2007 (2) TMI 123 - HC - Income Tax

Reassessment - AO contended that assessee had escaped income more than one lakh in the AY 1993-94 and notice u/s 148 issued but assessee contended as time barred - Held that notice not barred by limitation

Issues Involved:
1. Whether the reassessment proceedings under Section 147 of the Income Tax Act are barred by limitation and consequently, whether the impugned proceedings dated 2.6.2003 are without jurisdiction.
2. To what relief the petitioner is entitled to.

Issue-wise Detailed Analysis:

Issue (i): Whether the reassessment proceedings made under Section 147 of the Act are barred by limitation and consequently, the impugned proceedings dated 2.6.2003 are without jurisdiction?

The petitioner company filed its return for the assessment year 1993-94, which was completed under section 143(3) of the Act. The Department later issued a notice under Section 148 for reassessment, stating that the income had escaped assessment due to the transfer of excess assets as a result of amalgamation. The petitioner challenged this notice, arguing that the reassessment was barred by limitation as the notice was issued beyond the period of seven years after the close of the assessment year.

The respondent countered that the initiation of reassessment proceedings was within the time limit as per Section 149 of the Act, which allows for reassessment notices to be issued within ten years if the escaped income amounts to more than one lakh rupees. The court agreed with the respondent, noting that the notice was issued on 31.5.2001, prior to the amendment of Section 149 effective from 1.6.2001. Thus, the pre-amended provisions applied, and the notice was within the permissible time frame. Consequently, the court held that the reassessment proceedings were not barred by limitation and did not suffer from a lack of jurisdiction.

Issue (ii): To what relief the petitioner is entitled to?

The petitioner argued that the reassessment was initiated without proper jurisdiction as the exchange value of shares pursuant to the amalgamation was not furnished along with the return. The court noted that the petitioner had not provided the necessary details regarding the exchange value of shares, which was a material fact crucial to the assessment. This omission warranted the reassessment proceedings for the escaped income.

The court emphasized that the remedy under Article 226 of the Constitution of India is discretionary and should not be used to bypass effective statutory alternative remedies. The petitioner had the option to appeal to the Commissioner of Income Tax (Appeals) but failed to do so. The court cited several precedents, including A.V.Venkateswaran v. R.S.Wadhwani and Titaghur Paper Mills Co. Ltd. v. State of Orissa, which underscore that where a statutory remedy is available, it must be exhausted before seeking judicial review under Article 226.

The court further highlighted that factual disputes, such as the exchange value of shares, are not suitable for resolution under Article 226. The court referenced the decision in State of H.P. & Ors. v. Gujarat Ambuja Cement Ltd., which allows for judicial review only in cases of undisputed facts or where statutory remedies are inadequate.

Given the presence of disputed facts and the availability of an alternative statutory remedy, the court dismissed the writ petition. The court also expressed concern over the interim orders that had restrained the respondent from collecting significant public revenue, thereby affecting government welfare measures.

Conclusion:

The reassessment proceedings under Section 147 were held to be within the permissible time limit and not barred by limitation. The court dismissed the writ petition, emphasizing the need to exhaust statutory remedies and the unsuitability of judicial review under Article 226 for resolving factual disputes. The petitioner was advised to pursue the statutory appeal process for any further relief.

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