2025 (1) TMI 825 - HC - Income Tax

Validity of assessment order passed u/s 143 (3) r.w.s. 144B - scope of an appeal u/s 260A - scope of alternate remedy - HELD THAT - In Greatship (India) Limited 2022 (9) TMI 896 - SUPREME COURT the Hon ble Supreme Court did not approve the decision of the High Court to entertain the Writ Petition under Article 226 of the Constitution challenging the assessment order given the statutory alternate remedies available under the Maharashtra Value Added Tax 2002 and the Central Sales Tax Act, 1956. The Court held that the assessee showed no valid reasons to bypass the statutory remedy of appeal and that the Supreme Court has consistently taken the view that when an alternate remedy is available, judicial prudence demands that the courts refrain from exercising its jurisdiction under constitutional provisions. For all the above reasons, we decline to entertain this Petition. However, we leave it open to the Petitioner to avail the alternate remedy of appeal by clarifying that we have not examined the rival contentions on merits. If the Petitioner does institute an appeal, the Appellate Authority must note that the Petition was filed on 10 April 2024 and has been pending in this Court to date.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the High Court should entertain the writ petition under Article 226 of the Constitution of India to quash the assessment order issued under Section 143(3) read with Section 144B of the Income Tax Act, 1961, despite the availability of an alternate statutory remedy of appeal.
Whether the assessment order is without jurisdiction, as argued by the Petitioner, due to the alleged reassessment of income already declared and accepted in previous assessment years.
Whether the principles established in previous judicial precedents, such as the method of accounting adopted by the Petitioner, have been violated in the impugned assessment order.
Whether the Petitioner's claim that the alternate remedy is not efficacious due to potential pre-deposit requirements holds merit.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entertaining the Writ Petition Despite Alternate Remedy

Relevant Legal Framework and Precedents: The Court referred to Article 226 of the Constitution, which allows writ petitions but also emphasized the self-imposed restriction of not bypassing statutory remedies unless exceptional circumstances exist, as outlined in Whirlpool Corporation vs. Registrar of Trade Marks.
Court's Interpretation and Reasoning: The Court emphasized that statutory remedies should not be bypassed lightly. It noted that the Petitioner failed to demonstrate any of the exceptional circumstances that would justify bypassing the statutory appeal process.
Key Evidence and Findings: The Court found no evidence of a breach of fundamental rights, principles of natural justice, or jurisdictional overreach in the assessment order.
Application of Law to Facts: The Court applied the principles from Whirlpool Corporation and other precedents to determine that the Petitioner should pursue the statutory remedy of appeal.
Treatment of Competing Arguments: The Court acknowledged the Petitioner's arguments about the inefficacy of the alternate remedy but found them unconvincing.
Conclusions: The Court concluded that the Petitioner's case did not warrant bypassing the statutory appeal process.

Issue 2: Jurisdiction of the Assessment Order

Relevant Legal Framework and Precedents: The Petitioner cited precedents like Commissioner of Income-tax vs. Aditya Builders to argue that the assessment method was previously accepted and should not be changed.
Court's Interpretation and Reasoning: The Court found that the Petitioner's arguments were more appropriate for consideration by the Appellate Authority, which has the jurisdiction to analyze the factual and legal aspects in detail.
Key Evidence and Findings: The Court noted that the Petitioner had been using the Project Completion Method, which was accepted in previous assessments, but did not find this sufficient to establish a lack of jurisdiction.
Application of Law to Facts: The Court determined that the jurisdictional challenge was not sufficiently substantiated to bypass the appeal process.
Treatment of Competing Arguments: The Respondents argued for the exhaustion of alternate remedies, which the Court found persuasive.
Conclusions: The Court concluded that the jurisdictional challenge should be addressed in the statutory appeal process.

Issue 3: Violation of Judicial Precedents

Relevant Legal Framework and Precedents: The Petitioner argued that the assessment order violated precedents regarding accepted accounting methods.
Court's Interpretation and Reasoning: The Court held that the Appellate Authority is the appropriate forum to examine whether the assessment order contravenes established precedents.
Key Evidence and Findings: The Court did not find sufficient grounds to conclude that the assessment order was contrary to binding judicial precedents.
Application of Law to Facts: The Court applied the principle that factual differences could affect the applicability of precedents.
Treatment of Competing Arguments: The Respondents maintained that the assessment order was within jurisdiction, a position the Court found reasonable.
Conclusions: The Court concluded that the issue of precedent violation should be addressed in the appeal process.

Issue 4: Efficacy of Alternate Remedy

Relevant Legal Framework and Precedents: The Court considered the Petitioner's argument regarding the inefficacy of the alternate remedy due to potential pre-deposit requirements.
Court's Interpretation and Reasoning: The Court noted that the IT Act does not mandate pre-deposits and that the Petitioner could seek interim relief without pre-deposit.
Key Evidence and Findings: The Court found no compelling evidence that the alternate remedy was inadequate or ineffective.
Application of Law to Facts: The Court applied the principle that potential interim relief conditions do not render an appeal remedy ineffective.
Treatment of Competing Arguments: The Respondents argued that the statutory remedy was sufficient, a view the Court endorsed.
Conclusions: The Court concluded that the alternate remedy of appeal was adequate and should be pursued.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "There is a distinction between a wrong order and an order without jurisdiction. At least in this case, we are not satisfied that the impugned order falls in the category of 'wholly without jurisdiction'.
Core principles established: The Court reaffirmed the principle that statutory remedies should not be bypassed unless exceptional circumstances justify such action.
Final determinations on each issue: The Court dismissed the writ petition, directing the Petitioner to pursue the statutory appeal process, noting that none of the exceptions to the exhaustion of alternate remedies were applicable in this case.

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