Writ Petition before High Court – should be filed only in appropriate cases and not just to take a chance.

[DEV KUMAR KOTHARI]

Relevant provisions:

Article 226 of the Constitution of India.

Specific provisions -other related provisions which provide for alternate effective remedy by way of reperesentation, appeal, revision, review, rectification  or in some  other manner.

2022 (3) TMI 1294 - DELHI HIGH COURT - AVANTHA REALTY LIMITED VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-20W.P.(C) 5100/2022 & C.M.Nos.15145-15146/2022 . Dated: - 28 March 2022

Writ petitions (WP):  

In this article discussion is restricted on the issue of unnecessarily filing WP when there is alternate remedy before the concerned authority itself or before appellate and revisionary authority and the action of authority which is challenged is not such which can amount to attack on fundamental rights of a citizen or other vital reasons for which a WP can be filed. The study is with reference to a judgment referred above in case of  AVANTHA REALTY LIMITED.

Any normal course of enquiry by any authority in relation to subject matter should be faced as a normal course and attempt should not be made by filing WP and seeking intervention of High Court.

Case of Avanthi Supra.:

In this case the AO has issued  Show Cause Notices dated 23rd February, 2022 and 14th March, 2022 issued for the Assessment Year 2018-19.

The AO wanted to make an enquiry about correct  amount of capital gains on transfer of a property.

The peculiar facts of the case are:

The assesse / Writ  petitioner  disclosed total sale consideration of ₹ 378 crore for impugned property.

During survey proceedings, the Sale Deed was impounded .

As  per impounded deed  circle rate (stamp value rate) was ₹ 390,02,20,000/-.

The AO made a  reference to  District Valuation Officer (DVO).  Who reported, fair market value of the property  at ₹ 418,10,64,600/-.

The assesse / Writ Petitioner was also asked to explain as to why the improvement cost in excess of what has been reported in the valuation report of DVO should not be disallowed from the cost of acquisition.

Related party transaction- upon perusal of the paper book, the High Court found  it strange that though the property in question was mortgaged in favour of Yes Bank, yet the property in question was sold to a company in which the wife of the person in management of the Yes Bank was a Director.

Admittedly, the property in question was sold by the Petitioner below the circle rate (stamp value rate)  which was basis for  invoking section 50C of the Income-tax Act and to make proper enquiry the AO issued the SCN.

The High Court thus held that in view of these facts the AO has the jurisdiction to examine in detail the transaction in question.

Therefore in view of aforesaid, the High  Court opined  that the present writ petition is bereft of any merit.

Therefore the writ petition and applications were dismissed.

Proper course for assesse:

In this case, merely because consideration shown was less than circle rate, it was enough for the AO to make enquiry and issue show cause notice to assessee. In fact the AO was duty bound to do so for determination of income properly.

Furthermore, other peculiar facts prevailing in the case , as discussed above were  good reason to make in depth enquiry to protect interest of revenue.

Therefore, proper course for assesse was to submit reply to SCN with all contentions and documents to justify computation of capital gains submitted by assesse.

With due respect to the team of  assessee , author feels that this was a case of un-necessarily adopting route of WP and taking a chance to avoid  or delay enquiry that was for valid reasons and there was no reason for High Court to intervene in the matter.

A good case for imposing costs:

Author also feels that this was a fit case for imposing costs on petitioner for indulging into un-necessarily litigation and causing loss rather wastage of  valuable time of the Court, and departmental authorities / counsels of tax department which all are paid out of hard earned money of tax payers.

In fact the High Court has taken a liberal view by ordering that “needless to state that it shall be open to the Petitioner to urge all its contentions and submissions on merit before the Assessing Officer, who shall in turn, consider the same in accordance with law.