Court Dismisses Tax Reassessment Writ Petitions, Directs Petitioners to Statutory Appeals

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Case Name:

M/s Kasautii Vs Commissioner of Income Tax & Ors. (High Court of Jharkhand)

W.P.(T) No.2344 of 2015

Date: 3rd March 2020

Key Takeaways

1. The court emphasized the importance of exhausting statutory remedies before approaching the High Court under Article 226.

2. Writ petitions challenging tax reassessment notices may be dismissed if alternative remedies are available.

3. The court reaffirmed the principle laid down in previous Supreme Court judgments regarding the limited scope of writ jurisdiction in tax matters.

Issue

Should the High Court entertain writ petitions challenging income tax reassessment notices and orders when statutory appeal mechanisms are available under the Income Tax Act?

Facts

1. The petitioners filed writ petitions under Article 226 of the Constitution of India.

2. The petitions sought to quash notices issued under Section 148 (of Income Tax Act, 1961) for the assessment year 2010-11.

3. The petitioners also requested the court to declare the assumption of jurisdiction under Section 147 (of Income Tax Act, 1961) as void and to quash the assessment order under Section 143(3) (of Income Tax Act, 1961)/147 dated 24.03.2015. 

Arguments

Petitioners' Arguments:

1. The notices under Section 148 (of Income Tax Act, 1961) were not in compliance with the instructions provided in the GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors. case.

2. The High Court should exercise its jurisdiction under Article 226 to examine the validity of the notices. 

Revenue's Arguments:

1. The writ petitions are not maintainable due to the availability of alternative remedies through appeals.

2. The assessment orders have already been passed, and factual aspects should be determined by the appellate authority.

3. The petitioners did not comply with the procedure outlined in the GKN Driveshafts case, as they sought reasons for the notices without first filing returns. 

Key Legal Precedents

1. GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors., (2003) 1 SCC 72: This case outlines the proper procedure for responding to notices under Section 148 (of Income Tax Act, 1961). 

2. Commissioner of Income Tax & Ors. Vrs. Chhabil Dass Agarwal, (2014) 1 SCC 603: This judgment emphasizes that writ petitions should not be entertained when effective alternative remedies are available under the statute. 

Judgement

1. The court dismissed both writ petitions.

2. The petitioners were given liberty to avail the statutory remedy of appeal.

3. If appeals are filed within eight weeks from the date of the order, the appellate authority should consider them, taking into account the delay caused by the pendency of the writ petitions.

4. The court cited the Chhabil Dass Agarwal case, stating that writ jurisdiction should not be exercised when alternative remedies are available under the Income Tax Act. 

FAQs

Q1: Why did the court dismiss the writ petitions?

A1: The court dismissed the petitions because there were alternative remedies available through statutory appeals under the Income Tax Act. The court emphasized that writ jurisdiction should not be exercised when such remedies exist.

Q2: Can the petitioners still challenge the reassessment notices and orders?

A2: Yes, the court granted the petitioners liberty to file appeals through the statutory mechanism provided in the Income Tax Act.

Q3: What is the significance of the GKN Driveshafts case in this judgment?

A3: The GKN Driveshafts case outlines the proper procedure for responding to notices under Section 148 (of Income Tax Act, 1961). The revenue argued that the petitioners did not follow this procedure correctly.

Q4: What time frame did the court provide for filing appeals?

A4: The court allowed the petitioners to file appeals within eight weeks from the date of receipt or production of a copy of the order.

Q5: Will the delay in filing appeals be considered?

A5: Yes, the court instructed the appellate authority to consider the delay caused by the pendency of the writ petitions when examining the appeals.

1. These writ petitions are under Article 226 of the Constitution of India and since involving similar issues, as such, have been directed to be heard together and are being disposed of by this common order/ judgment.

2. In both the writ petitions, notices issued under Section 148 (of Income Tax Act, 1961) (hereinafter referred to as the Act, 1961) by the respondent No.2 for the assessment year 2010-11 have been sought to be quashed with a declaration that the assumption of jurisdiction under Section 147 (of Income Tax Act, 1961) by the respondent No.2 for the assessment year 2010-11 is ab initio void and further for quashing and setting aside the assessment order under Section 143(3) (of Income Tax Act, 1961)/147 of the Act, 1961 dated 24.03.2015.

