2021 (6) TMI 637 - HC - Income Tax

Maintainability of appeal v/s writ petitions - writ petitioners, strenuously contended that it is the case where the respondents themselves admitted certain vital facts and those admitted facts were not considered by the Assessing Authority and therefore, the order impugned is liable to be set aside - legality of investments - HELD THAT - When the contentions of petitioners are extracted in the counter-affidavit, that cannot be construed as an admission. By extracting the abovesaid statement in the very same paragraph, the respondents have stated that the Mauritius Company had simply been used by the UAE Company to hoodwink the taxing authorities in India, whereas actually, it is the UAE Company which has made the investment in the Assessees-Company . Therefore, the mere contention raised by petitioners regarding the alleged admission by the respondents, is incorrect and it is mere extraction of the averments of petitioners in their affidavit. This Court is of the considered opinion that all these mixed question of facts and law are to be adjudicated by the Appellate Authority in the present case with reference to the original documents and evidences. Such an exercise cannot be done by the High Court in writ proceedings. The High Court cannot proceed with these complicated facts merely based on the affidavits and counter-affidavits filed by the respective parties. It requires some deliberation and exhaustive enquiry, which is to be done by the Appellate Authority by examining the original documents and evidences. Thus, interference, in such circumstances, in a writ jurisdiction, is not preferable and the High Court may allow Assessees to prefer an appeal, so as to adjudicate the disputed question of facts as well as other legal grounds raised, including the violation of principles of natural justice. The Appellate Authorities are empowered to set aside, modify or to remand the matter back to the Original Authority, as the case may be. When such a power has been conferred on the Appellate Authorities, interference by the High Court in a writ jurisdiction may not be preferable. Thus this Court has no hesitation in arriving a conclusion that petitioners have not exhausted the appellate remedy provided under Section 246A of the Income Tax Act. Thus, petitioners are at liberty to prefer an appeal by following the procedures contemplated. In the event of filing any appeal, the Appellate Authority is bound to consider the same and pass orders on merits and in accordance with law and by affording an opportunity to the parties concerned. This Court has no hesitation in arriving a conclusion that petitioners have not exhausted the appellate remedy provided under Section 246A of the Income Tax Act. Thus, petitioners are at liberty to prefer an appeal by following the procedures contemplated. In the event of filing any appeal, the Appellate Authority is bound to consider the same and pass orders on merits and in accordance with law and by affording an opportunity to the parties concerned.

Issues Involved:
1. Challenge to the assessment orders under Section 143(3) of the Income Tax Act, 1961.
2. Alleged non-consideration of admitted facts by the Assessing Authority.
3. Legality of foreign investments and their approval by competent authorities.
4. Discrepancies and factual disputes in the financial transactions.
5. Appropriate forum for adjudication of mixed questions of fact and law.
6. Exhaustion of statutory appellate remedies before invoking writ jurisdiction.

Issue-wise Detailed Analysis:

1. Challenge to the assessment orders under Section 143(3) of the Income Tax Act, 1961:
The petitioners challenged the assessment orders dated 30.12.2010, claiming that the Assessing Authority did not consider certain admitted facts. The court noted that these orders were challenged directly through writ petitions without preferring an appeal.

2. Alleged non-consideration of admitted facts by the Assessing Authority:
The petitioners contended that the respondents had admitted certain vital facts which were not considered by the Assessing Authority. However, the court clarified that the statements in the counter-affidavit were merely extractions of the petitioners' averments and not admissions by the respondents.

3. Legality of foreign investments and their approval by competent authorities:
The petitioners argued that the share capital was legally approved by the Ministry of Finance, and there was no illegal flow of money. They relied on a letter dated 19.05.2008 from the Government of India approving 100% foreign equity participation amounting to US $250 million. The respondents, however, contended that the Mauritius Company was used by the UAE Company to hoodwink Indian tax authorities, indicating discrepancies in the financial statements.

4. Discrepancies and factual disputes in the financial transactions:
The court noted the discrepancies highlighted by the Assessing Officer, such as the mismatch in the value of investments and the lack of equivalent contributions from Indian promoters. These discrepancies required a detailed examination of original documents and evidence, which could not be conducted in writ proceedings.

5. Appropriate forum for adjudication of mixed questions of fact and law:
The court emphasized that mixed questions of fact and law should be adjudicated by the Appellate Authority, which has the power to examine original documents and evidence. The High Court, in writ jurisdiction, is not the appropriate forum for such detailed factual adjudications.

6. Exhaustion of statutory appellate remedies before invoking writ jurisdiction:
The court reiterated the principle that statutory appellate remedies must be exhausted before approaching the High Court under Article 226. The court cited various legal precedents emphasizing the importance of institutional respect and the proper use of appellate mechanisms. The court concluded that the petitioners must prefer an appeal under Section 246A of the Income Tax Act, and the Appellate Authority should consider the appeal on merits.

Conclusion:
The writ petitions were disposed of with the observation that the petitioners should exhaust their appellate remedies. The Appellate Authority was directed to consider any appeal filed by the petitioners on merits and in accordance with law, ensuring an opportunity for all parties to present their case. The court emphasized the importance of following statutory procedures and the limited scope of writ jurisdiction in such matters.

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