Direct or of I ncom e Tax, and ot hers v. Dolphin Drilling PTE Lim it ed

Judgment

( p e r H o n ’ b l e Ju s t i ce Sr i M a n o j K u m a r Ti w a r i )

1. This int ra- Court appeal is filed by Direct or of I ncom e Tax, I nt ernat ional Taxat ion, challenging j udgm ent dat ed 03.04.2015 rendered by learned Single Judge in Writ Pet it ion ( M/ S) No. 200 of 2011. By t he j udgm ent , not ice issued t o respondent under Sect ion 147 read wit h Sect ion 148 of I ncom e Tax Act , 1961 was set aside. Operat ive port ion of t he im pugned j udgm ent is ext ract ed below: “ The j udgm ent of Appellat e Aut horit y dat ed 16.02.2010 was assailed before I .T.A.T., how ever, sam e was also decided in favour of t he assessee. Since, quest ion of ownership and depreciat ion t hereon was accept ed t wice by t he C.I .T. ( A) in Assessm ent Year 2004- 05 and 2005- 06, t her efore, sam e cannot be allow ed t o be reopened in t he garb of r eassessm ent . Likewise second ground of opinion was also subj ect m at t er of t he appeal befor e C.I .T. ( A) , t her efore, sam e is also not per m it t ed t o be r eopened in t he nam e of reassessm ent . Consequent ly, w rit pet it ion succeeds and is her eby allowed. I m pugned not ices for re- assessm ent are hereby quashed.”

2. Appellant has challenged t he im pugned j udgm ent on t he ground t hat respondent , who filed writ pet it ion, wrongly claim ed depreciat ion t o t he t une of Rs. 1 3,05,73,40,212/ - by claim ing t o be owner of a Drilling Ship/ Rig, nam ed ‘Bellford Dolphin’ and t he Assessing Officer allowed depreciat ion am ount ing t o Rs. 1,31,71,89,885/ - t o respondent under t he belief t hat he is t he owner of Drilling Ship/ Rig, but it was lat er revealed t hat Drilling Ship/ Rig nam ed as ‘Bellford Dolphin’ belonged t o anot her ent it y, which also claim ed depreciat ion t hereupon.

3. Learned counsel for t he appellant subm it s t hat while passing assessm ent order in case of anot her ent it y, nam ely, M/ s Dolphin Drilling Lim it ed for t he Assessm ent Year 2005- 06, it was revealed t hat drilling ship ‘Bellford Dolphin’ is owned by Fred Olsen Drilling A.S., who had execut ed MOU wit h Dolphin Drilling Lim it ed for m aking available t he above m ent ioned drilling ship for t he purpose of ONGC’s deep wat er t ender. Learned counsel for t he appellant subm it s t hat respondent never disclosed t his vit al inform at ion t hat drilling ship belongs t o som e ot her ent it y t o I ncom e Tax aut horit ies.

4. He furt her subm it s t hat Fred Olsen Drilling A.S. had also writ t en a let t er t o ONGC t hat in case Dolphin Drilling Lim it ed get s t he cont ract , Fred Olsen Drilling A.S. will m ake t he vessel available t o Dolphin Drilling Lim it ed for use in deep sea prospect ing / ext ract ion. He subm it s t hat t hese evidences were received by I ncom e Tax Depart m ent from ONGC.

5. Learned counsel for t he appellant subm it s t hat respondent filed obj ect ion t o t he not ice issued t o him under Sect ion 148 of I ncom e Tax Act and t he Assist ant 2 Direct or of I ncom e Tax rej ect ed t he obj ect ion by giving valid reasons vide order dat ed 20.12.2010. He t hus subm it s t hat int erference wit h t he not ice and t he order dat ed 20.12.2010 is unwarrant ed.

6. I t is cont ended on behalf of t he appellant t hat bar of proviso t o Sect ion 147 of I ncom e Tax Act , 1961 is not at t ract ed t o t he case in hand as before t he Appellat e Forum , only quant um of depreciat ion allowable t o t he assessee was in issue and his eligibilit y t o claim depreciat ion was not in issue at all. Thus it is cont ended t hat t he reason given in t he im pugned j udgm ent for set t ing aside t he not ice under Sect ion 148 of I ncom e Tax Act and order dat ed 20.12.2010 is unsust ainable.

