By TIOL News Service:

NEW DELHI, OCT 4, 2017: The Supreme Court quashed a finding of the Delhi High Court, upholding the plea raised by the assessee therein, challenging the jurisdiction of an SCN issued to it. The assessee had approached the High Court claiming that the authority issuing the SCN did not have the jurisdiction to do so, as it was not the proper authority. The High Court accepted the assessee's contentions. However, the Supreme Court set aside the High Court's findings in this regard, and observed that neither had the assessee, in its reply to SCN raised the question of jurisdiction of the authority issuing such SCN, nor had it done so during the subsequent adjudication proceedings. Since the discrepancy was not highlighted earlier, in raising the issue directly before the High Court for the first time, the assessee had denied the revenue the opportunity to correct its mistake by issuing a fresh and valid SCN. The Court further observed that the assessee could not be allowed to take advantage of its own wrongs and so, claim an undeserved victory over the revenue.

Facts in brief -

The assessee had filed applications under the Delhi Tax Compliance Achievement Scheme, 2013 (hereinafter, the 'Amnesty Scheme'). Such scheme was notified by the GNCTD u/s 107 of the DVAT Act. Under Clause 8 of the Scheme, the Additional Commissioner (Spl. Zone), Department of Trade and Taxes issued an SCN to the assessee. In the reply to SCN, the assessee did not question the jurisdiction of such officer to issue SCN. When the order was confirmed rejecting the applications of the assessee, a writ was filed before the High Court, wherein the SCN was challenged as being out of order and unauthorised and lacking jurisdiction. The assessee's contention that the power to issue such SCN under clause 8 was vested with the Commissioner, and the same had not been delegated to the Designated Authority i.e. the concerned Additional Commissioner, found favor with the High Court. It was also held that Clause 8(3) of the Scheme, the SCN had to be issued within one year of the date of the declaration, and that in the present case, the SCN was time-barred. Hence the revenue approached the present forum.

On hearing the appeal, the Supreme Court held that,

++ While it is correct that the failure to raise the issue of jurisdiction by the assessee will not necessarily clothe the Additional Commissioner with the jurisdiction if the same is not contemplated by law, there are certain aspects of the case which need to be considered. Had the assessee raised the question of jurisdiction in its reply or in the course of the adjudication proceedings there would have been still time for the Commissioner to cure the defect and issue a valid notice. Cases under Amnesty Scheme would fall outside the arena of ordinary and routine matters and, therefore, it is possible to attribute a genuine mistake on the part of the Additional Commissioner in invoking jurisdiction under Clause 8 of the Amnesty Scheme. The question that looms large before the Court is that whether in such a situation the assessee should be allowed to raise the question of limitation and defeat the claim of the revenue to proceed afresh in the matter on that basis.

++ the aforementioned issue was dealt with by this Court in Grindlays Bank Ltd. vs. Income Tax Officer, Calcutta and Ors. , and considering the findings rendered therein, Clause 8(3) of the Amnesty Scheme will have no application to the present case where the initial SCN was issued within time and its legitimacy was not contested by the assessee. Had such legitimacy been questioned at the stage of reply or even in the course of the adjudication proceedings, there would still have been room/time for the revenue to correct the error that had occurred. A rectified notice could even have been issued after the order of adjudication was passed on 11th February, 2015. The close proximity of time between the reply submitted by the assessee to the SCN (27.01.2015) and the proceedings in adjudication revenue on the one hand and the date of filing of the Writ Petition (4.3.2015) would permit us to infer that the conduct of the assessee in raising the issue in the writ petitions and not earlier was not entirely bonafide. The assessee, therefore, cannot be allowed to take advantage of its own wrong. The courts exercising extraordinary jurisdiction cannot be understood to be helpless but concede to the assessee an undeserved victory over the revenue. The power of the High Court under Article 226 of the Constitution, wide and pervasive as it is, should have enabled the High Court to appropriately deal with the situation and issue consequential directions permitting initiation of fresh proceedings, if the revenue was so inclined. The High Court having failed to so act, we now correct the error and issue directions to enable the revenue to issue a fresh notice to the assessee under clause 8 of the Amnesty Scheme, if it so desires and is so advised.

Thus, the revenue appeal was partly allowed.

(See 2017-TIOL-373-SC-VAT)