised the conclusion in paragraph
91 as under:
(i) The Assessees, incorporated under the company law of
Sikkim, are resident Indian companies. If any income
accrued to them or was earned by them in India prior to
1
st April 1990, then such income is taxable under the
Act.
(ii) The Revenue is justified in contending that the Assessees
not having raised such objection at the first available
opportunity should not be permitted to urge the ground of
lack of jurisdiction of the Delhi officers to issue notices to
them under Sections 147/148 of the Act.
(iii) Mr. Rattan Gupta was not only doing the audit work of the
five Assessee companies, but determining who should be
the directors of the said companies. This coupled with the
fact that the blank signed cheque books of all the five
companies together with rubber seals, the letter heads, the
blank signed cheques and other records were also found in
the office of Rattan Gupta & Co., the factual determination
by the AO that the management and the control of the five
companies was actually wholly situated in Delhi gets
fortified. The exhaustive evidence gathered by the
Revenue, without being countered by the Assessees
despite opportunity being afforded, serves to substantiate
the case of the Revenue that the management and the
control of the five Assessee companies was in fact located
in Delhi.
CA 5769/2022 Etc. Page 11 of 67
(iv) The findings of the AO that the Assessees failed to prove
that the commission payments were earned by them
exclusively in Sikkim has not been dislodged by the
Assessees by producing any tangible material.
(v) There was an implied authority of Mr. Rattan Gupta to
receive such notices even in terms of Section 252(2) of the
Act, read with Order V Rule 20 CPC. Consequently, the
Court is unable sustain the finding of the ITAT that notice
was not properly served on the Assessees through Rattan
Gupta & Co. There was no need for the Department to have
gone in for substituted service and the refusal by Rattan
Gupta & Co. to receive the notice was sufficient to consider
it as a deemed service of notice.
(vi) The plea of the Assessees that the proceedings under
Section 148 of the Act gets vitiated in the absence of a
specific order vesting the ACIT with the powers under
Section 127 of the Act to issue notice under Section 148 of
the Act is rejected.
(vii) The plea of the Assessees that the notices under Section
142(1) and 143(2) of the Act were issued for the first time in
1998 and were time barred is rejected.
(viii) On merits there were sufficient grounds for exercising the
power under Section 148 of the Act.
(ix) The ITAT's conclusion that the interest under Sections 234
A and 234 B of the Act could not be charged since a
specific notice in that behalf was not issued by the AO is
unsustainable in law and is overruled.”
Concluding as above, the High Court has
accordingly answered the questions framed in favour of
the Revenue and against the assessees. The impugned
CA 5769/2022 Etc. Page 12 of 67
common judgment and order passed by the High Court is
the subject matter of present appeals.
Submissions:
3. Shri Arvind P Datar and Shri G. Umapathy, learned
senior counsel have appeared on behalf of the respective
assessee companies and Shri N. Venkataraman, learned
Additional Solicitor General of India has appeared on
behalf of the Revenue.
3.1 Shri Arvind P Datar, learned senior counsel
appearing on behalf of the assessee companies has
submitted that the issue involved in the present appeals
is, as to whether the provisions of Income Tax Act, 1961
shall be applicable to the assessee companies which are
registered under the Sikkim Companies Act and amenable
to Sikkim Tax Manual, 1948 in respect of three
Assessment Years, i.e., 1987-88, 1988-89 and 1989-90
when Income Tax Act, 1961 was not extended to the State
of Sikkim. It is submitted that the further issue is, whether
jurisdiction on the authorities in Delhi can be conferred
solely based on the alleged effective place of control and
management of the assessee companies for the purpose
of applicability of Income Tax Act, 1961.
CA 5769/2022 Etc. Page 13 of 67
3.2 Challenging the impugned judgment and order
passed by the High Court, Shri Arvind P Datar, learned
senior counsel appearing on behalf of the assessee
companies has vehemently submitted that the impugned
judgment is based on an erroneous assumption that the
effective control of the companies vested with one Mr.
Rattan Gupta, a resident of Delhi, who was rendering
accounting and auditing services.
3.3 It is submitted that the impugned judgment has
erroneously allowed the Department to levy interest on
the assessee companies without framing the issue as a
specific question of law as mandated by Section 260A of
the Act.
3.4 In support of his submission that the Income Tax
Act, 1961 shall not be applicable for the period during the
relevant assessment years, it is vehemently submitted by
Shri Datar, learned senior counsel appearing on behalf of
the assessee companies that the Income Tax Act, 1961
came to be extended to the State of Sikkim only on and
after 1st April, 1990. That therefore, the AO exceeded his
jurisdiction.
3.5 It is contended that the assessee companies having
been assessed to tax under the Sikkim Manual, 1948 and
having paid and discharged income tax under the said law
CA 5769/2022 Etc. Page 14 of 67
cannot be subjected to tax once over again by applying
the “head and brain” rule in the absence of an express
provision under the Income Tax Act, 1961, more so in
view of the well settled law that “a taxing statute should
not be interpreted in such a manner that its effect will be
to cast a burden twice over for the payment of tax on the
taxpayers unless the language of the statute is so
compelling that the Court has no alternative than to
accept it.” That in a case of reasonable doubt, the
construction most beneficial to the taxpayer is to be
adopted.
3.6 It is further contended that as such the present case
is squarely covered by the decision of this Court in the
case of Mahaveer Kumar Jain v. CIT, Jaipur, reported
in (2018) 6 SCC 527, wherein this Court considered a
question whether the appellant, who was a resident of
Rajasthan and had won a lottery from Sikkim during the
Assessment Year 1986-87 was liable to be taxed in India
where Income Tax Act, 1961 was in force, notwithstanding
that the said income had accrued or arisen to him at a
place where Income Tax Act, 1961 was not in force, i.e.,
Sikkim, more particularly when the said income had
already been taxed in the State of Sikkim under the
Sikkim Manual, 1948. Reliance is placed on certain
CA 5769/2022 Etc. Page 15 of 67
observations made in paragraphs 13 to 15 of the said
decision.
3.7 It is next submitted that the assessee companies
filed income tax returns before the appropriate authority
as per Sikkim Manual, 1948 and a demand was raised by
the said authority, which was paid. That the fact that the
appropriate Income Tax Authority under the Sikkim
Manual, 1948 accepted the income tax returns filed by the
assessee companies and raised demand based on such
returns establish the bona fides of the assessee
companies beyond reproach. Therefore, the allegation
that the assessee companies have no real business in
Sikkim is absolutely baseless, unfounded and untenable.
3.8 Making above submissions, it is urged that the
Income Tax Act, 1961 shall not be made applicable so far
as the assessee companies are concerned for the
relevant assessment years.
3.9 It is further submitted that as such the ACIT, Delhi
had no territorial jurisdiction to assess the assessee
companies and therefore clearly exceeded in his
jurisdiction in issuing notices under section 148 of the Act
on the assumption that the assessee companies were
carrying on business in India, on the basis of availability of
books of accounts of the assessee companies at the
CA 5769/2022 Etc. Page 16 of 67
premises of the Chartered Accountant of the assessee
companies, i.e., M/s Rattan Gupta & Co. It is submitted
that such an approach is wholly untenable in law, besides
being perverse.
3.10 It is further submitted that as observed and held by
this Court in the cases of Ajay Kumar v. State of
Uttarakhand, 2021 SCC OnLine SC 48 and Kiran Singh
v. Chaman Paswan, AIR 1954 SC 340, an order passed
by the authority without jurisdiction is a nullity.
3.11 It is contended that the exercise of territorial
jurisdiction by CIT, Delhi is also wholly untenable in law in
view of section 6(3) of the Act as it was at the relevant
point of time. That Mr. Rattan Gupta was a practising
Chartered Accountant and providing accounting and
auditing services to several corporates and individuals
and could have never been the “head and brain” behind
the assessee companies.