7. Learned counsel for t he appellant subm it s t hat t he quest ion of ownership of drilling ship/ rig cam e t o be exam ined in assessm ent proceedings under Sect ion 143( 3) / 254 in t he case of respondent ’s relat ed ent it y nam ely M/ s Dolphin Drilling Lim it ed, where it was found t hat series of t ransact ions purport ing t o t ransfer of ownership of t he Rig am ongst various closely relat ed ent it ies were support ed by proper docum ent at ion.

8. Learned counsel for t he appellant furt her subm it s t hat respondent wrongly received t he benefit of depreciat ion by m aking false claim t hat he was owner of t he asset / drillship and when t his fact cam e t o t he not ice of t he com pet ent aut horit y, he was j ust ified in form ing a belief regarding escapem ent of incom e and in issuing not ice t o t he respondent . Thus he subm it s t hat int erference wit h t he not ice m ade by learned Single 3 Judge was uncalled for.

9. Per cont ra, learned counsel for t he respondent support ed t he j udgm ent rendered by learned Single Judge by cont ending t hat t he not ice issued t o respondent was barred by second proviso t o Sect ion 147 of I ncom e Tax Act , as insert ed by Finance Act , 2008, t herefore learned Single Judge was j ust ified in int erfering wit h t he not ice issued t o t he respondent .

10. The int erference by learned Single Judge wit h t he not ice issued t o respondent under Sect ion 148 of I ncom e Tax Act is based on t he prem ise t hat quest ion of ownership of Drilling Ship/ Rig was accept ed t wice by C.I .T. ( Appeal) in Assessm ent Year 2004- 05 and 2005- 2006, t herefore, t he sam e issue cannot be allowed t o be reopened under t he garb of reassessm ent .

11. We asked learned counsel for t he respondent t o place t he relevant port ion of t he order passed by C.I .T. ( Appeals) or I .T.A.T which indicat es t hat quest ion of ownership of t he Drilling Ship/ Rig was also in issue before t he C.I .T. ( Appeals) or I .T.A.T. Learned counsel for t he respondent , however, was not able t o show anyt hing in t he j udgm ent rendered by C.I .T. ( Appeals) or I ncom e Tax Appellat e Tribunal ( I .T.A.T.) which m ay support t he observat ion m ade t he im pugned j udgm ent t hat t he quest ion of ownership of Drilling Ship/ Rig was also decided by C.I .T. ( Appeals) or I .T.A.T.

12. Thus, we find subst ance in t he subm ission m ade by learned counsel for t he appellant t hat in t he Appeal decided by C.I .T. ( Appeal) and I .T.A.T., only quant um of 4 depreciat ion allowable t o t he respondent was in issue and t he quest ion of his eligibilit y t o claim depreciat ion or quest ion of ownership of drilling ship, was not in issue at all.

13. The allegat ion against t he respondent is t hat he wrongly claim ed benefit of depreciat ion, alt hough he knew t hat he is not eligible for such benefit which can be claim ed only by owner of an asset . Since benefit of depreciat ion was given t o respondent and when subsequent ly it was t hat depreciat ion was wrongly given t o him , in such circum st ances, not ice issued t o respondent under Sect ion 148 of I ncom e Tax Act cannot be said t o be illegal.

14. This Court finds subst ance in t he subm ission m ade by learned counsel for t he appellant t hat respondent should have wait ed for t he assessm ent proceedings t o conclude and he should not have rushed t o file a pet it ion under Art icle 226 of t he Const it ut ion, challenging a not ice when he had full opport unit y t o com e clean of t he allegat ion by giving reply t o t he not ice, issued t o him .

15. Whet her respondent is owner of t he drilling ship ‘Bellford Dolphin’ or not , cannot be decided in a writ pet it ion and such disput ed quest ion of fact can best be decided by t he aut horit ies under I ncom e Tax Act . Despit e having st at ut ory rem edy, which was m ore effect ive, filing of writ pet it ion by respondent cannot be approved of. 5

