2019 (4) TMI 864 - HC - Income Tax

Jurisdiction in writ proceedings - challenge of order of assessment and Tax Recovery proceedings - invalid service of notices - service of attachments and auction proceedings - HELD THAT - The very question of validity or otherwise of service the notices of assessment would require detail examination of facts on record. The question of validity does not rest only on legal contentions. It would require a detail examination of facts, which must be done by the departmental authorities in statutory Appeals provided under the Act. It is well settled that when question of law and facts arises, the High Court in exercise of its writ jurisdiction would be slow in interfering with the orders passed by the competent authority. Availability of alternative efficacious remedy would be a ground to refuse to entertain the writ petition directly aimed at an order of assessment. When a taxing statute provides for statutory remedies, this Court would be slow in by passing such remedies and entertaining the writ petition directly aimed at the order of assessment. Additionally, the Petitioner s challenge to the order of assessment would necessarily have the element of challenge on merits. This would be in addition to the Petitioner s contention regarding invalid service of notices. Any challenge to the order of assessment on merits should be ordinarily allowed to be examined by the Commissioner Appeals in whom statutory appellate powers have been vested under the Act. Lastly, the Petitioner has not even formally challenged the assessment orders. The Petitioner has filed the Petition straight away contending that it did not have copies of assessment orders, neither the order dated 07/03/2019. Therefore it had asked the department to produce copies of such orders, which along with affidavit-in-reply, have been filed. The Petitioner has not sought any amendment to the Petition bringing formal challenge to such assessment orders. This is a purely technical ground and is mentioned only for the purpose of bringing the correct stage of the pleadings on record. Otherwise, this is not a prime ground on which we propose to relegate the Petitioner to appellate remedy. The entire case of the Petitioner to oppose the auction, as noted revolves around two elements; namely invalid assessment orders and questionable ownership of the paintings and artworks. We have dealt with both these aspects and therefore do not find it appropriate to either set aside or quash the auction proceedings on this ground. Petitioner is in the business of buying and selling paintings and artworks. The Petitioner does not claim any particular attachment over any of the painting or artwork. As noted earlier, the Petitioner has not challenged the valuation of these articles. Under such circumstances, even if the Petitioner were to ultimately succeed in Appeal proceedings, the amount recovered by the tax department through auction sale, can always be returned to the Petitioner with interest. In other words, by not interfering at this stage, we have not put the Petitioner to any irreversible situation. If the Petitioner ultimately succeeds in Appeal, subject to further Appeals the department would undoubtedly have to return the sale proceeds received through the auction. Petitioner has referred to several judgment in support of her contentions. These judgments mainly touch in the aspect of valid service of notice and resignation of a Director of the Company. However, since we have not finally decided either of these issues, it is not necessary to dwelve into these judgments. Under such circumstances, both the prayers of the Petitioner are refused. If the Petitioner files Appeals against the assessment orders, latest by 20/04/2019, the Appellate Commissioner shall hear such Appeals on merits, without reference to the limitation. We clarify that all the contentions of both the sides, in relation to such orders of assessment including the question of validity of assessment notices, are kept open. Petition is disposed of.

Summary

Issues Involved:
1. Validity of service of notice of assessment.
2. Ownership of paintings and artworks put to auction.
3. Legality of the auction proceedings.
4. Availability of alternative remedies.

Detailed Analysis:

1. Validity of Service of Notice of Assessment:
The Petitioner contended that the assessment notices were not properly served, rendering the assessment orders invalid. The company claimed that one director was in judicial custody and the other had resigned before the service of notice. The Petitioner argued that the department should have followed the alternative procedure under Order V of the CPC. The Respondents countered that notices were served by affixation at the company’s registered address and that the resignation of the director was not substantiated with evidence. The Court held that the issue of validity of service of notice requires detailed examination of facts, which should be addressed through statutory appeals rather than writ jurisdiction.

2. Ownership of Paintings and Artworks Put to Auction:
The Petitioner claimed ownership of only 19 out of 68 paintings and artworks auctioned by the Tax Recovery Officer. The Respondents provided evidence, including statements and bills, indicating that the paintings were stored by the Petitioner at a warehouse. The Court noted that the Petitioner failed to produce prima facie evidence to support its claim of limited ownership and that no other claimant had come forward. The Court found the department’s evidence sufficient to establish prima facie ownership by the Petitioner.

3. Legality of the Auction Proceedings:
The Petitioner challenged the auction on the grounds that the assessment orders were invalid and that the paintings did not belong to the company. The Court observed that the auction received wide publicity and no other claims of ownership were made. The Court also noted that the Petitioner did not challenge the valuation of the paintings. The Court concluded that the auction proceedings were conducted lawfully and that any potential reversal of the assessment orders through appeals would result in the return of sale proceeds with interest to the Petitioner.

4. Availability of Alternative Remedies:
The Court emphasized the principle of exhausting alternative remedies before invoking writ jurisdiction. It referred to the Supreme Court’s decision in Commissioner of Income Tax vs. Chhabil Dass Agarwal, which underscores the necessity of utilizing statutory remedies provided under the Act. The Court found that the Petitioner had not availed of the appellate remedies available under the Income Tax Act and directed the Petitioner to file appeals against the assessment orders by a specified date, ensuring that the appeals would be heard on merits without reference to the limitation period.

Conclusion:
The Court refused both prayers of the Petitioner, emphasizing the need for the Petitioner to utilize the statutory appellate remedies. The Court provided that if the Petitioner files appeals by the specified date, the Appellate Commissioner shall hear them on merits. The interim arrangement requested by the Petitioner was denied. The Petition was disposed of with all contentions of both sides kept open for the appellate proceedings.