3.12 It is further contended that even otherwise the reassessment was impermissible in law in the absence of
any original orders passed under section 143(3) of the
Act. Reliance is placed on the decision of this Court in the
case of trustees of H.E.H, the Nizam’s Supplemental
Family Trust v. CIT, reported in (2000) 3 SCC 501
(paragraphs 10 & 11). It is submitted that the said
CA 5769/2022 Etc. Page 17 of 67
decision was subsequently followed and affirmed by this
Court in the case of Standard Chartered Finance
Limited v. CIT, Bangalore, (2016) 14 SCC 634 (Civil
Appeal No. 1101 of 2016 dated 9.2.2016).
3.13 It is further submitted by Shri Datar, learned senior
counsel appearing on behalf of the assessee companies
that as such there was no material to substantiate that the
assessee companies’ control and management was
situated wholly in India. That the High Court has
proceeded on an erroneous presumption that the
assessee companies were controlled by one Rattan
Gupta, who was rendering accounting and auditing
services, simply because books of accounts had been
found in his office. It is submitted that no evidence was
produced to the effect that he ever appointed any person
as the Director of the assessee companies or dictated the
manner in which such Directors were to discharge duties
towards assessee companies. That the finding of the
High Court that the control over management vested with
Rattan Gupta and therefore the assessee companies
were situated in India, is therefore wholly untenable and
consequently to draw such presumption is legally
unsustainable.
CA 5769/2022 Etc. Page 18 of 67
3.14 It is further submitted that there was no cogent
material at the time of issuance of notices under section
148 of the Act to form a belief that income was chargeable
under the Income Tax Act, 1961 and that the burden to
prove that the control and management of assessee
companies was situated wholly in India lie with the
Department. That the law is well settled that the onus
was on the Revenue, which has not been discharged.
That on the contrary the High Court has erred in shifting
the onus on the assessee companies to prove that they
had legitimate business interest and income arising from
the State of Sikkim.
3.15 It is contended that the impugned order is based
solely on an erroneous supposition that Mr. Rattan Gupta
was in control of the management of the assessee
companies. That as such until the Assessment Years
1988-89, the audit and accounts of the assessee
companies were being handled by one Ravinder Singh &
Co. That the High Court has committed an error in
treating the said Ravinder Singh to be the partner of M/s
Rattan Gupta & Co. It is submitted that therefore, the
impugned order is based on a flawed presumption of a
critical fact and therefore the impugned judgment
deserves to be set aside by this Court.
CA 5769/2022 Etc. Page 19 of 67
3.16. Shri Datar further submitted that in the absence of
framing of any substantial question of law under Section
260A of the Act on levy of interest, the liability of interest
could not have been fastened upon the assessee
companies. That section 260A of the Income Tax Act is
analogous to Section 100 CPC which mandates framing
of question of law before exercising its jurisdiction on the
said issue. It is submitted that as such no issue of levy of
interest was framed by the High Court. That therefore the
High Court has committed a jurisdictional error in
recording a finding that ITAT’s conclusion that interest
under section 234 A & B of the Act could not be charged
since a specific notice in that behalf was not issued by the
Assessing Officer, is unsustainable in law.
3.17 In addition, it is submitted on the aspect on territorial
jurisdiction of the authorities at Delhi that the assessee
companies were having their registered offices in Sikkim.
Therefore, the issuance of notices under Section 148 of
the Act is beyond jurisdiction. That on the issue of
territorial jurisdiction, the ITAT found that since the
business premises of the assessees were in Sikkim, the
territorial jurisdiction to assess vested with the ACIT,
Gangtok. Therefore, the ITAT rightly held that the ACIT
Delhi who issued notices under section 148 of the Act had
CA 5769/2022 Etc. Page 20 of 67
no territorial jurisdiction. That the proper course for the
Department was to have the matter entrusted to ACIT,
Gangtok after complying with the mandate of section 127
of the Act for transferring jurisdiction of ACIT, Gangtok to
New Delhi. It is submitted that though the Revenue in its
appearance before the High Court raised a question of
law on the finding recorded by the ITAT on territorial
jurisdiction of the authorities at Delhi, while framing
question(s) of law, the High Court did not frame an issue
with regard to territorial jurisdiction. Thus, the finding with
regard to lack of territorial jurisdiction by ITAT had attained
finality.
3.18 Insofar as the levy of interest is concerned, it is
submitted that the ITAT specifically observed that no
direction was made by the AO for levy of interest.
Therefore relying upon the decision of this Court in the
case of CIT v. Ranchi Club Limited, (2001) 247 ITR 209
taking the view that levy of interest was under Section
234A, B & C of the Act, without a direction by the AO in
the assessment order is not legally sustainable. It is
further submitted that the High Court, while upsetting the
finding recorded by the ITAT on levy of interest, has erred
in relying upon the decisions of this Court in the cases of
Commissioner of Income Tax, Mumbai v. Anjum M.H.
CA 5769/2022 Etc. Page 21 of 67
Ghaswala, (2002) 1 SCC 633 and Commissioner of
Income Tax, Delhi v. Bhagat Construction Company
Private Limited, (2016) 15 SCC 738.
3.19 Shri Datar, learned senior counsel appearing on
behalf of the assessee companies contended that as such
there was no notice served upon the proper person and
the notice served upon Rattan Gupta cannot be said to be
a valid service of notice. That under section 2(35)(b) of
the Act, the Assessing Officer is required to serve a notice
only on persons who are connected with the management
or administration of the assessee company to treat them
as Principal Officer. That Rattan Gupta was never
connected with the management or administration of the
assessee companies so as to treat him as a Principal
Officer. That Rattan Gupta was not the Secretary,
Treasurer, Manager or Agent of the assessee companies
under section 2(35)(a) of the Act. Therefore, the AO
ought to have served a notice on Rattan Gupta informing
him of his intention to treat him as the Principal Officer of
the assessee companies on the ground that he was a
person connected with the management or administration
of the assessee companies under section 2(35)(b) of the
Act. However, in the present case, the AO never served a
notice on Rattan Gupta under section 2(35)(b) of the Act
CA 5769/2022 Etc. Page 22 of 67
expressing his intention to treat him as the Principal
Officer of the assessee companies. Therefore, this failure
vitiates the entire proceedings.
3.20 It is submitted that there is adequate evidence on
record to establish that:
(a)the business was managed from Gangtok in Sikkim
where the business was carried on by one Mr. Ajay
Kumar Agarwal, Local Director and Mr. H.L. Verma,
(b)the income was earned and assessed to income tax
in Sikkim as per the Sikkim Manual, 1948, and
(c)income tax was paid in Sikkim under Sikkim
Manual, 1948.
3.21 That further, seized vouchers and records clearly
establish that commission payments were received into
the bank accounts of these companies from identified
traders of large cardamom and that department had no
material in its possession to disbelieve that these traders
had made the commission payments only on sale of
cardamom.
3.22 It is submitted that books of accounts, ledgers etc.
which were found at the office premises of Mr. Rattan
Gupta’s office at Daryaganj, Delhi were handed over to
Mr. Rattan Gupta for providing professional accounting
services as he was a practising Chartered Accountant.
CA 5769/2022 Etc. Page 23 of 67
He had clearly stated that the books of accounts, ledgers
etc. were handed over to him for providing professional
services and that the business operations were carried
out from Gangtok in Sikkim by Mr. Ajay Kumar Agarwal,
Local Director and Mr. H.L. Verma and that he had
nothing to do with the business operations of the
assessee companies. A mere allegation that he is in
charge of the conduct of the company is not sufficient to
hold that he is the Principal Officer. There should be
credible material to how his active involvement in the
conduct and management of the business.
3.23 It is next submitted that assumption of jurisdiction
based on the seizure of books of accounts from the office
premises of the practising Chartered Accountant Mr.
Rattan Gupta at New Delhi and treating him as the
Principal Officer or “head and brain” of the companies
incorporated under the Sikkim Companies Registration
Act, 1961 when the said Chartered Accountant had
categorically stated on oath that he was rendering
professional accounting and reconciliation services to the
companies in question, is without jurisdiction, perverse
and deserves to be set aside. The failure of same would
set a very bad precedent and have far reaching
CA 5769/2022 Etc. Page 24 of 67
consequences on the rights of Chartered Accountants to
carry on their profession.
