2016 (2) TMI 1155 - HC - Income Tax

Reopening of assessment - Availability of alternative efficacious statutory remedy of appeal under Section 246A of the Act is also pleaded in the return for non-suiting the petitioner-assessee - Held that - The remedy of appeal before the ITAT is available if the outcome of the appeal under Sections 246/246A of the Act is not productive for the assessee. The jurisdiction and powers of the appellate authority under the Act are very wide so as to examine the legality and propriety of the impugned action of the AO and the consequential orders. Appellate authority, while exercising its jurisdiction, can take care of about the grievance of the assessee in right perspective and if feel persuaded can very well redress. Though for the Assessment Year 2008-09, fresh assessment order by AO has not been passed under Section 147/143(3) of the Act but the bone of contention for reopening of the assessment remains the same i.e. land consolidation expenses whether allowable or not to the assessee. Therefore, the objection of the Revenue about availability of alternative, efficacious remedy deserves credence vis-a-vis both the assessment orders and cannot be by-passed in the peculiar facts and circumstances of the instant case. The verdict of Supreme Court in Chhabil Dass Agarwal (2013 (8) TMI 458 - SUPREME COURT ) clearly clinches the issue in favour of the Revenue. The ratio decidendi of this judgment can very well be pressed into service vis-avis both the writ petitions and consequently objection of the Revenue is liable to be sustained to non-suit the petitioner in both the petitions. Supreme Court in an earlier decision in Champalal Binanai V/s. The Commissioner of Income-tax, West Bengal & Ors. 1969 (12) TMI 3 - SUPREME Court , while considering availability of alternative remedy of appeal under the Income-tax Act, 1922, opined that before exhausting the said remedy, an assessee is not entitled to invoke extraordinary jurisdiction enshrined under Article 226 of the Constitution. The argument of learned counsel for the assessee that statutory remedy of appeal is illusory and harassing cannot be countenanced in the backdrop of facts and circumstances of these matters, especially when against the original assessment orders, petitioner-assessee has successfully availed the remedy of appeal and the appellate authority has annulled the assessment orders to the extent of charging of interest under Section 234A/B/C of the Act. Availability of alternative efficacious remedy for maintainability of writ petition is a self-imposed restriction from which court, at times, may depart in certain special circumstances of an individual case. Such eventualities are (i) when the authority has acted arbitrarily without the sanction of law (ii) when the action of the authority is palpably wrong or (iii) when High Court is confronted with an unprecedented extraordinary situation. As afraid such very exceptional circumstances are not available in these petitions to bypass statutory alternative remedy. In view of foregoing discussions, both these petitions cannot be entertained on account of availability of efficacious alterative remedy of appeal.

Issues Involved:
1. Validity of notices issued under Section 148 of the Income-tax Act, 1961 for Assessment Years 2007-08 and 2008-09.
2. Legality of the re-assessment order dated 27th March 2015 passed under Section 147/143(3) of the Act.
3. Whether the initiation of re-assessment proceedings was based on a mere change of opinion.
4. Whether the Assessing Officer (AO) acted independently or under the influence of higher authorities.
5. Availability and adequacy of alternative statutory remedies.

Detailed Analysis:

1. Validity of Notices Issued under Section 148 of the Income-tax Act, 1961:
The petitioner-assessee challenged the notices issued under Section 148 for both assessment years, arguing that the reasons for reopening the assessments were not valid and were based on a mere change of opinion. The court emphasized that the AO must have "reason to believe" that income has escaped assessment, which must be based on tangible material and not merely on reappraisal of the same material. The court noted that the AO had recorded reasons for issuing the notices, specifically questioning the land consolidation expenses claimed by the assessee. The court found that the Revenue had made an effort to justify its action for reopening the assessments and had followed the prescribed procedure.

2. Legality of the Re-assessment Order Dated 27th March 2015:
The petitioner-assessee also challenged the re-assessment order dated 27th March 2015 for the Assessment Year 2007-08. The court noted that the assessment order is an appealable order under Sections 246 and 246A of the Act. The court emphasized that the appellate authority has wide jurisdiction to examine the legality and propriety of the AO's actions and can address the grievances of the assessee. The court concluded that the petitioner should avail the alternative remedy of appeal.

3. Whether the Initiation of Re-assessment Proceedings was Based on a Mere Change of Opinion:
The petitioner argued that the re-assessment proceedings were initiated based on a mere change of opinion, which is not permissible under the law. The court referred to various legal precedents, including the Supreme Court's decision in Commissioner of Income-tax V/s. Kelvinator of India Ltd., which held that mere change of opinion cannot be a valid reason for reopening assessment proceedings. The court found that the AO had recorded specific reasons for reopening the assessments, which were not merely based on a change of opinion but on tangible material.

4. Whether the Assessing Officer Acted Independently or Under the Influence of Higher Authorities:
The petitioner contended that the AO initiated the re-assessment proceedings under the influence of higher authorities. The court found no cogent and convincing material to substantiate this assertion. The court noted that the AO had exercised his discretion independently and had recorded reasons for reopening the assessments based on his findings.

5. Availability and Adequacy of Alternative Statutory Remedies:
The respondent-Department argued that the writ petitions were not maintainable due to the availability of alternative statutory remedies of appeal under Sections 246 and 246A of the Act. The court agreed with this contention, citing the Supreme Court's decision in Commissioner of Income-tax V/s. Chhabil Dass Agarwal, which held that when a statutory forum is created for redressal of grievances, a writ petition should not be entertained. The court emphasized that the petitioner should exhaust the alternative remedy of appeal before approaching the court.

Conclusion:
The court rejected both writ petitions, emphasizing the availability of alternative statutory remedies of appeal. The court directed the petitioner to approach the appellate authority within 15 days and instructed the appellate authority to consider any application for condonation of delay sympathetically. The court also allowed the AO to proceed further in the matter for the Assessment Year 2008-09 in accordance with law.

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