3. Learned counsel for the revenue has submitted by raising the issue of maintainability on the ground of availability of alternative remedy of appeal.

According to him, since notices under Section 148 (of Income Tax Act, 1961) have now been culminated into an order of assessment which can be assailed before the appellate authority and as such the writ petitions may not be entertained as because once the order of assessment has been passed in terms of the notice under Section 148 (of Income Tax Act, 1961)/143(3)/147 of the Act, 1961, the factual aspect is to be determined which would properly be appreciated by the appellate authority and so far as the jurisdiction of High Court under Article 226 of the Constitution of India is concerned, the same may not be exercised by appreciating the factual aspect, moreover, since the forum of appeals are available, hence, these writ petitions under Article 226 of the Constitution of India are not maintainable.

4. In response to such submission, Mr. Biren Poddar, learned senior counsel for the petitioners has submitted that even if the order of assessment has been passed after the issuance of notice under Section 148 (of Income Tax Act, 1961), the said notices can be looked into by the High Court under Article 226 of the Constitution of India since according to him, the said notices are not in terms of the instruction as contained in the judgment rendered in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors., (2003) 1 SCC 72.

5. In response to such submission, learned counsel for the revenue in furtherance of his argument which he has already advanced, has submitted by referring to the conduct of the petitioners that in the judgment of the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors. (supra), the Hon’ble Apex Court has clarified that when a notice under Section 148 (of Income Tax Act, 1961) is issued, proper course of action for the noticee is to file return and if he so desires, to seek reasons of issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order but herein the petitioners have not filed return and without filing it, the reasons for issuance of notices have been sought for, as such, the petitioners itself have not complied with the instruction as has been observed in the judgment rendered in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors. (supra) and hence the ground which has been agitated by the learned counsel for the petitioners about hearing the matter on merit under Article 226 of the Constitution of India is not fit to be allowed.

6. This Court, therefore, is of the view that so many factual aspects have been agitated by the petitioners basis upon which the notices under Section 148 (of Income Tax Act, 1961), re-assessment orders passed and the consequential demand notices issued thereof, have been questioned.

7. It has already been held by Hon’ble Apex Court in the case of Commissioner of Income Tax & Ors. Vrs. Chhabil Dass Agarwal, (2014) 1 SCC 603 at paragraph Nos. 16 and 17 which reads hereunder as:-

“16. In the instant case, the Act provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assesse could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The remedy under the statute, however, must be effective and not a mere formality with no substantial relief. In Ram and Shyam Co. v. State of Haryana this Court has noticed that if an appeal is from “Caesar to Caesar’s wife” the existence of alternative remedy would be a mirage and an exercise in futility.

17. In the instant case, neither has the writ petitioner assesse described the available alternate remedy under the Act as ineffectual and non-efficacious while invoking the writ jurisdiction of the High Court nor has the High Court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of the instant case. In light of the same, we are of the considered opinion that the writ court ought not to have entertained the writ petition filed by the assesse, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 (of Income Tax Act, 1961), the reassessment orders passed and the consequential demand notices issued thereon.”

8. In view of the decision of the Hon’ble Supreme Court rendered in the case of Commissioner of Income Tax & Ors. Vrs. Chhabil Dass Agarwal (supra), as above, we are of the opinion that the petitioners have approached this Court without availing the alternative remedy available under the Income Tax Act and have not been able to put-forth any cogent and satisfactory reason to persuade us to exercise our extraordinary jurisdiction under Article 226 of the Constitution of India.

9. This Court, after applying the aforesaid principle as laid down by the Hon’ble Apex Court and considering the fact that the factual dispute has been agitated, is of the view that when alternative remedy of appeal is available under the statute, it would not be appropriate and proper for this Court to exercise extraordinary jurisdiction conferred to this Court.

10. In the result, both the writ petitions stand dismissed, however, with the liberty to the petitioners to avail the statutory remedy of appeal.

11. If the memorandum of appeal is preferred within a period of eight weeks from the date of receipt/production of a copy of this order along with the limitation petition, then let the same be considered by the appellate authority in accordance with law also considering the delay that has been caused due to pendency of the writ petitions.

12. This goes without saying that the petitioners would be at liberty to raise all the issues before the appellate Forum which would be available to them in law.

(Dr. Ravi Ranjan, C.J.)

(Sujit Narayan Prasad, J.)

Saurabh

N.A.F.R.