2024 (1) TMI 1430 - HC - Income Tax

Remedy of a statutory appeal against the assessment order - statutory remedy of appeal is sought to be bypassed by arguing that the impugned order is in breach of principles of natural justice contrary to statutory provisions and otherwise perverse - HELD THAT - As petitioner has admitted that an appeal against an assessment order does not involve making of any pre-deposit as a condition precedent for entertainment of the appeal. Otherwise we have cases where parties plead this as a cause for not availing the alternate remedy. Apart from the fact that this cannot be good cause in this case there is no such requirement as admitted by learned counsel for the petitioner. Accordingly we decline to entertain this petition. However we leave it open to the petitioner to appeal the impugned assessment order in accordance with law. The impugned order was made on 18 March 2024. This petition was instituted on 14 June 2024. The matter was pending in this Court. Therefore this aspect may be considered by the appellate authority should the petitioner institute an appeal and seek condonation of delay.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal question considered by the Court was whether the petitioner could bypass the statutory remedy of appeal against the assessment order dated 18 March 2024 by arguing a breach of natural justice and statutory provisions. The Court also examined whether the impugned order was perverse and if the petitioner's application for rectification under Section 154 of the Income-tax Act (IT Act) had been improperly ignored.

ISSUE-WISE DETAILED ANALYSIS

1. Breach of Principles of Natural Justice

Relevant legal framework and precedents: The petitioner argued that the assessment order relied on a ground not mentioned in the show cause notice, which allegedly constituted a breach of natural justice. The petitioner referenced Section 144B1(xii) of the IT Act and the case of Vivek Asher Vs Income-tax Officer to support this claim.

Court's interpretation and reasoning: The Court noted that the show cause notice dated 14 February 2024 specifically required the petitioner to address the addition of approximately Rs.8.41 crores under Section 68 of the IT Act. Therefore, the Court found that, prima facie, there was no gross violation of natural justice.

Key evidence and findings: The show cause notice's content was pivotal, as it indicated that the petitioner was informed of the potential addition under Section 68, albeit the exact ground for the addition was contested.

Application of law to facts: The Court determined that the issue of whether natural justice was violated required deeper investigation, which would be more appropriately conducted by the appellate authority.

Treatment of competing arguments: The Court acknowledged the petitioner's reliance on Vivek Asher but distinguished the facts of that case from the present one, indicating that the circumstances did not warrant bypassing the appellate process.

Conclusions: The Court concluded that the alleged breach of natural justice did not justify bypassing the statutory appeal process, especially since a detailed investigation was necessary to establish such a breach.

2. Exhaustion of Alternate Remedies

Relevant legal framework and precedents: The Court referred to its previous decision in Oberoi Constructions vs. Union of India, emphasizing the principle of exhausting alternate remedies before seeking judicial intervention.

Court's interpretation and reasoning: The Court reiterated that the rule of exhaustion of alternate remedies should not be lightly deviated from unless a clear violation of natural justice is established. In this case, the Court found no compelling reason to bypass the statutory remedy of appeal.

Key evidence and findings: The absence of a pre-deposit requirement for filing an appeal was noted as a factor that did not hinder the petitioner from pursuing the statutory remedy.

Application of law to facts: The Court applied the principle of exhaustion of remedies, concluding that the petitioner should pursue the appeal process, as no immediate breach of natural justice was evident.

Treatment of competing arguments: The Court dismissed the argument that the absence of a pre-deposit requirement could justify bypassing the appeal process, as acknowledged by the petitioner's counsel.

Conclusions: The Court declined to exercise its extraordinary jurisdiction and advised the petitioner to appeal the assessment order through the available statutory channels.

3. Application for Rectification under Section 154 of the IT Act

Relevant legal framework and precedents: The petitioner had filed an application for rectification under Section 154 of the IT Act, which had not been addressed by the respondents.

Court's interpretation and reasoning: The Court directed the respondents to dispose of the rectification application expeditiously and in accordance with the law.

Key evidence and findings: The pending status of the rectification application was noted, with the Court emphasizing the need for a timely resolution.

Application of law to facts: The Court applied legal principles to ensure that the rectification application was addressed on its merits.

Treatment of competing arguments: The Court did not delve into competing arguments regarding the rectification application, focusing instead on procedural compliance.

Conclusions: The Court mandated the respondents to resolve the rectification application within a month of the order's upload.

SIGNIFICANT HOLDINGS

Core principles established: The Court reaffirmed the principle that statutory remedies must be exhausted before seeking judicial intervention unless a clear violation of natural justice is demonstrated. It emphasized the importance of adhering to procedural requirements and the role of appellate authorities in investigating complex factual disputes.

Final determinations on each issue: The Court declined to entertain the petition, directing the petitioner to pursue the appeal process and ensuring that the rectification application was addressed promptly. The Court also allowed for consideration of delay condonation by the appellate authority, given the petition's pendency.