2013 (8) TMI 458 - SC - Income Tax

Jurisdiction of High Court - reassessment - Writ petition filed against order passed u/s 148 - High Court quashed reassessment proceedings - Held that - 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 - 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. 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 - Decided in favour of Revenue.

Summary

Issues Involved:
1. Validity of the High Court's interference under Article 226 of the Constitution despite the availability of an alternative statutory remedy.
2. Assessment and re-assessment orders under Section 148 of the Income Tax Act, 1961.
3. Tax liability of non-Sikkimese individuals residing in Sikkim.

Detailed Analysis:

1. Validity of the High Court's interference under Article 226 of the Constitution despite the availability of an alternative statutory remedy:

The Supreme Court addressed whether the High Court was justified in entertaining the writ petition under Article 226 of the Constitution when an equally efficacious alternative remedy was available under the Income Tax Act. It reiterated the principle that non-entertainment of writ petitions when an alternative remedy exists is a rule of self-imposed limitation, primarily a rule of policy, convenience, and discretion rather than a rule of law. The Court emphasized that the High Court should not interfere if there is an adequate and efficacious alternative remedy available unless an exceptional case is made out or sufficient grounds exist to invoke the extraordinary jurisdiction under Article 226. The Court cited several precedents, including *State of U.P. vs. Mohammad Nooh* and *Titaghur Paper Mills Co. Ltd. vs. State of Orissa*, to support this principle.

The Court noted that the Income Tax Act provides a complete mechanism for assessment, re-assessment, and obtaining relief from improper orders through appeals to the Commissioner of Income Tax (Appeals). The assessee did not describe the alternate remedy as ineffectual or non-efficacious, nor did the High Court provide cogent reasons for exercising its jurisdiction. Therefore, the Supreme Court concluded that the High Court ought not to have entertained the writ petition filed by the assessee.

2. Assessment and re-assessment orders under Section 148 of the Income Tax Act, 1961:

The case involved the issuance of notices under Section 148 of the Income Tax Act for the Assessment Years 1995-1996 and 1996-1997, following the discovery of unexplained income and non-filing of returns by the assessee. The Assistant CIT, Circle-I, Siliguri, confirmed the notices and completed ex-parte assessments under Section 144 of the Act, raising significant tax demands and initiating penalty proceedings under Section 271(1)(c) of the Act.

The assessee challenged these notices and subsequent assessment orders through writ petitions, which were initially referred to a Committee and later disposed of with directions to maintain the status quo until a final decision by the Committee. Following amendments to the Act and instructions from the Central Board of Direct Taxes, the assessing authority reaffirmed the tax liability through a demand notice dated 11.12.2009.

3. Tax liability of non-Sikkimese individuals residing in Sikkim:

The primary issue before the Writ Court was whether the income of non-Sikkimese individuals residing in Sikkim was taxable under the Income Tax Act. This question was referred to a Committee, and the writ petitions were disposed of with directions to maintain the status quo. The insertion of Section 10(26AAA) of the Act by the Finance Act, 2008, exempted certain income accruing to Sikkimese individuals from tax. However, the Central Board of Direct Taxes issued instructions regarding the tax liability of non-Sikkimese individuals residing in Sikkim, which influenced the subsequent assessment orders.

Conclusion:

The Supreme Court allowed the appeal, set aside the High Court's judgment, and granted liberty to the respondent to file an appropriate petition/appeal against the re-assessment orders within four weeks. The appellate authority was directed to consider the petition on merits without reference to the period of limitation and not be influenced by the High Court's observations. All contentions of the parties were left open.