1987 (5) TMI 2 - HC - Income Tax

Summary

Issues Involved:
1. Disallowance of incentive bonus as business expenditure.
2. Genuineness of thumb impressions on payment receipts.
3. Jurisdiction and propriety of the Commissioner (Appeals) in setting aside the assessment for further investigation.
4. Applicability of res judicata in income tax assessments.
5. Exhaustion of alternative remedies before seeking relief under Article 226 of the Constitution.

Detailed Analysis:

1. Disallowance of Incentive Bonus as Business Expenditure:
The petitioner claimed a deduction of Rs. 12,68,683 as incentive bonus paid to employees for the assessment year 1980-81. This claim was disallowed by the Assessing Officer on several grounds, including non-satisfaction of conditions under section 36(1)(ii) of the Income-tax Act, 1961, and doubts about the genuineness of the payments. The Commissioner (Appeals) upheld the disallowance, citing that the payments were recorded on separate sheets and received against thumb impressions, many of which were identical or similar.

2. Genuineness of Thumb Impressions on Payment Receipts:
The Assessing Officer's suspicion about the genuineness of thumb impressions was supported by an expert's opinion obtained during remand proceedings. The Commissioner (Appeals) noted that the thumb impressions on payment vouchers did not belong to the workers but to other persons allegedly authorized by the workers. This raised doubts about the genuineness of the payments, leading to the conclusion that the nature and extent of the payments were being withheld by the appellant company.

3. Jurisdiction and Propriety of the Commissioner (Appeals) in Setting Aside the Assessment for Further Investigation:
The Commissioner (Appeals) set aside the assessment for further investigation, directing that the thumb impressions be examined by photo enlargement if necessary. The petitioner challenged this order, arguing that the Commissioner (Appeals) acted without jurisdiction and disregarded judicial propriety by not following the Tribunal's decision for the assessment year 1981-82, which was in favor of the petitioner.

4. Applicability of Res Judicata in Income Tax Assessments:
The court held that an assessment year is a self-contained period, and a decision in one year does not operate as res judicata for another year. The Commissioner (Appeals) was justified in setting aside the assessment for further investigation, as new facts or incomplete information from earlier decisions warranted re-examination.

5. Exhaustion of Alternative Remedies Before Seeking Relief Under Article 226 of the Constitution:
The court emphasized that the High Court should not ordinarily interfere with tax authorities' orders under Article 226, except in cases of jurisdictional errors or violations of natural justice. The petitioner had not exhausted the alternative remedy of appealing to the Tribunal, which could grant the same relief sought in the writ petition. The court cited several precedents, including decisions from the Supreme Court, reinforcing the principle that statutory remedies must be exhausted before invoking the writ jurisdiction.

Conclusion:
The writ petition was rejected summarily, as the court found no exceptional circumstances warranting interference under Article 226. The Commissioner (Appeals) acted within his jurisdiction under section 251 of the Income-tax Act, and the petitioner was directed to pursue the alternative remedy of appealing to the Tribunal.