2013 (4) TMI 372 - HC - Income Tax

Reopening of assessment - The only point of the petitioner for filing this Writ Petition is that the first respondent has reopened the assessment by changing the method of accounting from completed contract method to percentage completion method without assigning valid reasons and, therefore, the impugned order is non-est in law. - Held that - The change in method and the reasons for the change are the matters which can be seriously looked into by the appellate authority, if the petitioner moves the concerned forum in accordance with law. It is true, reasons are to be given for change in the accounting system, but the same cannot be a ground to waive the appellate remedy when the appellate forum can very well within its jurisdiction and powers adjudicate the matter on the questions and issues raised by the petitioner. When such an appellate remedy is very much available to the petitioner before the appellate forum, without availing the same, the petitioner is before this Court. It is also true that waiver of appellate remedy is available to the petitioner in circumstances where there is an infringement of fundamental right, a violation of principles of natural justice or when there is anything ultra vires the law. In this case, in the absence of any of the above elements, it is not proper for the petitioner to avoid the effective alternative appeal remedy. Therefore, the contention of the learned counsel for the petitioner cannot be sustained. - writ petition dismissed - Decided against the assessee.

Summary

Issues Involved:
1. Change of Accounting Method
2. Violation of Principles of Natural Justice
3. Availability of Alternative Remedy

Issue-wise Detailed Analysis:

1. Change of Accounting Method:
The petitioner, a company engaged in the business of elevators and escalators, consistently followed the 'completed contract method' of accounting for over 20 years. This method was accepted by the Income Tax Department in previous assessments. The petitioner maintained that the income from contracts accrues only upon the completion of the contract and the transfer of title to the customer. However, for the assessment year 2008-09, the respondent assessed the income using the 'percentage of completion method,' bringing to tax the entire amount of advances received as of 31.03.2008, amounting to Rs.410,96,81,202/-. The petitioner argued that this change was contrary to the provisions of the Act and the principles of consistency.

2. Violation of Principles of Natural Justice:
The petitioner contended that the change in the accounting method without valid reasons was arbitrary and violated the principles of natural justice. The petitioner cited several judicial precedents emphasizing the need for consistency in accounting methods and the requirement for valid reasons when deviating from an established method. The petitioner argued that the respondent did not provide an opportunity to address these aspects, rendering the assessment order liable to be set aside.

3. Availability of Alternative Remedy:
The respondent argued that the petitioner had an alternative remedy available under the Income Tax Act, which provides for appeals and revisions. The respondent contended that the petitioner should have exhausted these remedies before approaching the High Court. The court agreed with the respondent, stating that the petitioner should have utilized the statutory appeal process before filing a writ petition. The court emphasized that it is a well-settled principle that in tax matters, statutory remedies should not be bypassed.

Conclusion:
The court dismissed the writ petition, stating that the petitioner should have exhausted the alternative statutory remedies available. The court noted that the appellate authority could address the issues raised by the petitioner, including the change in the accounting method and the reasons for such change. The court also clarified that the period of pendency of the writ petition would be excluded while computing the limitation period for filing an appeal. The court directed the Registry to return the original impugned order to the petitioner's counsel to enable the petitioner to file an appeal.