3.24 Making above submissions and relying upon the
aforesaid decisions, it is prayed that the present appeals
be allowed.
4. The present appeals are vehemently opposed by
Shri N. Venkataraman, learned Additional Solicitor
General of India appearing on behalf of the Revenue. He
has taken us through the findings recorded by the
Assessing Officer in the Assessment Order, findings of the
CIT(A) vide order dated 30th March, 2001, findings
recorded by the ITAT vide order dated 8th January, 2002
and the findings recorded by the High Court including the
findings recorded regarding the issue pertaining to service
of notice and levy of interest.
4.1 Insofar as the submission on behalf of the
appellants on control and management of affairs of the
companies is concerned, it is submitted that section 6 of
the Act defines residence in India. That the relevant
provision is section 6(3) of the Act. That this principle of
control and management of its affairs is not something
which had originated for the first time in the Income Tax
Act, 1961. This expression had existed even under the
Income Tax Act, 1922. It is submitted that under the
CA 5769/2022 Etc. Page 25 of 67
erstwhile Income Tax Act, 1922, Section 4A defined
residence in taxable territories. Section 6 of the Act deals
with residence in India and the relevant provision would
be Section 6(3) pre-amendment in 2017 and postamendment 2017 w.e.f. 01.04.2017. He has taken us
through the relevant provisions under the Income Tax Act,
1922 (Section 4A), Section 6(3) of the Act (existed prior to
01.04.2017) and Section 6(3) of the Act substituted by
Finance Act w.e.f. 01.04.2017.
4.2 On the interpretation on the control and
management of affairs, Shri N. Venkataraman, learned
ASG has relied upon the following English, Supreme
Court and High Court judgments both under the Act, 1922
and Act, 1961:
i) San Paulo v. Carter (1896) AC 31 Lord
Halsbury;
ii) V.V.R.N.M. Subbayya Chettiar v. CIT, Madras,
AIR 1951 SC 101;
iii) Erin Estate v. CIT, 1959 SCR 573;
iv) Narottan and Pereira Ltd. v. CIT, Bombay City,
1953 23 ITR 454 (paragraphs 3 & 4) (Bombay High
Court Judgment);
CA 5769/2022 Etc. Page 26 of 67
v) Estate of A. Mohammed Rowther v. CIT,
Madras, 1963 49 ITR 39, (Madras High Court
Judgment);
vi) CIT v. Chitra Palayakat Co., 1985 156 ITR 730
(Madras High Court Judgment);
vii) Commissioner of Income Tax v. Nandlal
Gandalal, 1960 40 ITR 1 (SC);
viii)A.M.M. Firm v. Reserve Bank of India, 1982 SCC
OnLine Mad. 187 (Madras High Court Judgment);
ix) Commissioner of Income Tax v. Bank of China,
1985 SCC OnLine Cal. 24 (Calcutta High Court
Judgment); and
x) Universal Cargo Carriers Inc. v. Commissioner
of Income Tax, 1990 SCC OnLine Cal. 385 (Calcutta
High Court Judgment)
4.3 Relying upon the aforesaid decisions, it is submitted
as under:
a) Holding lands, receipt of payments and carrying on
trade is of no consequence as long as the control of the
commercial venture and directions governing the
commercial venture are given from elsewhere.
CA 5769/2022 Etc. Page 27 of 67
b) Domicile or registration of the company is not
relevant. The making, maintaining, managing and
working is insufficient.
c) Directors authorised to manage the work and
employees rendering service again are insufficient.
d) The determinative test is where the sole right to
manage and control every department of its affairs lies.
Managers and directors whose services are merely
remunerated is not a relevant criterion. The profits
although received by the employees as remuneration,
do not belong to them and are not in their disposal.
Incurring of debts or payment to agents are of no
consequence.
e) The test is, where the head and seat and directing
power of the affairs of the company is, which works with
some degree of permanence while the expression
‘wholly’ would seem to recognize the possibility of the
seat of such power being divided between two distinct
and separate places.
f) The question to be asked is from where the person
or group of persons control or direct the business.
g) Mere activity by the company does not create
residence.
CA 5769/2022 Etc. Page 28 of 67
h) In case of dual residence, it is necessary to show
that the company performs some of the vital organic
functions incidental to its existence in both the places
so that there are in fact two centres of management.
i) Control and management which must be shown is
not merely theoretical control and power, or de jure
control and power but the de facto control and power
actually exercised in the course of the conduct and
management of the affairs of the firm. Mere presence
of directors or vesting of power in them is insufficient
unless otherwise they had exercised the power
elsewhere in the territory under question.
j) Even acting under a power of attorney is not
sufficient as the same can be cancelled at any moment
and as a power of attorney holder they must submit to
the principal an explanation of what they have been
doing and the principal has the right of keeping a
vigilant eye over their work from the board room and the
power exercised by the power of attorney holder is only
de jure control and not de facto control and
management.
k) The intrinsic test is where the central control and
management actually abides. Mere presence of even
CA 5769/2022 Etc. Page 29 of 67
the managing partner or mere delegation of power is
insufficient.
l) The expression control and management of its
affairs is much wider than the expression used in some
treatises ‘Control and Management of the business.’
4.4 It is further submitted that in light of the principles
laid down in the aforesaid decisions, it is well settled that
a question, as to where the control and management lies
is to be decided in light of the actual or the factual
exercise of control, inasmuch as the Courts consistently
have taken the view that mere presence of a partner firm
in India even when he happens to be the managing
partner, is not conclusive of the issue.
4.5 It is further submitted that to cull out the meaning of
management and control under the old Section 6(3) preamendment 2017, which shall be applicable in the present
case, section 6(3) post 1st April, 2017 is also required to
be considered. That the test under the new law post 1st
April, 2017 is “Key management and commercial
decisions necessary for the conduct of the business as a
whole or in substance.” It is submitted that the place of
effective management (POEM) is the new standard
CA 5769/2022 Etc. Page 30 of 67
prescribed by the Parliament, w.e.f. 1st April, 2017, in
alignment with the global needs and business practices.
4.6 Taking us to the findings recorded by the AO, CIT(A)
and the High Court which are on appreciation of
evidence/material on record, it is vehemently submitted by
Shri N. Venkataraman, learned ASG that it was rightly
concluded that the control and management of the
companies was in Delhi and that it was a clear design on
the part of the respective assessees to treat the income
as arising from Sikkim to avoid the payment of tax under
the Act, 1961. It is submitted that the control and
management of the companies was being done by Rattan
Gupta from his Delhi office. Therefore, the assessees can
be said to be residence in India and therefore liable to pay
tax under the Income Tax Act, 1961.
4.7 Insofar as the submission on behalf of the
appellants that in the absence of any original assessment,
there shall not be any re-assessment under sections
147/148 of the Act, Shri N. Venkataraman, learned ASG
has heavily relied upon the decision of this Court in the
case of Commissioner of Income Tax v. Sun
Engineering Works P. Ltd. (1992) 4 SCC 363
(paragraph 14). It is submitted that in the said decision, it
is observed and held by this Court that under section 147,
CA 5769/2022 Etc. Page 31 of 67
the AO has been vested with the power to ‘assess or
reassess’ the escaped income of an assessee. That the
term ‘escaped assessment’ includes both “nonassessment” as well as “under assessment.”
4.8 Insofar as the submission on behalf of the
appellants on service of notice is concerned, it is
submitted that the principal place of business is the seat
of control and therefore notice sent to Delhi is sufficient.
On the service of notice at Delhi, Shri N. Venkataraman,
learned ASG has heavily relied upon the
observations/findings recorded by the High Court in the
impugned judgment and order in paragraphs 78 to 83.
Thereafter, relying upon the decision of the Calcutta High
Court in the case of India Glycols Ltd. v.
Commissioner of Income Tax, 2004 SCC OnLine Cal.
736, it is submitted that notices sent/served at Delhi can
be said to be valid notice/service.
