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July 28, 2021

Maintainability of Writ Petitions in Assessment/Reassessment cases: Supreme Court

Maintainability of Writ Petitions in Assessment/Reassessment cases: Supreme Court

Fact and Issue of the case

The assessee is a Sikkim based non-Sikkimese who had filed his first return of income for Assessment Year 1997-1998. Upon assessment, it was discovered that he had a net profit of Rs.5,78,832/- during the Assessment Year 1996-1997 relevant to the Assessment Year 1995-1996. Since no return was filed by the assessee for the Assessment Year 1996-1997 despite capitalizing the aforesaid profit, proceedings under Section 147 of the Act  were  initiated  against  him  for  the  said  Assessment  Year. Accordingly,  on  26.05.1998  the  notice  was  issued  under  Section  148 of the Act. Further, the Revenue has found out that as on 31.03.1996 the assessee had brought forward closing capital of Rs.1,73,90,397/- including the aforesaid net profit during the Assessment Year 1996- 1997 The same remained unexplained as the return of income for Assessment  Year  1995-1996  was  also  not  furnished  by  the  assessee. Hence,  another  notice  under  Section  148  was  issued  to  the  assessee for the Assessment Year 1995-1996, dated 30.03.2000. It has come on record  that  the  assessee  did  not  comply  with  the  aforesaid  notices issued under Section 148 of the Act and thus, a letter dated 19.01.2001 came to be issued to the assessee as a reminder to file his return of income for the assessment years clearly mentioning that  failure  to  do  so  would  lead  to  an  ex-parte  assessment  under Section 144 of the Act. Thereafter, upon filing of written submissions by the assessee, notice under Section 142(1) of the Act dated 25.06.2001 was issued for the Assessment Year 1995-1996 alongwith final show cause fixing compliance for hearing dated 09.07.2001. The assessee sought for an adjournment which was not granted  and  the  assessments  were  completed  ex-parte  under  Section 144 of the Act raising a tax demand of Rs.2,45,87,625/- and Rs.6,32,972/- for Assessment Years 1995-96 and 1996-97, respectively by orders dated 09.07.2001 and 28.03.2001, respectively. Further, penalty proceedings under Section 271(1)(c) of the Act were also initiated for both Assessment Years.

The assessee approached the Writ Court in Writ Petition(c) Nos. 31 and 38 of 2001 challenging the aforesaid notices issued under Section 148, dated 26.05.1998 and 30.03.2000 and the subsequent assessment orders, dated 09.07.2001 and 28.03.2001. The issue raised before the Writ Court was whether the income of the non-Sikkimese residing in Sikkim is taxable under the Act. The said question was referred to a Committee for its consideration and the Writ Petition was disposed of as withdrawn with the direction to maintain statusquo in the matter till the declaration of final decision by the Committee, by order dated 21.07.2005. In the meanwhile, Section 10 (26AAA) of the Act was inserted by Section 4 of the Finance Act, 2008 whereby certain income accruing or arising to a Sikkimese individual was exempted from tax. Thereafter, Central Board of Direct Taxes (for short ‘the Board’) issued Instruction No. 8 dated 29.07.2008 in respect of tax liability of the income accruing or arising to a non-Sikkimese individual residing in Sikkim. In the light of the aforesaid amendment and instruction, the Writ Court by order dated 15.07.2009 reiterated the earlier order dated 21.07.2005 and granted liberty to parties to approach the Writ Court or any other competent authority/forum for redressal of their grievances arising out of the matter.

It is in the aforesaid backdrop that the assessing authority has passed the assessment order against the assessee confirming the earlier notices issued for Assessment Years 1995-1996 and 1996-1997 respectively and held that the assessee is liable to pay the income tax as demanded by demand notice dated 11.12.2009.

Aggrieved by the aforesaid, the assessee instead of exhausting the statutory remedy available under the Act, e., statutory appeal before the Statutory Appellate Authority (Commissioner of Income Tax (Appeals)) has approached the High Court under Article 226 of the Constitution of India. Suffice it is to notice here that the Writ Court has delved into the merits of the case and thought it fit to quash the order of the assessing authority dated 11.12.2009, by judgment and order dated 05.10.2010.

Being aggrieved by the aforesaid judgment and order of the Writ Court, the Revenue is before us in this appeal questioning the correctness or otherwise of the impugned judgment and order.

Observation of the court

In the instant case, the Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee 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.  vs.  State  of  Haryana,  (1985)  3  SCC  267 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. In the instant case, neither has the assessee-writ petitioner 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 instant case.

In light of the same, court is of the considered opinion that the Writ Court ought not to have entertained the Writ Petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the re-assessment orders passed and the consequential demand notices issued thereon.

In view of the above, court allows this appeal and set aside the judgment and order passed by the High Court in Writ Petition (Civil) No.44 of 2009.

Court grant liberty to the respondent, if he so desires, to file an appropriate petition/ appeal against the orders of re-assessment passed under Section 148 of the Act within four weeks’ time from today. If the petition is filed before the appellate authority within the time granted by this Court, the appellate authority shall consider the petition only on merits without any reference  to  the period of limitation.

However, it is clarified that the appellate authority shall not be influenced by any observation made by the High Court while disposing of the Writ Petition (Civil) No.44 of 2009, in its judgment and order dated 05.10.2010.

Conclusion

The court allowed the petition and ruled in favour of the petitioner

Read the full order from below

Maintainability-of-Writ-Petitions-in-AssessmentReassessment-cases-Supreme-Court

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