1997 (11) TMI 76 - HC - Income Tax

Summary

Issues: Challenge to demand notice under Income-tax Act, 1961 based on assessment procedure and circulars, legality of assessment under section 143(3) disregarding circular, demand notice validity, alternative remedy available to petitioners.

Analysis:
The writ application challenged a demand notice issued by respondent No. 5 under the Income-tax Act, 1961. The petitioners contended that they had complied with the conditions set out in a circular issued by the Central Board of Direct Taxes for assessment year 1995-96, exempting them from sample scrutiny under section 143(3). Despite this, the Assessing Officer conducted a sample scrutiny, leading to an assessment under section 143(3) which the petitioners disputed. They further argued that the assessment was completed unlawfully and in violation of the circular guidelines. The petitioners appealed the assessment before the Commissioner of Income-tax (Appeals) V, Calcutta, who disposed of the appeal on May 30, 1997.

The petitioners received a demand notice dated October 13, 1997, which they deemed unlawful. Counsel for the petitioners argued that both the Assessing Officer and the appellate authority erred in proceeding under section 143(3) contrary to the Central Board of Direct Taxes press note. The counsel cited relevant Supreme Court cases to support their contention. On the other hand, counsel for the respondents highlighted the petitioners' right to appeal before the Tribunal as an alternative remedy provided under the Income-tax Act, 1961.

The Judge, after considering the facts and provisions of the Income-tax Act, 1961, found that the petitioners indeed had an alternative remedy available to them - to appeal to the Appellate Tribunal under section 253 of the Act. Consequently, the Judge held that the writ court should not entertain the writ application and that the petitioners should pursue the remedy provided under the Act. The Judge clarified that the dismissal of the application was not based on the merits of the case but on the availability of an alternative remedy. The parties were granted liberty to raise all points before the appropriate authority, and the application was dismissed without any order as to costs.