4.9 As regards levy of interest under Section 234A of
the Act is concerned, it is urged by Shri N. Venkataraman,
learned ASG that interest levied under Section 234A is
mandatory and there is no discretion with the AO and
therefore there is no question of non-compliance of
principles of natural justice. It is submitted that so far as
the penalty leviable under section 271 of the Act is
CA 5769/2022 Etc. Page 32 of 67
concerned, the same is discretionary, however the interest
is not discretionary. Therefore, for imposing penalty,
principles of natural justice are required to be complied
with, however in case of interest, the same being
mandatory in nature and automatic there is no
requirement of following principles of natural justice and/or
even if in the assessment order there is no specific order
to levy the interest but the interest charged is indicated in
the ITNS 150 accompanying the assessment order and
the same would be sufficient compliance for demanding
interest. Heavy reliance is placed on the Constitution
Bench decision of this Court in the case of Anjum M.H.
Ghaswala (supra) as well as subsequent decision in the
case of Karanvir Singh Gossal v. Commissioner of
Income Tax, (2012) 13 SCC 802 and the decision of this
Court in the case of Bhagat Construction Company
Private Limited (supra).
4.10 It is submitted that the ITAT has relied upon the
decision of this Court in the case of Ranchi Club Ltd.
(supra). However, the said decision has been
subsequently overruled and/or held not to be good law in
view of the subsequent decisions in the cases of Anjum
M.H. Ghaswala (supra) and Bhagat Construction
Company Private Limited (supra).
CA 5769/2022 Etc. Page 33 of 67
4.11 Insofar as the submission regarding non-framing of
the substantial question of law on levy of interest is
concerned, heavy reliance is placed on the decision of
this Court in the case of State Bank of India v. S.N.
Goyal, (2008) 8 SCC 92 (paragraph 13). It is submitted
that as observed and held by this Court in the aforesaid
decision, when a question of law arises incidentally or
collaterally, having no bearing on the final outcome, it will
not be a substantial question of law. It is submitted that in
the present case, the Constitution Bench in Anjum M.H.
Ghaswala (supra) has held that the interest is both
mandatory and automatic and the decision of this Court
and various High Courts had concluded that it does not
require a separate notice, hearing and an independent
order. It is submitted that this Court in the case of Bhagat
Construction Company Private Limited (supra) had in
no uncertain terms made the legal position clear by
holding that should the assessing authority enclose an
ITNS 150 form computing the interest liability and
annexed the same with the assessment order, the same
would constitute adequate compliance for sustaining the
interest and upholding it. That the aforesaid judgment
makes it evidently clear that when an issue is incidental or
collateral then it does not give rise to a substantial
CA 5769/2022 Etc. Page 34 of 67
question of law. Once the tax liability is upheld, interest
become automatic, mandatory and collateral.
4.12 It is next submitted that the final outcome of the tax
liability or the final outcome of the substantial questions
raised and decided by the High Court, had been decided
without any sense of dependence on the issue of interest.
That the final legal outcome of the substantial questions
raised and decided is not dependent or contingent upon a
decision on interest. On the contrary, the moment the tax
liability gets upheld, if the AO had imposed interest at the
first instance, (which in this case is not under dispute)
then interest would get added to the tax liability as it does
not require an independent and stand alone consideration
as to whether the same is leviable.
4.13 As regards the reliance placed upon the decision of
this Court in the case of Shiv Raj Gupta v. CIT, Delhi,
AIR 2020 SC 3556, by the learned senior counsel
appearing on behalf of the appellants on non-framing of
substantial question of law in terms of Section 260A of the
Act so far as the interest liability is concerned, it is
submitted that the said decision shall not be applicable to
the facts of the case at hand and more particularly in case
of an interest which is automatic and mandatory. It is
submitted that in the said case, the dispute was with
CA 5769/2022 Etc. Page 35 of 67
respect to capital gains which by its very nature is a
separate head of income and the issue relates to the very
taxability. That therefore, failure to raise a question of
taxability of capital gains in a particular case may
tantamount to a failure in raising a substantial question of
law in terms of Section 260A of the Act. However, the
same may not apply on interest as the interest is
automatic and mandatory.
4.14 Making above submissions and relying upon the
aforesaid decisions, it is prayed that the present appeals
be dismissed.
Consideration:
5. We have heard learned counsel for the respective
parties at length.
We have also gone through the orders passed by
the Assessing Officer, CIT(A), ITAT and the impugned
judgment and order passed by the High Court in great
detail.
At the outset, it is required to be noted that the AO
held against the respective assessees on all points
including Rattan Gupta being the main person in
management and control of the respective companies
CA 5769/2022 Etc. Page 36 of 67
situated in Delhi as well as the jurisdiction of the AO in
Delhi. The findings shall be referred to hereinbelow. The
findings recorded by the AO have been upheld by the
CIT(A), which are also against the respective assessees.
However, the ITAT reversed the order passed by the
CIT(A), which order has been reversed by the High Court
by holding that the decision of the ITAT is perverse both,
on facts and in law.
6. While appreciating the correctness of the impugned
judgment and order passed by the High Court and while
appreciating the submissions made by the learned
counsel appearing for the respective parties, the findings
recorded by the AO, CIT(A), ITAT and the High Court in
the impugned judgment and order are required to be
referred to, which are as under:
Findings record by the AO while passing the
Assessment Order:
i) The directors are all from outside Sikkim and had
never been to Sikkim, and the lone director Mr.
Ajay Agarwal was projected as a resident of
Gangtok, Sikkim, which could not be sustained
as no proof or identity was shown;
CA 5769/2022 Etc. Page 37 of 67
ii) The entire books of accounts were found and
seized at New Delhi at the address of Mr. Rattan
Gupta, Chartered Accountant, 4556/4, Ansari
Road, Darya Ganj, New Delhi. Returns were filed
without audit reports and auditors have not
signed balance sheets and the auditors were
also based out of Delhi. Though bank accounts
were available both in Delhi and Sikkim, the
authorized signatories, to operate both the
accounts were located only in Delhi;
iii) The statutory books, registers and the
shareholders were all located in Delhi;
iv) No evidence was ever produced for having
conducted board meetings in Sikkim;
v) When it came to earning of commission from
various agents, the genuineness of the
addresses given at Sikkim could not be proved.
When notices were issued under Section 131 of
the Act, no response was forthcoming and, from
the memorandum and articles of association it
was clear that the agents were kith and kin of the
directors;
vi) Shockingly, the total commission alleged to have
been earned was more than the sale of
CA 5769/2022 Etc. Page 38 of 67
cardamom and what could have been produced
by the State of Sikkim in a year. These facts
have been corroborated by the intelligence wing
of the department;
vii) There were no employees and no expenses
incurred at Sikkim;
viii) At the time of search and seizure on 15.03.1990
at the premises of Mr. Rattan Gupta & Co., the
following things were seized:
1) Books of accounts
2) Funds
3) Memorandum and Articles of Association
4) Blank cheque books of the bank accounts
held both in New Delhi, Gangtok and Sikkim
5) Pass books of all the 5 companies both Delhi
and Gangtok
6) Blank printed letter pads and rubber stamps
ix) Mr. Rattan Gupta in his statement dated 15th
March, 1990, confirmed that as part of
reconciliation, the persons contacted were
Dalmia Resorts International Private Limited and
Gujarat Heavy Chemicals Limited and other
entities. He further confirmed that Mr. Rajiv Jain
became a director in 3 companies on his
CA 5769/2022 Etc. Page 39 of 67
instructions and he had also made directors in all
the 5 Sikkim companies and named a few of
them. It was conceded clearly that though these
persons became directors at his behest no work
was performed by these persons except signing
papers;
x) Mr. Rajiv Jain in his statement dated 15th March,
1990 confirmed that cheque books and pass
books were found at the office of Mr. Rattan
Gupta and so is the case with rubber stamps
and blank printed letter heads;
xi) Mr. Ravinder Singh in his statement confirmed
that he had been looking after the day-to-day
affairs of these companies from Delhi till March,
1998, after which Rattan Gupta took over the
position as the only director and the other
directors were his nominees, and Rattan Gupta
functioned and operated only from Delhi and no
office expenses have been incurred in Sikkim;
xii) The AO also entered a finding that there has
been a fund transfer from Delhi into the bank
accounts at Sikkim to claim exemption and these
have been round tripping of money going from
CA 5769/2022 Etc. Page 40 of 67
Delhi to Sikkim and getting remitted back into
Delhi and claiming exemption in Sikkim; and
xiii) This was done till 31st March, 1989 and the
moment Income Tax Act was extended in 1990
the whole apparatus erased and no commission
was shown by any of the companies.
