2019 (9) TMI 390 - HC - Income Tax

Question of law or facts - Jurisdiction of writ - Invoking Section 144C - rate of tax payable by writ petitioner assessee is 20% and not 10% - whether Tribunal was right in holding that the provisions of section 144B of the IT Act, 1961 are attracted and the reference to the IAC was in accordance with the provisions of section 144B? - alternate remedy - HELD THAT - This court after a careful analyse of rival submissions and the case law is convinced that the submission of learned Revenue counsel that Southern Petrochemical 2008 (11) TMI 233 - MADRAS HIGH COURT case is distinguishable deserves to be accepted for more than one reason, as Southern Petrochemical case turns on section 144B which is different from section 144C which we are now concerned with, more importantly the facts scenario is completely different and the substantial question of law itself makes it clear that answer to substantial question of law is on the facts and circumstances of the case. As far as argument predicated on jurisdictional fact is concerned, jurisdictional fact should be such that, absent a particular fact, the authority should be completely denuded of its powers to make impugned proceedings. This court reminds itself that unlike Southern Petrochemical case which is a regular tax case appeal, this is a case under writ jurisdiction wherein there is no disputation that writ petitioner has an alternate remedy. Therefore, jurisdictional fact should be so striking that it strikes at the very root of the exercise of the power by the authority making the impugned order. There is further discussion regarding alternate remedy in the latter part of this order infra. Be that as it may, suffice to say that this court is unable to convince itself that (from a reading of the language in which section 144C of IT Act is couched) respondent is completely denuded of powers to make draft and final assessment orders in cases where the rate at which tax is to be paid by the assessee is put in issue Period of limitation - A perusal of the manner in which limitation plea has been projected or in other words, challenge to the impugned draft and final assessment orders insofar as it is predicated on limitation plea is concerned, it comes out clearly that it is a mixed question of fact and law. It is not a pristine question of law. The aforesaid manner in which limitation plea has been articulated by writ petitioner in the affidavit filed in support of the writ petition is clearly subjected to disputation and disagreement by revenue. Therefore, this court has no hesitation in holding that on the facts and circumstances of the instant case, as the plea of limitation turns on facts and as it is clearly not a pristine question of law and as it at best qualifies as mixed question of law and facts, it would be appropriate to not to decide facts in a writ petition and leave it to appellate authority to decide on facts Alternate remedy rule is not an absolute rule. Though alternate remedy rule is not an absolute rule, in a long line of authorities, Hon ble Supreme Court has repeatedly held that alternate remedy shall be exercised in cases of (a) absence of jurisdiction, (b) violation of principles of natural justice, and (c) order being passed disregarding well settled laws of land, etc., To be noted, this is not a comprehensive list, but only an illustrative list which is set out only for the limited purpose of appreciating this instant order. Owing to all that have been set out thus far, this court does not find any ground to interfere with the impugned orders in writ jurisdiction.

Summary

Issues Involved:
1. Jurisdictional fact regarding the invocation of Section 144C of the Income Tax Act, 1961.
2. Limitation for passing the assessment order.
3. Alternative remedy available to the petitioner.

Issue-wise Detailed Analysis:

1. Jurisdictional Fact Regarding the Invocation of Section 144C of the Income Tax Act, 1961:

The petitioner, a foreign company incorporated in Cyprus, challenged the draft and final assessment orders for the assessment year 2015-16 under Section 144C of the Income Tax Act, 1961. The petitioner argued that the invocation of Section 144C was improper as there were no variations in the income returned by the petitioner, which is a prerequisite for invoking this section. The respondent countered that while the income remained unchanged, the tax payable was altered from 10% to 20%, thus justifying the invocation of Section 144C.

The court examined the Southern Petrochemical Industries Corporation Ltd. Vs. Income Tax Officer case cited by the petitioner. The court found this case distinguishable as it dealt with Section 144B, which is different from Section 144C, and the facts were not analogous. The court concluded that the respondent was not denuded of powers to make draft and final assessment orders under Section 144C based on the tax rate issue.

2. Limitation for Passing the Assessment Order:

The petitioner argued that the limitation to pass an assessment order under Section 143(3) had expired, and the respondent used Section 144C to circumvent this limitation. The court noted that the limitation period for the assessment year 2015-16 was two years, and the petitioner had raised a mixed question of fact and law regarding the limitation, which was disputed by the revenue.

The court held that since the limitation plea involved factual disputes, it was inappropriate to decide this in a writ petition. The appellate authority should address these factual issues.

3. Alternative Remedy Available to the Petitioner:

The court acknowledged that an alternative remedy was available to the petitioner under Section 246A of the Income Tax Act. The petitioner cited the Martech Peripherals (P.) Ltd. case to argue that the existence of an alternative remedy does not exclude the court's jurisdiction. However, the court noted that the absence of jurisdiction argument had been negated, and there was no violation of principles of natural justice in this case.

The court emphasized the principle from the Dunlop and Satyawati Tondon cases that the rule of alternate remedy should be applied with utmost rigour in fiscal matters. The court concluded that there were no grounds to interfere with the impugned orders in writ jurisdiction and dismissed the writ petitions, preserving the petitioner's right to pursue the case under Section 246A of the Income Tax Act.

Conclusion:

The writ petitions were dismissed, and the petitioner was advised to pursue the alternative remedy available under Section 246A of the Income Tax Act. The court preserved the petitioner's right to raise all questions in the appellate proceedings.