2018 (4) TMI 1001 - HC - Income Tax

Maintainability of Writ petition - alternate remedy of appeal - manner in which objection considered - Held that - There appears to be no allegation of the violation of principles of natural justice as the petitioner has been given an opportunity to file their objections to the draft assessment order. What is now agitated before this Court is with regard to the manner in which the objections were considered and it is alleged that the finding rendered by the respondent in the impugned assessment order is purely based on surmises and conjectures. However this challenge is only in respect of two issues which have been mentioned in the impugned assessment order as in respect of other issues the petitioner itself is in the process of filing an appeal before the Commissioner of Income Tax (Appeals). Thus a piecemeal challenge to the impugned order should not be encouraged more particularly when factual issues are involved and it is but proper for the petitioner to avail the statutory appeal remedy and not to by-pass the same. This Court finds that this is not a fit case where the discretionary jurisdiction under Article 226 of The Constitution of India should be exercised - writ petition is held to be not maintainable and the petitioner is granted liberty to avail the alternate remedy of appeal before the Appellate Authority

Summary

Issues:
Challenge to impugned assessment order under Income Tax Act, 1961; Justification for approaching High Court under Article 226 despite alternate remedy of appeal before Commissioner of Income Tax (Appeals).

Analysis:
The petitioner challenged the assessment order under Section 143(3) read with Section 92CA read with Section 144C(1) of the Income Tax Act, 1961. The primary issue was whether the petitioner could approach the High Court under Article 226 despite having an alternate remedy of appeal before the Commissioner of Income Tax (Appeals). The petitioner argued that the assessment order did not consider their objections, particularly regarding the disallowance under Section 14A of the Act. They contended that the findings were based on surmises and conjectures, urging the Court to set aside the order and remand the matter for fresh consideration, specifically on the issue of disallowance under Section 14A.

The petitioner cited the decision in the case of Redington (India) Limited and emphasized the importance of following judicial discipline in assessing tax liabilities. They also highlighted a miscalculation in the draft assessment order regarding disallowance under Section 14A, which was not addressed by the respondent. The petitioner disputed the findings recorded by the respondent, alleging that they were not based on any material evidence but on assumptions. The petitioner sought to challenge only specific aspects of the assessment order while planning to file an appeal on other issues before the Commissioner of Income Tax (Appeals).

The respondent argued that the Rules had been amended, rendering the Redington (India) Limited decision obsolete. They contended that all issues raised by the petitioner were factual and should be addressed through the statutory appeal process rather than a piecemeal challenge through a writ petition. The respondent maintained that the writ petition was not maintainable and that the petitioner should exhaust the alternate remedy of appeal before the Commissioner of Income Tax (Appeals).

The Court considered the principles governing the exercise of discretionary jurisdiction under Article 226 in cases with alternate statutory remedies. It noted that exceptions to the general rule of exhausting statutory remedies included violations of natural justice, non-compliance with statutory provisions, or fundamental principles of judicial procedure. The Court found that the petitioner had not alleged any violation of natural justice and that the challenge was limited to specific issues while an appeal was contemplated for other matters. Consequently, the Court held that a piecemeal challenge should not be entertained, and the petitioner should pursue the statutory appeal remedy rather than bypassing it. The writ petition was dismissed, granting the petitioner liberty to avail the alternate remedy of appeal before the Appellate Authority.

In conclusion, the Court emphasized that the petitioner could raise all contentions in the appeal, ensuring that the observations in the order would not prejudice their rights in the appellate process.