Findings recorded by the CIT(A):
1) That the appellate authority upheld the findings of
the AO, more specifically regarding commission
alleged to have been received by reiterating that
the summons sent to different persons who had
allegedly paid amounts as commission had not
responded to him and that the assessees had also
not produced any worthwhile evidence to prove the
genuineness of commission received.
2) That even U.P. Karma was examined on 8th
October, 1998 and he confirmed that he had joined
in 1998 and had no idea of earlier annual general
body meetings and could not produce any minutes.
He also confirmed that he did not have any idea
about the business in which all the 5 companies
were involved earlier. That he is a working director
CA 5769/2022 Etc. Page 41 of 67
claiming that he had never visited Gangtok, which
shows that Sikkim has been merely used without
actual rendition of any affairs.
3) As regards the charging of interest, the CIT(A)
gave a finding that the interest was charged as per
the workings mentioned in ITNS 150 which was
forming part of the assessment order, which is
sufficient and good enough to uphold interest in
terms of the decision of this Court.
Findings recorded by the ITAT:
1) After confirming the fact that the notices were
dispatched only in the name of the respective
companies in c/o Rattan Gupta, Chartered
Accountant, it was observed that Rattan Gupta
would not qualify as a principal officer within the
meaning of section 2(35)(a) of the Act. At this
stage, it is required to be noted that the High Court
has observed that in any event the authorised
representative of the assessee appeared before
the AO and accepted that the notices has been
issued. In that view of the matter, thereafter it is
CA 5769/2022 Etc. Page 42 of 67
not open for the assessees to make a grievance
with respect to non-service of the notice;
2) On the aspect relating to the control and
management of the affairs, the ITAT recorded the
findings as under:
i) It is important to highlight that the ITAT
had neither reserved nor found the
findings of the AO as upheld by the
CIT(A), as not maintainable or factually
erroneous or perverse.
ii) The findings of fact rendered by the AO
as upheld by the CIT(A) remain
undisturbed and unquestioned.
iii) The entire discussion by the ITAT has
only been an analysis of various case law
on this point without questioning the
underlying findings.
iv) The ITAT finally came to a conclusion that
since all the 5 companies had been
registered in Sikkim, Sikkim will get the
jurisdiction to tax.
Thereafter, the ITAT concluded that the revenue could not
discharge its burden and, therefore, control and
CA 5769/2022 Etc. Page 43 of 67
management was only in Sikkim and the income had
accrued only in Sikkim.
6.1 While reversing the finding of the AO on whether the
commission was not earned in Gangtok, though the AO
found that the notices were sent to those who had
allegedly paid the commission to the assessees and the
summons under Section 131 had not been complied with,
the ITAT gave a finding that the AO did not proceed further
and thus, since no adverse material has been brought on
record, the AO could not have proceeded to draw adverse
inference as the burden was heavily on the revenue.
6.2 On the levy of interest, the ITAT concluded that the
interest could not have been levied since the AO had not
applied his mind before levying interest following the
decision of the Patna High court in the case of Ranchi
Club Limited (supra).
Findings recorded by the High Court:
1. That a company, though incorporated in Sikkim, if it
had earned any income outside Sikkim and within
India, Income Tax Act, 1961 would apply to such
income and the jurisdiction of the income tax
authorities would not get excluded as long as what
CA 5769/2022 Etc. Page 44 of 67
is sought to be brought to take is the income of the
company incorporated in Sikkim, which income
accrued to it and was earned in India.
2. While referring to the various statements made by
the directors who are all stationed in Delhi, the High
Court has given the following findings:
i) Rattan Gupta had not acted merely as an
auditor giving professional advice to the 5
entities;
ii) His own employees are appointed as
directors;
iii) The explanation offered for signed cheque
books, rubber seals and letter heads being
available in his office is not convincing;
iv) Rattan Gupta had tried to shift the entire
responsibility of handling of cheques to Mr.
Verma; Mr. Verma was never produced by
the assessee;
v) The burden of proof could not be discharged
in the instant case and therefore, the High
Court upheld the findings of the AO that the
precise role of Mr. Rattan Gupta as being in
de facto control of the 5 entities appears to
be correct;
CA 5769/2022 Etc. Page 45 of 67
vi) That two persons who had been identified to
have handled the business and supervised
it, namely, H.L. Verma and Uma Shankar
Sitani were produced by the assessees for
their statements to be recorded. The High
Court found that Mr. R.K. Goswami, Mr.
Vedant Mehta and Mr. Rajiv Jain had all
become directors on the request of Mr.
Rattan Gupta, a fact which was not
disproved or found to be incorrect.
6.3 Thereafter, the High Court concluded that the
control and management of affairs was wholly in India for
the following reasons:
a) Rattan Gupta was not only doing audit work but
determining who should be the directors of the said
companies.
b) The rubber seals, letter heads, blank signed
cheques and other records were all found in the office
of Rattan Gupta. The factual determination by the AO
remains undisputed and this fortifies that the control
and management was in Delhi.
c) The statement of Rattan Gupta suggesting that H.L.
Verma or Uma Shankar Sitani were actually handling
CA 5769/2022 Etc. Page 46 of 67
the affairs of the 5 entities could not be made good by
offering either of them for examination.
d) Once documents were seized and statements were
recorded from various persons, the burden gets shifted
to the assessees to produce some evidence to counter
the picture and, the court found that its extremely
unusual that the seals and the signed blank cheques
would be lying with the Chartered Accountant.
e) The High Court in paragraph 70 held that the
revenue is right as there can be no presumption in law
that control and management is at the registered office.
f) In paragraph 71, the High Court held that “it appears
to the Court that the ITAT has not upset the factual
finding of the AO, which was confirmed by the CIT(A).
The above exhaustive evidence gathered by the
revenue, without being countered by the assessee
despite opportunity being afforded, serves to
substantiate the case of the revenue that the
management and control of the 5 assessee companies
was in fact located in Delhi. The finding by the ITAT in
this regard is plainly perverse and unsustainable in law.”
g) On commission and accrual of income, the High
Court concluded as under:
CA 5769/2022 Etc. Page 47 of 67
i) The findings by the AO that the assessee had
failed to prove that the commission payments earned
by them is exclusively in Sikkim had not been
dislodged by the assessee by producing any tangible
material;
ii) The evidence produced by the assesses are
only copies of bills and vouchers and receipt of
money from such agents at Sikkim in its bank
accounts and assessments have been made under
the Sikkim Manual, 1948;
iii) The High Court in para 76 held that “none of
the 5 entities named by the assessees as having paid
the commission to them appeared in the course of
assessment proceedings to confirm the payments
having been made to the assessees.” The High
Court also recorded that the rate of commission paid
was unrealistic and beyond human probabilities, nonexistence of any employees in Sikkim, non-incurring
of any expenditure in Sikkim as found in the P&L
account and finally the balance sheet showing that
notwithstanding that the income was from
commission the assets were in the form of
investments in Dalmia Group would stare at the face
of the assessees and remains unrebutted. The High
CA 5769/2022 Etc. Page 48 of 67
Court concluded that the findings by the ITAT in this
regard is contrary to the record and is based on
surmises and unsustainable in law.
6.4 In light of the above findings, the submissions made
by the learned counsel for the respective parties on
service of notice upon Rattan Gupta being in the control
and management of the respective assessees; the control
and management of the affairs of the assessee
companies; the applicability of the Income Tax Act, 1961;
jurisdiction of the AO and levy of interest are required to
be considered.
7. On appreciation of the entire evidence on record,
the AO, CIT(A) and the High Court have specifically held
against the assessees that in fact Rattan Gupta did not
merely render professional services but had a vital say in
the control and management of the assessee companies
and in fact he was in control and management of the
affairs of the respective assessee companies.
