2022 (6) TMI 805 - HC - Income Tax

Reopening of assessment u/s 147 - Scope of new section 148A - Whether at this stage of notice under Section 148, writ Court should venture into the merits of the controversy when AO is yet to frame assessment/re-assessment in discharge of statutory duty casted upon him under Section 147 ? - HELD THAT - The debate is not new. While dealing with the similar situation under the old Act i.e. Indian Income Tax Act, 1922, Division Bench of this Court in 'Lachhman Das Nayar and others vs. Hans Raj Puri, Income- Tax Officer 1952 (9) TMI 45 - HIGH COURT OF PUNJAB AND HARYANA as held a particular machinery has been set up under the Act by the use of which alone total assessable income for the purposes of the Income-tax is to be ascertained and jurisdiction to question the assessment otherwise than by the use of this machinery is incompatible with the scheme of the Act. The challenge of the action of the Income-Tax Officer by a writ prohibition or mandamus is, therefore, not available to the assessee. Thus, the consistent view is that where the proceedings have not even been concluded by the statutory authority, the writ court should not interfere at such a pre-mature stage. Moreover it is not a case where from bare reading of notice it can be axiomatically held that the authority has clutched upon the jurisdiction not vested in it. The correctness of order under Section 148A(d) is being challenged on the factual premise contending that jurisdiction though vested has been wrongly exercised. By now it is well settled that there is vexed distinction between jurisdictional error and error of law/fact within jurisdiction. For rectification of errors statutory remedy has been provided. In the light of aforesaid settled proposition of law, we find that there is no reason to warrant interference by this Court in exercise of the jurisdiction under Article 226/227 of the Constitution of India at this intermediate stage when the proceedings initiated are yet to be concluded by a statutory authority. Hence, the writ petition stands dismissed.

Summary

Issues:
1. Whether the writ court should analyze the controversy at the notice stage under Section 148 of the Income Tax Act before the assessment is completed by the Assessing Officer?

Analysis:
The petitioner, a partnership firm, filed a writ petition seeking to quash a notice issued under Section 148 of the Income Tax Act, 1961, and an order passed under Section 148A(d) for the assessment year 2015-16. The petitioner argued that the order under Section 148A(d) was erroneous as it did not consider their stance. The High Court examined whether it should delve into the merits of the controversy at the notice stage when the Assessing Officer is yet to complete the assessment. The court referred to previous judgments to determine the appropriate course of action.

The court cited the case of 'Lachhman Das Nayar and others vs. Hans Raj Puri' under the old Indian Income Tax Act, 1922, which highlighted that the legislature entrusted the determination of facts and law to the Income-tax Officers. The court also referred to the case of 'Rasulji Buxji Kathawala vs. Income Tax Commissioner, Delhi,' emphasizing that intervening at the notice stage was not justified when other statutory remedies were available to the assessee. Additionally, the court mentioned the case of 'Sumit Passi vs. Assistant Commissioner of Income-Tax,' stating that the Assessing Officer's reasons for believing that taxable income escaped assessment should not be dismissed without a fact-finding procedure, as the assessee had remedies under the Act.

Furthermore, the court discussed the Delhi High Court case of 'Gulmuhar Silk Pvt. Ltd. vs. Income Tax Officer Ward 10(3) Delhi,' which emphasized that the petitioner could challenge the finding of fact during the statutory proceedings and that the Income Tax Act provided a complete machinery for assessment. The Supreme Court's decision in 'Raymond Woollen Mills Limited vs. Income Tax Officer, Centre XI, Range Bombay' was also cited, indicating that the court should not strike down the reopening of a case prematurely, leaving the questions of fact and law to be decided by the assessing authority.

Based on the settled legal principles and precedents, the High Court concluded that it should not interfere at an intermediate stage when the proceedings initiated by the statutory authority are yet to be concluded. The court dismissed the writ petition, clarifying that its decision should not be construed as an opinion on the merits of the case.