2024 (7) TMI 1292 - HC - Income Tax

Validity of reassessment proceedings - period of limitation prescribed u/s 153(2) - whether the reassessment made by ITO without communicating the order of reassessment and the demand notice of the said reassessment within time can be treated as a valid assessment made within the period of limitation prescribed under section 153(2)? - HELD THAT - The question that arose for consideration is whether the said reassessment proceeding shall be deemed to be completed when the impugned order of assessment was passed on 28-12-2006 or whether such proceeding shall be deemed to be completed only after communication of the impugned assessment order to the assessee on 05-01-2007. This issue is no longer res-integra and the same has been decided by the Hon'ble Apex Court and various High Courts of the country in a catena of its decisions that the order of any authority cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it and that it is not enough if the order is made, signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it, or even destroy it, before it is made known, based on subsequent information, thinking or change of opinion. It is hereby held that the proceeding of the reassessment of the Return submitted by the assessee for the AY 2003-2004 shall be deemed to be completed only on 05-04-2007 when the assessment order was served/ communicated to the representative of the assessee and the same was not completed within the period prescribed under section 153(2) of the Act. Objection raised by the DSGI about the maintainability of the present writ petition on ground of availability of filing a statutory appeal u/s 246 - It is to be pointed out that it is a settled principle of law that availability of an alternative and effective remedy does not exclude or completely barred the High Court from entertaining a writ petition under Article 226 of the Constitution of India. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, however, there are certain exceptions to this rule. Some of the exceptions are where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principle of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, or where the writ petition seeks enforcement of any of the fundamental rights, or where the order or proceeding are wholly without jurisdiction, or where the vires of an act is challenged or where the controversy is purely a legal one and it does not involve disputed question of facts but only question of law then such writ petition should be decided by the High Court instead of dismissing the petition on ground of an alternative remedy being available. Writ petition allowed by quashing and setting aside the impugned assessment orders passed by the AO as being illegal and violative of the provisions of section 153(2) of the Income Tax Act, 1961.

Summary

Issues Involved:
1. Validity of the reassessment order dated 28-12-2006.
2. Validity of the penalty order dated 29-06-2007.
3. Compliance with the provisions of section 153(2) of the Income Tax Act, 1961.
4. Maintainability of the writ petition in light of an alternative statutory remedy.

Issue-wise Detailed Analysis:

1. Validity of the Reassessment Order Dated 28-12-2006:
The writ petition challenged the reassessment order dated 28-12-2006 on the grounds that it was not communicated to the assessee within the prescribed period under section 153(2) of the Income Tax Act, 1961. The court noted that the first notice under section 148 was served on 06-12-2005 and the second notice on 03-03-2006. Consequently, the nine-month period for completing the reassessment started on 01-04-2006 and ended on 31-12-2006. Although the reassessment order was passed on 28-12-2006, it was communicated to the authorized representative of the assessee only on 05-01-2007. Citing various judgments, the court held that an order is deemed to be completed only when it is communicated to the affected party. Thus, the reassessment was not completed within the prescribed period, rendering the order invalid.

2. Validity of the Penalty Order Dated 29-06-2007:
The penalty order dated 29-06-2007 was also challenged as a consequential order to the reassessment order. Since the reassessment order was deemed invalid for not complying with section 153(2), the penalty order was also rendered invalid. The court quashed the penalty order on the same grounds.

3. Compliance with the Provisions of Section 153(2) of the Income Tax Act, 1961:
Section 153(2) stipulates that no order of assessment, reassessment, or re-computation shall be made after the expiry of nine months from the end of the financial year in which the notice under section 148 was served. The court emphasized that an order must be communicated to the affected party to be considered complete. Since the reassessment order was communicated after the nine-month period, it violated section 153(2) and was thus invalid.

4. Maintainability of the Writ Petition in Light of an Alternative Statutory Remedy:
The respondents argued that the writ petition was not maintainable due to the availability of an alternative statutory remedy under section 246 of the Income Tax Act. The court noted that while the general rule is to exhaust alternative remedies, exceptions exist, such as when the statutory authority does not act in accordance with the law or when the issue is purely a legal one. Given that the facts were undisputed and the issue was purely legal, the court decided to entertain the writ petition. Additionally, the case had been pending since 2007, making it impractical to redirect the petitioners to the departmental forum at this stage.

Conclusion:
The court allowed the writ petition, quashing and setting aside the reassessment order dated 28-12-2006 and the penalty order dated 29-06-2007 as illegal and violative of section 153(2) of the Income Tax Act, 1961. The parties were directed to bear their own costs.