7.1 On control and management of business, few
decisions on interpretation of Section 4A of the erstwhile
Income Tax Act, 1922 and interpretation of Section 6(3) of
the Income Tax Act, 1961 are required to be referred to,
which are as under:
CA 5769/2022 Etc. Page 49 of 67
i) In the case of V.V.R.N.M. Subbayya Chettiar
(supra), it is observed in paragraph 10 as under:
“10. The principles which are now well established in England
and which will be found to have been very clearly enunciated
in Swedish Central RailwayCo. Ltd. v. Thompson (Inspector of
Taxes) [Swedish Central Railway Co. Ltd. v. Thompson
(Inspector of Taxes), 1925 AC 495 : 9 TC 373 (HL)] , which is
one of the leading cases on the subject, are:
(1) That the conception of residence in the case of a
fictitious “person”, such as a company, is as artificial as the
company itself, and the locality of the residence can only be
determined by analogy, by asking where is the head and seat
and directing power of the affairs of the company. What these
words mean have been explained by M. Patanjali Sastri, J. with
very great clarity in the following passage where he deals with
the meaning of Section 4-A(b) of the Income Tax Act:
“4-A. (b) ‘Control and management’ signifies, in the present
context, the controlling and directive power, ‘the head and
brain’ as it is sometimes called, and ‘situated’ implies the
functioning of such power at a particular place with some
degree of permanence, while ‘wholly’ would seem to recognise
the possibility of the seat of such power being divided between
two distinct and separated places.”
As a general rule, the control and management of a business
remains in the hand of a person or a group of persons, and the
question to be asked is wherefrom the person or group of
persons controls or directs the business.
(2) Mere activity by the company in a place does not create
residence, with the result that a company may be “residing” in
one place and doing a great deal of business in another.
(3) The central management and control of a company may
be divided, and it may keep house and do business in more
than one place, and, if so, it may have more than one
residence.
(4) In case of dual residence, it is necessary to show that
the company performs some of the vital organic functions
incidental to its existence as such in both the places, so that in
fact there are two centres of management.”
CA 5769/2022 Etc. Page 50 of 67
ii) Thereafter, in the case of Erin Estate (supra), it is
observed in paragraphs 6 & 9 as under:
“6. There is no doubt that the question raised for our decision
is a question of law. Whether or not the appellant is a resident
firm under Section 4-A(b) would depend upon the legal effect
of the facts proved in the case. The status of the appellant
which has to be determined by reference to the relevant
section of the Act is a mixed question of fact and law and in
determining this question the principles of law deducible from
the provisions of the said section will have to be applied. This
position has not been disputed before us in the present
proceedings. Section 4-A(b) provides inter alia that “for the
purpose of the Act, a firm is resident in the taxable territories
unless the control and management of its affairs is situated
wholly without the taxable territories”. This provision shows
that, where the partners of a firm are residents of this country,
the normal presumption would be that the firm is resident in
the taxable territories. This presumption is rebuttable and it
can be effectively rebutted by the assessee showing that the
control and management of the affairs of the firm is situated
wholly without the taxable territories. The onus to rebut the
initial presumption is on the assessee. The control and
management contemplated by the section evidently refers to
the controlling and directing power. Often enough, this power
has been described in judicial decisions as the “head and
brain”; the affairs of the firm which are subject to the said
control and management refer to the affairs which are relevant
for the purpose of taxation and so they must have some
relation to the income of the firm. When the section refers to
the control and management being situated wholly without the
taxable territories it implies that the control and management
can be situated in more places than one. Where the control
and management are situated wholly outside India the initial
presumption arising under the section is effectively rebutted. It
is true that the control and management which must be shown
to, be situated at least partially in India is not the merely
theoretical control and power, not a de jure control and power
but the de facto control and power actually exercised in the
course of the conduct and management of the affairs of the
firm. Theoretically, if the partners reside in India they would
CA 5769/2022 Etc. Page 51 of 67
naturally have the legal right to control the affairs of the firm
which carries on its operations outside India. The presence of
this theoretical de jure right to control and manage the affairs
of the firm which inevitably vests in all the partners would not
by itself show that the requisite control and management is
situated in India. It must be shown by evidence that control
and management in the affairs of the firm is exercised, may be
to a small extent, in India before it can be held that the control
and management is not situated wholly without the taxable
territories. (Vide B.R. Naik v. CIT [(1945) 13 ITR 124 : (1946)
14 ITR 334] ). The effect and scope of the provisions of
Section 4-A(b) has been considered by this Court
in V.V.R.N.M. Subbayya Chettiar v. CIT [1950 SCC 971 :
(1950) SCR 961, 965] . After examining the relevant decisions
on this point, Fazi Ali, J., who delivered the judgment of the
Court, has observed “(1) that the conception of residence in
the case of a fictitious ‘person’ such as a company, is as
artificial as the company itself and the locality of the residence
can only be determined by analogy, by asking where is the
head and seat and directing power of the affairs of the
company. …(2) Mere activity by the company in a place does
not create residence, with the result that the company may be
residing in one place and doing a great deal of business in
another. (3) The central management and control of a
company may be divided and it may keep house and do
business in more than one place, and, if so, it may have more
than one residence. (4) In case of dual residence, it is
necessary to show that the company performs some of the
vital organic functions incidental to its existence as such in
both the places so that in fact there are two centres of
management”. It is in the light of these principles that Section
4-A(b) has to be construed. Thus, the only question which
remains to be considered is whether the High Court of Madras
was right in holding that the appellant was resident in India
under Section 4-A(b).
xxx xxx xxx
9. Mr Kolah then raised a further point which had not been
urged before the High Court. He contended that the control
and management mentioned in Section 4-A(b) must be control
CA 5769/2022 Etc. Page 52 of 67
and management valid and effective in law. Under Section 12
of the Partnership Act, it is only the majority of partners who
could have given effective directions to the superintendent and
since there is no evidence that the alleged control and
management has been exercised by the majority of partners
acting in concert it would not be possible to hold that any
control and management of the firm's affairs resided in India.
We do not think there is any substance in this argument.
Under Section 12(a), every partner has a right to take part in
the conduct of the business and it is only where difference
arises as to ordinary matters connected with the business of
the firm that the same has to be decided by majority of
partners under sub-section (c) of the said section. It has not
been suggested or shown that there was any difference
between the partners in regard to the matters covered by the
individual partner's letters of instruction to the superintendent.
Indeed the course of conduct evidenced by these letters
shows that Andiappa Pillai who holds the maximum number of
individual shares has purported to act for the partnership and
usually gave instructions in regard to the conduct and
management of the firm's affairs. On the record we see no
trace of any protest against, or disagreement with, this
conduct of Andiappa Pillai. Besides, it was never suggested
during the course of the enquiry before the Income Tax
Officers that the directions given by Andiappa Pillai were not
valid or effective and had not been agreed upon by the
remaining partners. That is why we think this technical point
raised by Mr Kolah must fail.”
