2014 (7) TMI 605 - HC - Income Tax

Reassessment order u/s 147 r.w section 148 of the Act - Whether an order passed by the AO on the objections of an assessee can be assailed before the Court under Article 226 of the Constitution of India Held that - A challenge made to an order passed on the objections of the assessee would in effect is a challenge made to a notice u/s 148 of the Act - Such an order passed by the AO is only at the stage of process of determination and not a determination by itself - revenue cannot have a legal right as there is no legal injury suffered by them at that stage - the jurisdiction vested with High Court under Article 226 of the Constitution of India can be exercised in a given case - the restriction is self-imposed and nothing else - in a case, where no adjudication is required on facts, then certainly jurisdiction of the Court under Article 226 of the Constitution of India can very well be invoked - Therefore, to such a limited extent, we are inclined to hold that the jurisdiction of this Court under Article 226 of the Constitution of India can be exercised. The decision in Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal 2013 (8) TMI 458 - SUPREME COURT followed - challenge was made to the correctness or otherwise and the notices u/s 148 of the Act, re-assessment orders passed and the consequential demand notices - neither has the assessee 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 - the 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 u/s 148 of the Act, the re-assessment orders passed and the consequential demand notices issued - where an adjudicatory process is involved on merits, then the only remedy open to an assessee is to go through the procedure provided under the enactment. If an income chargeable to tax has been under assessed or such income has been assessed at too low a rate or such income has been made the subject of excessive relief under this Act or excessive loss or depreciation allowance or any other allowance under this Act has been computed or where a person is found to have any asset (including financial interest in any entity) located outside India, having deemed to be the cases of escaped assessment, it would come under the purview of Section 147 - Thus, the provision would make it clear that the power of the assessing officer is rather wide. The legislative intent is to allow the AO to go through the process of assessment - Even under Section 147 of the Act, a Court of law cannot presume a lack of jurisdiction, when a fact in issue requires adjudication - It has to be exercised in terms of Sections 139, 143(2) and 143(3) - an order passed on the objections of the assessee over adjudicating facts is not open to challenge by way of filing a writ petition - the order passed on a consideration of the objections raised cannot be termed as the order having civil consequences - The assessing officer is not required to consider the objections in detail - When u/s 147 the AO can even assess any other income chargeable to tax, which has escaped assessment, which comes to his notice subsequently during the course of the proceeding, the power being wide, it cannot be challenged on the ground of improper or inadequate consideration of objections - the order passed on the objections raised by the assessee would not prevent the AO from exercising his power on merits while passing the assessment order Decided against the assessee.

Summary

Issues Involved:
1. Whether an order passed by the assessing officer on the objections of an assessee can be assailed before the Court under Article 226 of the Constitution of India.
2. Whether an assessment/re-assessment order passed under Section 147 read with 143(3) of the Income-tax Act, 1961 is to be tested by a Court of law under Article 226 of the Constitution of India.

Detailed Analysis:

1. Jurisdiction under Article 226:
The Court examined whether an order passed by the assessing officer on the objections of an assessee could be challenged under Article 226 of the Constitution of India. The Court reiterated that a writ under Article 226 is discretionary and extraordinary, particularly when a complete mechanism is provided under the statute, especially in fiscal matters. The Court emphasized that a writ of certiorari is concerned with the decision-making process rather than the decision itself. The Court noted that the assessment process is still under adjudication before the assessing officer, and thus, the petitioners cannot claim a legal right or injury at this stage.

The Court acknowledged that the jurisdiction under Article 226 could be exercised in certain circumstances, such as when an officer without proper authority attempts to reopen an assessment or when the reopening is barred by limitation or lacks inherent jurisdiction. However, in these cases, the Court found no such circumstances and deemed the stage premature for invoking Article 226.

2. Alternative Remedy:
The Court highlighted the principle that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained if an effective alternative remedy is available. The Court referred to the Supreme Court's judgment in Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal, which held that the High Court should not entertain a writ petition if an effective alternative remedy is available to the aggrieved person.

The Court emphasized that the existence of an alternative remedy must be effective and not a mere formality. The Court found that the petitioners had not described the available alternative remedy as ineffectual or non-efficacious and thus should have exhausted the statutory remedies before resorting to writ jurisdiction.

3. G.K.N. Driveshafts (India) Limited Case:
The Court discussed the ratio decidendi of G.K.N. Driveshafts (India) Limited Vs. Income-tax Officer, where the Supreme Court clarified that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file a return, seek reasons for issuing the notice, file objections, and have the assessing officer dispose of the objections by passing a speaking order. The Court noted that this procedural safeguard does not create a right or take away one accrued and is not an adjudication in the strict sense. The Court concluded that such preliminary orders cannot be challenged by invoking the extraordinary jurisdiction under Article 226.

4. Jurisdictional Fact vs. Adjudicatory Fact:
The Court distinguished between jurisdictional facts and adjudicatory facts, noting that the assessing officer's role involves both assessment and adjudication. The Court explained that a jurisdictional fact is a condition precedent for assuming jurisdiction, while an adjudicatory fact involves determining issues on merit. The Court held that where an adjudicatory process is involved, the only remedy open to an assessee is to follow the procedure provided under the statute.

5. Provisions of the Income-tax Act, 1961:
The Court reviewed the relevant provisions of the Income-tax Act, including Sections 147 and 148, which deal with the power of the assessing officer to assess or reassess income that has escaped assessment. The Court emphasized that the legislative intent is to allow the assessing officer to go through the process of assessment and that an order passed on the objections of the assessee over adjudicating facts is not open to challenge by way of a writ petition.

Conclusion:
The Court answered both issues against the assessees and in favor of the revenue. The writ petitions were dismissed, and the Court granted a further period of four weeks for filing statutory appeals before the appellate authority in cases where assessment/reassessment orders had been passed. The appellate authority was directed to decide the appeals on merits without considering the period of limitation. The connected miscellaneous petitions were also closed, with no order as to costs.