16. Hon’ble Suprem e Court t he Co m m i ssi o n e r o f I n co m e Ta x a n d o t h e r s v . Ch h a b i l D a ss A g a r w a l , report ed in ( 2 0 1 4 ) 1 SCC 6 0 3 has held as under: t his Court t he correct ness of “ 1 4 . I n Union of I ndia v. Guwahat i Carbon Lt d. [ ( 2012) 11 SCC 651] t his Court has reit erat ed t he aforesaid principle and observed : ( SCC p. 653, para 8) t he “ 8. Before we discuss im pugned order, w e int end t o rem ind ourselves t he observat ions m ade in Munshi Ram v. Municipal Com m it t ee, Chhehart a [ ( 1979) 3 SCC 83 : 1979 SCC ( Tax) 205] . I n t he said decision, t his Court was pleased t o observe t hat : ( SCC p. 88, para 23) ‘23. … [ when] a revenue st at ut e provides for a person aggrieved by an assessm ent t hereunder, a part icular rem edy t o be sought in a part icular forum , in a part icular way, it m ust be sought in t hat forum and in t hat m anner, and all t he ot her forum s and m odes of seeking [ r em edy] are excluded.’” t hat laid down t he enact m ent it can be said t he provisions of t his Court has 1 5 . Thus, w hile recognised som e except ions t o t he rule of alt ernat ive rem edy i.e. where t he st at ut ory aut horit y has not act ed in accordance wit h quest ion, or in defiance of t he fundam ent al principles of j udicial procedure, or has resort ed t o invoke t he provisions which are repealed, or when an order has been passed in t ot al violat ion of t he principles of nat ural j ust ice, t he proposit ion in Thansingh Nat hm al case [ AI R 1964 SC 1419] , Tit aghur Paper Mills case [ Tit aghur Paper Mills Co. Lt d. v. St at e of Orissa, ( 1983) 2 SCC 433 : 1983 SCC ( Tax) 131] and ot her sim ilar j udgm ent s t hat t he High Court will not ent ert ain a pet it ion under Art icle 226 of t he Const it ut ion if an effect ive alt ernat ive rem edy is available t o t he aggr ieved person or t he st at ut e under which t he act ion com plained of has been t aken it self cont ains a m echanism for redressal of grievance st ill holds t he field. Therefore, when a st at ut ory forum is creat ed by law for redressal of grievances, a writ pet it ion should not be ent ert ained ignoring t he st at ut ory dispensat ion. t he inst ant case, t he assessm ent / reassessm ent of t he Act provides com plet e 1 6 . I n m achinery t ax, im posit ion of penalt y and for obt aining relief in respect of any im proper orders passed by t he Revenue Aut horit ies, and t he assessee could not be perm it t ed t o abandon t hat m achinery and t o invoke t he j urisdict ion of t he High Court t he Const it ut ion when he had under Art icle 226 of adequat e rem edy open t he Com m issioner of I ncom e Tax ( Appeals) . The rem edy under t o him by an appeal t o 6 t he st at ut e, however, m ust be effect ive and not a m ere form alit y wit h no subst ant ial relief. I n Ram and Shy am Co. v. St at e of Haryana [ ( 1985) 3 SCC 267] t his Court has not iced t hat if an appeal is from “ Caesar t o Caesar's wife” t he exist ence of alt ernat ive rem edy would be a m irage and an exercise in fut ilit y. 1 7 . I n t he inst ant case, neit her has t he writ pet it ioner assessee described t he available alt ernat e rem edy under t he Act as ineffect ual and non- efficacious while invok ing t he writ j urisdict ion of t he High Court nor has t he High Court ascribed cogent and sat isfact ory reasons t o have exercised it s j urisdict ion in t he fact s of t he inst ant case. I n light of t he sam e, we are of t he considered opinion t hat t he writ court ought not t o have ent ert ained t he writ pet it ion t he assessee, wherein he has only quest ioned t he correct ness or ot herwise of t he not ices issued under Sect ion 148 of t he Act , t he reassessm ent orders passed and t he consequent ial dem and not ices issued t hereon.” filed by

