2003 (5) TMI 41 - HC - Income Tax

Petitioner had challenged the jurisdiction of the Assistant Commissioner of Income-tax, Investigation, Circle-4(1), Calcutta, to issue the notice for rectification of the assessment relating to the assessment year 1991-92 under section 154 - in our view, the notice seems to be illegal since the grounds do not conform to the ingredients of section 154. - As such we declare the notice impugned illegal, invalid bad in law and without jurisdiction. - In the result, the appeal succeeds

Issues Involved:
1. Maintainability of the writ petition against the notice.
2. Estoppel against the assessee by reason of his submission of reply to the notice.
3. Mistake apparent from the records and its sub-issues:
- Scope for forming two opinions.
- Debatable issue.
- Establishing the mistake through long drawn arguments.
- Applicability of Explanation (b) to section 6(1)(c).
- Confusion or doubt between clause (a) or clause (b) of the Explanation.
- Absence of reason in the assessment order as a mistake apparent from the records.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The court held that a writ petition cannot be entertained where there is an adequate alternative efficacious remedy. However, in this case, the writ petition had been entertained and kept pending for a long time, making it iniquitous to relegate the petitioner to an alternative remedy under the Income-tax Act. The court referenced L. Hirday Narain v. ITO and other cases to support the view that the writ petition should be maintained despite the existence of an alternative remedy, especially when the notice appears to be without jurisdiction or illegal.

2. Estoppel Against the Assessee:
The court examined whether the assessee, having submitted a reply to the notice and then moving the writ petition, was estopped from challenging the notice. It was held that the writ petition could be maintained despite the submission of the reply, especially since the petition was entertained and kept pending. The court emphasized that the question of estoppel would not be fatal in this context.

3. Mistake Apparent from the Records:
The court summarized the scope of section 154, stating that it can be invoked for rectification of a mistake apparent on the face of the records, which must be obvious, clear, and patent. The mistake should not require long and elaborate reasoning or arguments and must not be a debatable point of law.

Sub-issues under Mistake Apparent from the Records:

a. Scope for Forming Two Opinions:
The court found that the facts could lead to two possible opinions regarding the assessee's residential status under section 6(1)(c). The court noted that the issue was debatable and required drawing inferences from the facts, which is not permissible under section 154.

b. Debatable Issue:
The court held that the question of whether the assessee was a "non-resident" or "ordinarily resident" was debatable and could not be rectified under section 154. The court referenced several cases, including CIT v. South India Bank Ltd., to support this view.

c. Establishing the Mistake Through Long Drawn Arguments:
The court concluded that establishing the mistake required long and elaborate reasoning and arguments, which is not permissible under section 154. The court emphasized that a mistake must be glaring and obvious to be rectifiable under section 154.

d. Applicability of Explanation (b) to Section 6(1)(c):
The court examined whether the assessee could be brought within Explanation (b) to section 6(1)(c). The court found that the facts did not conclusively establish this and that the issue was debatable.

e. Confusion or Doubt Between Clause (a) or Clause (b) of the Explanation:
The court noted that there was confusion or doubt as to whether the assessee would be governed by clause (a) or clause (b) of the Explanation to section 6(1)(c). This further supported the view that the issue was debatable and not rectifiable under section 154.

f. Absence of Reason in the Assessment Order as a Mistake Apparent from the Records:
The court held that the absence of reasoning in the assessment order, when the decision is in favor of the assessee, cannot be considered a mistake apparent from the records. The court referenced S.S. Gadgil v. Lal and Co. to support this view.

Conclusion:
The court declared the notice impugned illegal, invalid, bad in law, and without jurisdiction. The appeal was allowed, the order dated September 10, 2002, was set aside, and the writ petition was allowed. The impugned notice dated January 9, 1996, was quashed. The court issued a writ certiorari accordingly, and the appeal was allowed without any order as to costs.

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