iii) That thereafter the Bombay High Court in the case
of Narottam and Pareira Ltd. (supra) through Justice
M.C. Chagla, as His Lordship then was, observed and
held in paragraphs 3 and 4 as under:
“3. It is also necessary that the control and
management of the affairs of the company should be
situated wholly in the taxable territories. Therefore, if
any part of the control and management is outside the
taxable territories then the company would not be
CA 5769/2022 Etc. Page 53 of 67
resident. In this connection it is perhaps necessary to
look at the converse definition for a Hindu undivided
family, firm or other association of persons. In their
case they are resident unless the control and
management of its affairs is situated wholly without
the taxable territories. Therefore; whereas in the case
of a Hindu undivided family or firm or association of
persons any measure of control and management
within the taxable territories would make them
resident, in the case of a company any measure of
control and management of its affairs outside the
taxable territories would make it non-resident. In
construing the expression “control and management”
it is necessary to bear in mind the distinction between
doing of business and the control and management of
business. Business and the whole of it may be done
outside India and yet the control and management of
that business may be wholly within India. In this
particular case considerable emphasis is placed upon
the fact that the whole of the business of the company
is done in Ceylon and the whole of the income which is
liable to tax has been earned in Ceylon. But that is not
a factor which the Legislature has emphasised, It is
entirely irrelevant where the business is done and
where the income has been earned. What is relevant
and material is from which place has that business
been controlled and managed. “Control and
management” referred to in Section 4A(c) is, as we
shall presently point out on the authorities, central
control and management. The control and
management contemplated by this sub-section is not
the carrying on of day to day business by servants,
CA 5769/2022 Etc. Page 54 of 67
employees or agents. The real test to be applied is,
where is the controlling and directing power, or rather,
where does the controlling and directing power
function or to put it in a different language there is
always a seat of power or the head and brain, and
what has got to be ascertained is, where is this seat of
power, or the head and brain. A company or for the
matter of that a firm or an undivided Hindu family has
got to work through servants and agents, but it is not
the servants and agents that constitute the seat of
power or the controlling and directing power. It is that
authority to which the servants, employees and agents
are subject, it is that authority which controls and
manages them, which is the central authority, and it is
at the place where the central authority functions that
the company resides. It’ may be in some cases that
like an individual a company may have residence in
more than one place. It may exercise control and
management not only from one fixed abode, but it
may have different places. That would again be a
question dependent upon the circumstances of each
case. But the contention which Mr. Kolah has most
strongly pressed before us is entirely unacceptable
that a company controls or manages at a particular
place because its affairs are carried on at a particular
place and they are carried on by people living there
appointed by the company with large powers of
management. A company may have a dozen local
branches at different places outside India, it may send
out agents fully armed with authority to deal with and
carry on business at these branches, and yet it may
retain the central management and control in Bombay
CA 5769/2022 Etc. Page 55 of 67
and manage and control all the affairs of these
branches from Bombay and at Bombay. It would be
impossible to contend that because there are
authorised agents doing the business of the company
at six different places outside India, therefore the
company is resident not only in Bombay but at all
these six different places.
4. ….It is perfectly true that these two managers do all
the business of the company in Ceylon and in doing
that business naturally a large amount of discretion is
given to them and a considerable amount of authority.
But the mere doing of business does not constitute
these managers the controlling and directing power.
Their power-of-attorney can be cancelled at any
moment, they must carry out any orders given to them
from Bombay, they must submit to Bombay an
explanation of what they have been doing, and
throughout the time that they are working in Ceylon a
vigilant eye is kept over their work from the directors'
board room in Bombay. The correspondence which has
also been relied upon between the company here and
its office in Colombo also goes to show and
emphasises the same state of affairs. Mr. Kolah is right
again when he puts emphasis upon the fact that what
we have to consider in this case is not the power or
the capacity to manage and control, but the actual
control and management, or, in other words, not the
dejure control and management but thede facto
control and management, and in order to hold that the
company is resident during the years of account it
must be established that the company de facto
controlled and managed its affairs in Bombay. Mr.
CA 5769/2022 Etc. Page 56 of 67
Kolah says that the two powers-of-attorney go to show
that whatever legal or juridical control and
management the company might have had, in fact the
actual management was exercised by the two
managers in Ceylon. In our opinion this is not a case
where the company did nothing with regard to the
actual management and control of its affairs and left it
to some other agency. As we said before, the two
managers were the employees of the company acting
throughout the relevant period under the control and
management of the company, and therefore in the
case we are considering there was not only a dejure
control and management, but also a de facto control
and management.”
That thereafter, Justice Kania, as His Lordship then
was, after referring to the decision in the case of B.R.
Naik v. Commissioner of Income Tax, Bombay, (1945)
13 ITR 124 has observed and held that the expression
“control and management” means where the central
control and management actually abides.
iv) The Calcutta High Court in the case of Bank of
China (supra) has specifically held that a company
may be simultaneously resident in more than one place,
but the control and management is where the head and
CA 5769/2022 Etc. Page 57 of 67
brain is situated. While holding so, in paragraphs 7 to 9,
it is observed and held as under:
“7. Under s. 6(3), a non-Indian company is said to be resident
in India in any previous year if during that year the control and
management of its affairs is situated wholly in India. The
determination as to at what place or places the control and
management of a particular company is situated is essentially
a question of fact to be determined on the facts and
circumstances of the particular case. A company can be
simultaneously resident in more than one place but the
question is whether the control and management is situated
wholly in India during the relevant previous year. The
expression “control and management” signifies the controlling
and directive power, “the head and brain”, as it is sometimes
called, and “situated” implies the functioning of such power at
a particular place with some degree of permanence. The word
“wholly” as used in s. 6(3) would indicate that the seat of such
power may be divided between two distinct and separate
places. The expression “control and management” means de
facto control and management and not merely the right or
power to control and manage. In order to hold that a nonIndian company is resident in India during any previous year, it
must be established that such company de facto controls and
manages its affairs in India. The principles are by now well
settled.
8. Lord Loreburn L.C. in De Beers Consolidated Mines
Ltd. v. Howe, [1906] 5 TC 198 (HL) at page 212, observed as
follows:
“Mr. Cohen propounded a test which had the merits of
simplicity and certitude. He maintained that a company
resides where it is registered, and nowhere else…… I cannot
adopt Mr. Cohen's contention. In applying the conception of
residence to a company, we ought, I think, to proceed as
nearly as we can upon the analogy of an individual. A
company cannot eat or sleep, but it can keep house and do
business. We ought, therefore, to see whether it really keeps
house and does business. An individual may be of foreign
nationality, and yet reside in the United Kingdom. So may a
company. Otherwise, it might have its chief seat of
CA 5769/2022 Etc. Page 58 of 67
management and its centre of trading in England, under the
protection of English law, and yet escape the appropriate
taxation by the simple expedient of being registered abroad
and distributing its dividends abroad. The decision of Chief
Baron Kelly and Baron Huddleston in Calcutta Jute Mills Co.
Ltd. v. Henry Nicholson, [1876] 1 TC 83 : [1876] 1 Ex D 428
and Cesena Sulphur Co. Ltd. v. Henry Nicholson, [1876] 1
TC 83 : [1876] 1 Ex D 428, now thirty years ago, involved the
principle that a company resides for purposes of income-tax
where its real business is carried on. Those decisions have
been acted upon ever since. I regard that as the true rule;
and the real business is carried on where the central
management and control actually abides.”
9. Since that judgment, the words underlined have been taken
as the test, although central management and control has
sometimes been stated in the form “head, seat and directing
power”. The question depends on the fact of the management
and not on the physical situation of the thing that is managed.
A company is managed by the board of directors and if the
meetings of the board of directors are held within India, it may
be said that the central control and management is situated
here. The direction, management and control “the head and
seat and directing power” of a company's affairs is, therefore,
situate at the place where the directors' meetings are held
and, consequently, a non-Indian company would be a resident
in this country if the meetings of the directors who manage
and control the business are held here. The word “affairs”
means affairs which are relevant for the purpose of the I.T. Act
and which have some relation to the income sought to be
assessed. It is not the bare possession of powers by the
directors, but their taking part in or controlling the affairs
relating to the trading, that is of importance in determining the
question of the place where the control is exercised. They
must exercise their power of control in relation to business or
activity wherefrom the profit is derived. (See Egyptian Hotels
Ltd. v. Mitchell, [1915] 6 TC 542 (HL)).”
v) In the case of Nandlal Gandalal (supra), this Court
has held that the expression “control and management”
in Section 4A(b) of the Income Tax Act, 1922, means de
CA 5769/2022 Etc. Page 59 of 67
facto control and management and not merely the right
or power to control and manage.
8. The sum and substance of the above decisions of
this Court as well as various High Courts would be that
where the head and seat and directing power of the affairs
of the company and the control and management is must
be shown is not merely theoretical control and power, i.e.,
not de jure control and power, but de facto control and
power actually exercised in the course of the conduct and
management of the affairs of the firm; that the domicile or
the registration of the company is not at all relevant and
the determinate test is where the sole right to manage and
control of the company lies.
