2023 (5) TMI 1012 - HC - Income Tax

Income escaping assessment - Obligation to file return of income - Assessee being a member of a scheduled tribe - Deriving income exclusively within a notified area - Entitlement for full exemption of income u/s 10(26) - whether not obliged to file any return of income u/s 139(1) or her income be charged to tax? - HELD THAT - In the present case, a regular appeal is maintainable and the submission on behalf of the writ petitioner to the effect that such regular appeal will be confined only to the order passed u/s 147 of the Act and cannot be enlarged to look into the factual aspects going into the making of the order, cannot be countenanced. Indeed, when an appeal is of limited scope, the appellate provision will expressly provide therefor as in cases where appeals are limited to questions of law and facts are excluded. There is no expression in the entirety of Section 246A of the Act to construe the power of the appellate authority to be limited only to Section 147 and not take up the fundamental issue that is sought to be raised in the present proceedings. Finally, the writ petitioner appeals to the Court to exercise its discretion since the primary premise of the argument falls within a narrow campus. The petitioner appeals that it would be better if the legal question raised were to be decided and the matter left to the Department for the Department s further consideration. Ordinarily, there is an element of bona fides which is taken into consideration by a writ court, particularly when allowing its discretion to be exercised in an extraordinary manner. All that was required of her upon receiving the several notices was to demonstrate that such income, in its entirety, was exempted under Section 10(26) - Yet, notice after notice went unheeded till the petitioner furnished the details of her bank accounts, claimed that she had invested and reinvested in mutual funds and glibly submitted that she maintained no accounts despite maintaining that she was an authorised distributor of LPG gas cylinder and an exporter of coal and limestone and the like. Such conduct on the part of a citizen would not excite to a Constitutional Court to exercise any discretion in her favour. Indeed, the interpretation of a provision of the statute and the considerations going into allowing an extraordinary remedy to be pursued may sometimes depend primarily the conduct of a party approaching the Court or an element of prejudice suffered by such party. In this case, neither the conduct nor the alleged prejudice suffered by the petitioner herein prompts the Court to exercise any discretion to receive the matter and adjudicate the same without leaving the petitioner free to approach the regular remedy in accordance with law. As however, recorded that since the matter had been pending in this Court for a substantial period of time, whatever may have been the reasons therefor, the Department should not take point of limitation before the appellate forum; or else, even if such objection is taken, the appellate forum deals with the objection with a degree of latitude towards the petitioner herein. Legal issues raised on merits have not been gone into and it will be open to the appellate forum to decide the same in accordance with law.

Issues Involved:
1. Propriety of orders under Section 147 of the Income-Tax Act, 1961.
2. Exemption under Section 10(26) of the Income-Tax Act.
3. Requirement to file a return of income under Section 139(1) of the Income-Tax Act.
4. Alternative remedy and jurisdiction under Article 226 of the Constitution.

Summary:

1. Propriety of Orders under Section 147:
The writ petition challenges several orders passed under Section 147 of the Income-Tax Act, 1961 for multiple assessment years starting from AY 2013-14. The orders were issued in March 2022, and the petitioner approached the court under Article 226 of the Constitution by the end of April 2022. The petitioner received a notice under Section 148 on March 27, 2021, indicating that the assessing officer believed the petitioner's income had escaped assessment due to non-filing of returns. The assessing officer noted significant transactions, including mutual fund investments and high-value banking transactions, totaling over Rs. 8.05 crore, which led to the belief that income chargeable to tax had escaped assessment.

2. Exemption under Section 10(26):
The petitioner, a member of a scheduled tribe, claimed full exemption of income under Section 10(26) of the Act, asserting no obligation to file returns under Section 139(1). The petitioner argued that the entirety of the income, derived exclusively within a notified area, was exempt. Despite multiple notices and requests for documentation, the petitioner failed to provide substantial responses, only furnishing minimal documents like a distributorship letter and a caste-cum-residency certificate.

3. Requirement to File Return under Section 139(1):
The petitioner contended that under Section 10(26), there was no need to file a return if the total income was perceived to be exempt. The court discussed the statutory requirement of filing returns to verify the exemption claims and noted that the petitioner's argument implied that a person could avoid filing returns based on their perception of exemption, which could not be a valid stance.

4. Alternative Remedy and Jurisdiction:
The court emphasized the principle of alternative remedy, noting that the petitioner could have pursued a regular appeal under Section 246A of the Act. The court cited precedents, including the Whirlpool Corporation and Godrej Sara Lee cases, outlining scenarios where a writ petition could be entertained despite an alternative remedy. However, it found that none of these exceptions applied, as there was no violation of natural justice, jurisdictional error, or challenge to the vires of any provision.

Conclusion:
The court found the petitioner's conduct, including non-compliance with notices and inadequate responses, did not merit the exercise of its extraordinary jurisdiction. The court dismissed the writ petition, allowing the petitioner to approach the appellate forum within four weeks, with instructions for the Department to consider the delay leniently. The merits of the legal issues raised were left open for the appellate forum to decide.

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