17. Sim ilar view was t aken by Hon’ble Suprem e Court t he case of Co m m i ssi o n e r o f I n co m e Ta x , Gu j a r a t Vs. Vi j a y b h a i Ch a n d r a n i , report ed ( 2 0 1 3 ) 1 4 SCC 6 6 1 . Para 11, 12, 13 and 14 of t he said j udgm ent are ext ract ed below: - t hat t o believe t he docum ent s seized “ 1 1 . I n t he inst ant case, it t ranspires from t he record t hat j urisdict ional assessing aut horit y, upon having a t he reason indicat e escapem ent of incom e, has issued show- cause not ices under Sect ion 153- C t o t he assessee for reassessm ent of his incom e during Assessm ent Years 2001- 2002 t o 2006- 2007. Thereaft er, upon request of t he assessing aut horit y has furnished him wit h t he copies of docum ent s seized under Sect ion 132- A. The assessee being dissat isfied w it h t he said docum ent s inst ead of filing his explanat ion/ reply t o t he show- cause not ices, has filed a writ pet it ion before t he High Court im pugning t he said not ices. t he assessee, 1 2 . I n our consider ed view, at t he said st age of issuance of t he not ices under Sect ion 153- C, t he assessee could have addressed his grievances and explained his st and t o t he assessing aut horit y by filing an appropriat e reply t o t he said not ices inst ead of filing t he writ pet it ion im pugning t he said not ices. I t is set t led law t hat when an alt ernat e rem edy is available t o t he aggrieved part y, it m ust exhaust t he sam e before approaching t he writ court . I n Bellar y St eels & Alloys Lt d. v. CCT [ ( 2009) 17 SCC 547] , t his Court had allowed t he assessee t herein t o wit hdraw t he original writ pet it ion filed before t he High Court as t he said 7 proceedings cam e t o be filed against t he show- cause not ice and observed t hat t he High Court should not have int erfered in t he m at t er as t he writ pet it ion was filed wit hout even reply t o t he show- cause not ice. This Cour t furt her observed as follows: ( SCC p. 548, para 3) “ 3. … I n t he circum st ances, we could have dism issed t hese civil appeals only on t he ground of failure t o exhaust st at ut ory rem edy, but for t he fact t hat huge invest m ent s involving t he large num ber of indust r ies is in issue.” t his Court against 1 3 . We are fort ified by t he decision of t his Court in I ndo Asahi Glass Co. Lt d. v. I TO [ ( 2002) 10 SCC 444] wherein t he assessee had approached t he j udgm ent and order of t he High Court which had dism issed t he writ pet it ion filed by t he assessee wherein challenge was m ade t he t he show- cause not ice assessing aut horit y on t he ground t hat alt ernat ive rem edy was available t o t he assessee. This Court concurred wit h t he findings and conclusions reached by t he High Cour t and dism issed following t he said appeal w it h observat ions: ( SCC p. 445, para 5) issued by t he t o “ 5. This and t he ot her fact s cannot be t aken up for considerat ion by t his Court for t he first t im e. I n our t he opinion, conclusion t hat it is appropriat e for t he appellant s t o file a reply t o t he show- cause not ice and t ake what ever defence is open t o t hem .” t he High Court was right in com ing t o I n our considered opinion, at 1 4 . I n t he present case, t he assessee has invoked t he writ j urisdict ion of t he High Court at t he first inst ance wit hout first exhaust ing t he alt ernat e rem edies provided under t he Act . t he said st age of proceedings, t he High Court ought not have ent ert ained t he writ pet it ion and inst ead should have direct ed t he assessee t o file reply t o t he said not ices and upon receipt of a decision from t he assessing aut horit y, if for any reason it is aggriev ed by t he said decision, t o quest ion t he sam e before t he forum provided under t he Act .”

18. I n t he present case, t he disput e is whet her respondent has wrongly claim ed depreciat ion in respect of an asset , which was owned by som e ot her ent it y. The not ice under Sect ion 148 was also issued t o respondent t o ascert ain t he fact , whet her respondent is owner of drilling ship ‘Bellford Dolphin’. Alt hough C.I .T. ( Appeals) and I .T.A.T. had decided t he appeals in which quant um of depreciat ion allowable t o t he respondent issue, however, t he quest ion whet her 8 respondent is ent it led for depreciat ion or whet her he is owner of t he drilling ship, was not considered at all. The quest ion of ownership of drilling ship is a quest ion of fact which could best have been decided by t he aut horit ies under I ncom e Tax Act , t herefore, we are of t he considered opinion t hat int erference m ade by learned Single Judge in t he m at t er was uncalled for.

19. For t he aforesaid reasons, t he im pugned j udgm ent cannot be sust ained in t he eyes of law. We allow t he appeal and set aside t he im pugned j udgm ent rendered by learned Single Judge in Writ Pet it ion ( M/ S) 200 of

2011. _______________________________ M A N OJ K UM A R TI W A RI , J. ____________________________ SUBH A SH UPA D H YA Y, J. Dt : 12 t h August , 2025 Mahinder MAHINDER SINGH DN: c=IN, o=HIGH COURT OF UTTARAKHAND, ou=HIGH COURT OF UTTARAKHAND, 2.5.4.20=da6212e6e78d94ed3134842bc6a8d6ca168979ca7b8c2f031a92d1a18b08923c, postalCode=263001, st=UTTARAKHAND, serialNumber=AB77B7C5B240908B392BE84F5CDD4C2AF35DC4626D305B1BC9EA4BABA43D2B8F, cn=MAHINDER SINGH 9