2021 (7) TMI 1203 - HC - Income Tax

Reopening of assessment u/s 147 - Scheme of Amalgamation, Arrangement and Compromise Adopted - assessee challenges the assessment orders on the ground that the respondent had erred in rejecting the claim of deductions on inventories return off, sundry debtors return off and loans and advances written off as per the Court orders dated 17.12.2007 for the assessment years 2001-02 to 2003-04 on the basis that the said claims were made for the first time in the revised return - maintainability of the revised return beyond the period of limitation as well as the pendency of reopening of the proceedings under Section 148 - HELD THAT - An affidavit in a writ proceedings is insufficient to make a fact finding with reference to the documents and evidences. Therefore, the importance of an appellate remedy to be exhausted, at no circumstances, be undermined. High Court cannot dispense with the appellate remedy in a routine manner. Writ Petitions are filed on various grounds some times with an idea to avoid delay in disposal of appeals - legislative intention to exhaust the appellate remedy is to be considered by the Court. The legislatures thought fit that by providing an appeal, complete adjudication of facts, circumstances, documents and evidences would be completed. Thus, such a valuable remedy provided has to be exhausted in all circumstances. Petitioner has raised certain legal grounds for the purpose of entertaining a writ petition. All such legal grounds may be pleaded before the appellate authority for effective adjudication. The final fact finding by the appellate authority would be of greater assistance to the High Court for effective disposal of the writ petition. The parties aggrieved must, at the first instance, prefer an appeal, exhaust the same and thereafter, they have to approach the appropriate form. The power of review of the High Court under Article 226 of the Constitution of India is to scrutinize the processes through which a decision is taken by the competent authority in consonance with the provisions of a statute and rules, but not the decision itself. Therefore, the power of judicial review under Article 226 of the Constitution of India cannot be extended for the purpose of adjudicating the disputed facts with reference to the documents and evidences, which cannot be done at all. Based on the mere affidavit and some xerox copies of the documents, High Court cannot form an opinion with reference to the complete facts. As far as the Income Tax matters are concerned, it involves certain technicalities and intricacies in accountancy. Such intricacies and the expertise are to be exercised by the competent appellate authority of the Department of Income Tax, who is having thorough knowledge about the taxation policies. Therefore, the finding of appellate authority in such circumstances are of paramount importance for the High Court to exercise the power of judicial review. This Court is of the considered opinion that in all these cases, the petitioner has challenged the assessment orders passed admittedly and appeal is contemplated under the provisions of the Act. There is no other reason for the purpose of entertaining a writ petition before exhausting the appellate remedy and therefore, the petitioner-company is at liberty to approach the appellate authority by filing an appeal in a prescribed format and in compliance with the provisions of the Act. In the event of filing any such appeal, the appellate authority shall consider the same on merits and in accordance with law and by affording opportunity to the writ petitioner and dispose of the appeal as expeditiously as possible.

Issues Involved:
1. Challenge to the assessment orders for different assessment years.
2. Rejection of claims for deductions on inventories, sundry debtors, and loans and advances written off.
3. Compliance with the orders of the Income Tax Appellate Tribunal (ITAT) and Commissioner of Income Tax (Appeals-V) (CIT(A)).
4. Validity and maintainability of revised returns filed by the petitioner.
5. Jurisdiction and consideration of High Court orders in assessment proceedings.
6. Necessity of exhausting appellate remedies before approaching the High Court.

Issue-wise Detailed Analysis:

1. Challenge to the Assessment Orders for Different Assessment Years:
The petitioner, a company engaged in software and multimedia exports, challenged the assessment orders for various years, arguing that the respondent erred in rejecting their claims for deductions on inventories, sundry debtors, and loans and advances written off. The petitioner contended that these claims were made in revised returns filed on 31.03.2008, based on a court order dated 17.12.2007.

2. Rejection of Claims for Deductions:
The petitioner argued that the respondent incorrectly rejected their claims for deductions, which were made in revised returns. They relied on the ITAT's directions, asserting that the respondent, as a subordinate authority, should have followed the ITAT's orders. The petitioner also contended that the respondent failed to adhere to the CIT(A)'s orders for the assessment year 2004-05, thus violating the directions of both the ITAT and CIT(A).

3. Compliance with ITAT and CIT(A) Orders:
The petitioner emphasized that the assessment orders violated the directions of the ITAT and CIT(A). They argued that the respondent should have considered these orders while passing the assessment orders. The petitioner also referenced a High Court judgment dated 29.11.2007 and subsequent orders, asserting that the respondent did not comply with these judicial directions.

4. Validity and Maintainability of Revised Returns:
The petitioner filed revised returns on 12.01.2007 and 27.12.2007, after the completion of the assessment. The Department contended that these revised returns were filed beyond the period of limitation and could not be treated as valid. The petitioner argued that the High Court had considered the maintainability of the revised returns and directed the Revenue to consider them in terms of the scheme sanctioned by the Court effective from 01.01.2004.

5. Jurisdiction and Consideration of High Court Orders:
The respondent argued that the High Court's direction was applicable only for the assessment year 2004-05 and not for earlier years. The respondent also contended that the revised returns were filed beyond the scope permitted by the High Court's order. The High Court observed that the respondent had considered the Court's orders while passing the assessment orders but found that the claims made by the petitioner in their revised returns did not have the sanction of law.

6. Necessity of Exhausting Appellate Remedies:
The High Court emphasized the importance of exhausting appellate remedies before approaching the High Court. It noted that the assessment orders were appealable under the provisions of the Income Tax Act, and the petitioner should have approached the appellate authority for adjudication of disputed facts. The Court highlighted that it could not adjudicate the merits of the case based on affidavits and documents submitted in writ proceedings. The Court directed the petitioner to prefer an appeal and exhaust the appellate remedy, emphasizing that the appellate authority's findings would be crucial for effective judicial review.

Conclusion:
The High Court disposed of the writ petitions, directing the petitioner to approach the appellate authority for redressal of their grievances. The Court underscored the necessity of exhausting appellate remedies and the limitations of judicial review under Article 226 of the Constitution of India in adjudicating disputed facts. The Court emphasized that the appellate authority, with expertise in taxation matters, was better suited to consider the facts and circumstances of the case.

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