1965 (10) TMI 6 - HC - Income Tax

Challenge to a protective assessment with a prayer that it should be set aside - held that it ought to be raised before the taxing authorities and cannot appropriately be allowed to be urged before the High Court in a petition under art. 226 - petition accordingly also fails and is dismissed

Issues Involved:
1. Vires of certain provisions of the Income-tax Act.
2. Jurisdiction to issue notice under section 148 of the Income-tax Act.
3. Delay and laches in filing the writ petition.
4. Acquiescence and estoppel.
5. Adequacy of alternative remedies under the Income-tax Act.
6. Jurisdictional defect and serious legal infirmity.
7. Validity of reopening assessment under the current Income-tax Act.

Issue-wise Detailed Analysis:

1. Vires of Certain Provisions of the Income-tax Act:
The petitioners initially raised the issue of the vires of certain provisions of the Income-tax Act. However, during the hearing, the petitioner's counsel did not pursue this issue, opting to leave it open for a later stage when the imposition of penalty might arise. Consequently, the court did not address this issue in detail.

2. Jurisdiction to Issue Notice under Section 148 of the Income-tax Act:
The primary ground of challenge was that the time prescribed by law for reopening the assessment for the year 1946-47 had expired long ago, specifically on 31st March 1955. The petitioners argued that under the current Income-tax Act, the department had no jurisdiction to issue the impugned notice dated 25th March 1963. The respondents contended that the notice was issued within the permissible time frame under the current Act, which allows reopening within sixteen years if the escaped income amounts to or exceeds fifty thousand rupees.

3. Delay and Laches in Filing the Writ Petition:
The respondents argued that the writ petition was highly belated as the impugned notice was issued on 25th March 1963, and the assessment order was made on 31st October 1964. The petitioner filed the writ petition on 30th November 1964, without offering a cogent explanation for the undue delay. The court emphasized that undue delay and laches could disentitle the petitioner from invoking the extraordinary jurisdiction of the High Court under Article 226 of the Constitution.

4. Acquiescence and Estoppel:
The respondents also contended that the petitioner had acquiesced to the notice by responding to it and was thus estopped from challenging it in the present proceedings. The petitioner's counsel argued that the petitioner was unaware of the assessment proceedings. However, it was noted that the petitioner had since preferred appeals against the assessment orders, indicating some level of acquiescence.

5. Adequacy of Alternative Remedies under the Income-tax Act:
The court highlighted that the Income-tax Act provides a complete machinery for assessment of tax and relief in respect of improper or erroneous orders made by the revenue authorities. The court held that it would be inappropriate to allow the petitioner to bypass the statutory remedies and approach the High Court under Article 226, especially when the petitioner had already filed appeals under the Income-tax Act.

6. Jurisdictional Defect and Serious Legal Infirmity:
The petitioner's counsel conceded that the merits of the assessment order could not be argued before the High Court on the writ side and should be canvassed before the Appellate Tribunal. The court stated that it would only interfere if there was a jurisdictional defect or serious legal infirmity going to the root of the matter. The court found no such defect or infirmity in the present case.

7. Validity of Reopening Assessment under the Current Income-tax Act:
The petitioner argued that the right to reopen the assessment under the earlier statute had been extinguished and could not be revived by the current Act. The court referred to various amendments to section 34 of the Indian Income-tax Act, 1922, and the provisions of the current Act, particularly sections 147, 148, and 149. The court held that the current Act did allow reopening within sixteen years if the escaped income exceeded fifty thousand rupees, and thus the notice was valid.

Conclusion:
The court dismissed the writ petitions, emphasizing that the petitioner should seek redress through the statutory remedies provided under the Income-tax Act. The court refrained from expressing any opinion on the merits of the arguments regarding the validity of the notice or the assessment order, considering the petitioner's request. The petitions were dismissed with costs fixed at Rs. 200.

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