9. Applying the above principles of law to the facts of
the case at hand, and the findings recorded by the AO,
confirmed by the CIT(A), it is rightly concluded that the
control and management of the affairs of the respective
assessees were with Rattan Gupta, Chartered Accountant
in Delhi. The findings of fact recorded by the AO,
confirmed by the CIT(A) that the control and management
of the affairs of the assessee companies was with Rattan
Gupta are based on the entire material on record. In light
of the aforesaid findings, the High Court has not
CA 5769/2022 Etc. Page 60 of 67
committed any error in reversing the contrary findings
recorded by the ITAT and it is rightly observed and held
that service of notice upon Rattan Gupta treating him as
the principal officer and/or as a principal officer for and on
behalf of the assessee companies were valid notices and
the High Court has rightly held that the AO at New Delhi
was having the jurisdiction to issue notice under the
Income Tax Act, 1961.
10. Insofar as the case on behalf of the respective
assessees that the entire income was earned in Sikkim by
way of commission on sale of cardamom and therefore
such income shall not be liable to be taxed under the
Income Tax Act, 1961 is concerned, at the outset, it is
required to be noted that there are concurrent findings
recorded by the AO and the CIT(A), as approved by the
High Court, that no income by way of commission, as
claimed by the assessees, has been established and
proved by the assessees. In fact, the AO issued
notices/summons to different persons who had allegedly
paid amounts as commission, however, those persons
had not responded. Therefore, the AO as such has rightly
drawn an adverse inference. At this stage, it is required to
be noted that as such the assessees did not produce any
worthwhile evidence to prove the genuineness of the
CA 5769/2022 Etc. Page 61 of 67
commission received. Despite the above, the ITAT
reversed the findings of fact recorded by the AO and the
CIT(A) by observing that the AO did not proceed further
(after issuing the summons/notices) and that since no
adverse material has been brought on record the AO
could not have proceeded to draw an adverse inference
as the burden was heavy on the revenue. Once, the AO
issued summons to those who had allegedly paid the
commission to the assessees and the summons were
issued under Section 131 which were not complied with
and it was the assertion on behalf of the respective
assessees that they earned the income of commission
within Sikkim, the burden to prove the same was upon the
assessees. Under the circumstances, the ITAT wrongly
and erroneously shifted the burden upon the AO to prove
the contrary. Therefore, in absence of any material on
record that the commission was earned only in Gangtok,
the assessees cannot be permitted to say that they were
liable to pay the tax under the Sikkim Manual, 1948 and
not under the Income Tax Act, 1961. It appears that the
assessees with mala fide intention and to evade the
payment of tax under the Income Tax Act, 1961 came out
with a case that they earned the income within Sikkim,
which has not been established and proved. It was a
CA 5769/2022 Etc. Page 62 of 67
clear attempt on the part of the respective assessees to
wriggle out of the clutches of the Income Tax Act, 1961.
11. As regards the submission on behalf of the
respective assessees that as there was no original
assessment under the Income Tax Act, 1961, there could
not have been the re-assessment under sections 147/148
of the Act, 1961 is concerned, the same has no substance
in view of the binding decision of this Court in the case of
Sun Engineering Works P. Ltd. (supra). In paragraph
14 of the said decision, it is observed and held as under:
“14…..Thus, under Section 147, the assessing officer has
been vested with the power to ‘assess or reassess’
the escaped income of an assessee. The use of the
expression “assess or reassess such income or recompute the
loss or depreciation allowance” in Section 147 after the
conditions for reassessment are satisfied, is only relatable to
the preceding expression in clauses (a) and (b) viz., “escaped
assessment”. The term “escaped assessment” includes both
“non-assessment” as well as “under assessment”. Income is
said to have “escaped assessment” within the meaning of this
section when it has not been charged in the hands of an
assessee in the relevant year of assessment. The expression
“assess” refers to a situation where the assessment of the
assessee for a particular year is, for the first time, made by
resorting to the provisions of Section 147 because the
assessment had not been made in the regular manner under
the Act. The expression “reassess” refers to a situation where
an assessment has already been made but the Income Tax
Officer has, on the basis of information in his possession,
reason to believe that there has been under assessment on
account of the existence of any of the grounds contemplated
by the provisions of Section 147(b) read with the Explanation
(1) thereto.”
CA 5769/2022 Etc. Page 63 of 67
12. Insofar as the submission on behalf of the
respective assessees regarding levy of interest and the
submission on behalf of the assessees that in absence of
any specific order passed in the assessment order to levy
interest, the interest could not have been levied, is
concerned, the said issue as such is concluded against
the assessees in view of the Constitution Bench decision
of this Court in the case of Anjum M.H. Ghaswala
(supra) as well as the subsequent decision in the case of
Karanvir Singh Gossal (supra). The ITAT relied upon
the decision of the Patna High Court in the case of
Ranchi Club Ltd. (supra), however, the decision of the
Patna High Court in the case of Ranchi Club Ltd.
(supra) is held to be not good law, in view of the
Constitution Bench decision of this Court in the case of
Anjum M.H. Ghaswala (supra).
12.1 In the case of Anjum M.H. Ghaswala (supra), while
dealing with the interest under the provisions of Sections
234A, 234B and 234C of the Income Tax Act, 1961, it is
observed and held that the interest contemplated under
the said provisions is mandatory in nature and the power
of waiver or reduction has not been expressly conferred
on the Commission. The same indicates that insofar as
CA 5769/2022 Etc. Page 64 of 67
the payment of statutory interest is concerned, the same
is outside the purview of the settlement contemplated in
Chapter XIX-A of the Act. In the present case also, the
levy of interest under Section 234A for default in
furnishing the return of income is mandatory and
automatic. Section 234A of the Act provides that where
the return of income for any assessment year is furnished
after the due date or is not furnished, the assessee shall
be liable to pay simple interest. Thus, interest under
section 234A is statutory interest leviable and payable and
therefore the decision of this Court in the case of Anjum
M.H. Ghaswala (supra) shall be applicable with full force.
Therefore, when the interest is levied as per the workings
mentioned in ITNS 150 which is forming part of the
assessment order, it is rightly held to be sufficient and
good enough to charging interest. (See decision of this
Court in the case of Bhagat Construction Company
Private Limited (supra)).
13. As regards the submission on behalf of the
assessees that no substantial question of law was framed
on levy of interest, at the outset, it is required to be noted
that both the parties made submissions on levy of interest
elaborately which have been dealt with and considered by
the High Court in light of the Constitution Bench decision
CA 5769/2022 Etc. Page 65 of 67
of this Court in the case of Anjum M.H. Ghaswala
(supra). Even otherwise, the said issue can be said to be
incidental or collateral. Even otherwise, in view of the
decision of this Court in the case of Anjum M.H.
Ghaswala (supra) holding that the levy of interest under
Section 234A is statutory interest and mandatory and
automatic, thereafter the said issue cannot be said to be a
question of law.
Conclusion:
14. In view of the above and for the reasons stated
above and the findings recorded by the AO, CIT(A),
confirmed by the High Court, it cannot be said that the
High Court has committed any error in upsetting the
findings recorded by the ITAT. We are in complete
agreement with the view taken by the AO, CIT(A) and the
High Court on all issues including the issue of control and
management of the affairs of the assessee companies by
Rattan Gupta from Delhi; jurisdiction of the AO at New
Delhi; applicability of the Income Tax Act, 1961; that the
assessees did not prove that the income was earned by
way of commission in Sikkim and therefore the tax was
not liable to be paid under the Income Tax Act, 1961 and
CA 5769/2022 Etc. Page 66 of 67
was liable to be paid under the Sikkim Manual, 1948. We
are also in agreement with the view taken by the High
Court on levy of interest in view of the binding decision of
the Constitution Bench in the case of Anjum M.H.
Ghaswala (supra), which has been subsequently
followed in the case of Karanvir Singh Gossal (supra).
15. In view of the above and for the reasons stated
above, the present appeals fail and the same deserve to
be dismissed and are accordingly dismissed. However, in
the facts and circumstances of the case, there shall be no
order as to costs.
………………………………J.
[M.R. SHAH]
NEW DELHI; ………………………………J.
APRIL 10, 2023. [B.V. NAGARATHNA]

CA 5769/2022 Etc. Page 67 of 67

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