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2024 (9) TMI 1766 - HC - Income TaxReopening of assessment - applicability of Section 151 - Sanction has not been granted by the appropriate authority as specified - impugned notice would be required to be held to be illegal in view of the law as laid down in the decision in Hexaware Technologies Limited 2024 (5) TMI 302 - BOMBAY HIGH COURT - HELD THAT - We are fairly informed at the bar that a final assessment order has already been passed and such order has been appealed against by the petitioner and such appeals are pending. Our attention is drawn to a decision of this Court in Rajan Pradeep kumar Dubey 2024 (8) TMI 1505 - BOMBAY HIGH COURT wherein in similar circumstances when an appeal filed by the assessee was pending we had not entertained the writ petition and had permitted the petitioner to pursue the appeal. In the light of the aforesaid observations we need to be consistent in our approach. We may observe that the appellate authority is bound by the decisions of the Jurisdictional High Court. Thus in the facts and circumstances of this case it is open to the petitioner to raise in the appellate proceedings all such pleas as raised in the present petitions. Certainly the appellate authority would consider all the pleas which the petitioner intends to urge including that the notice under Section 148 issued is itself illegal in view of what has been held in the decision of this Court in Hexaware. The justification of the petitioner to pursue these petitions is that the appeal would take many years to be adjudicated and the sword of litigation would remain hanging over the head of the petitioner despite the law having been declared in Hexaware. ORDER - The petitioner shall pursue its appeals already filed before the Commissioner of Income-tax Appeals against the impugned assessment order. It is open to the petitioner to raise contentions on the impugned notice and the order having become untenable in the light of the decision of this Court in Hexaware. We also permit the Petitioner to file an application before the appellate authority praying that the appeals be disposed of in view of the decision of this Court in Hexaware.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in these petitions are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Notice under Section 148 of the Income Tax Act Relevant legal framework and precedents: Section 148 authorizes the Income Tax Department to issue a notice for reassessment if it has reason to believe that income has escaped assessment. The validity of such notice is subject to procedural safeguards, including sanction requirements under Section 151 and related provisions. The Court's recent decisions in Hexaware and Siemens have emphasized strict compliance with these procedural provisions, holding that notices issued without proper sanction are illegal and void. Court's interpretation and reasoning: The Court reiterated that the notices issued under Section 148 must comply with the sanction requirements as interpreted in Hexaware and Siemens. These decisions are binding on the appellate authorities and must be considered in adjudicating the legality of the notices. Key evidence and findings: The petitioner challenged the notices on grounds that they were issued without proper sanction, contrary to the binding precedents. The Court noted that the petitioner had already filed appeals and revision applications contesting these issues. Application of law to facts: The Court held that the petitioner is entitled to raise the illegality of the notices before the appellate and revisional authorities, which are bound to consider the binding precedents. The writ jurisdiction under Article 226 is not ordinarily to be invoked when efficacious statutory remedies are available and pending. Treatment of competing arguments: The petitioner argued that the notices were illegal and that the writ petitions should be entertained to provide immediate relief. The revenue contended that the petitioner has alternative remedies in the form of appeals and revisions, which should be pursued first. The Court agreed with the revenue, emphasizing the principle of exhausting statutory remedies before approaching the High Court under Article 226. Conclusions: The notices under Section 148 are subject to challenge before the appellate authorities, which must consider the binding precedents. The Court declined to entertain the writ petitions on this ground. Issue 2: Entertaining Writ Petitions when Appeals and Revision Proceedings are Pending Relevant legal framework and precedents: The Income Tax Act provides statutory remedies including appeals to the Commissioner of Income Tax (Appeals) and revision applications under Section 264. The High Court's jurisdiction under Article 226 is discretionary and generally not exercised where alternative statutory remedies are available. Court's interpretation and reasoning: The Court referred to its earlier decision in Rajan Pradeepkumar Dubey vs. Income Tax Officer, where it declined to entertain writ petitions challenging assessment orders when appeals were pending. It emphasized the importance of allowing appellate authorities to decide issues in the first instance, especially when bound by relevant precedents. Key evidence and findings: The petitioner had already filed appeals and revision applications challenging the impugned notices and assessment orders. The Court noted that these proceedings remain pending. Application of law to facts: The Court held that the writ petitions are not maintainable in such circumstances and that the petitioner should pursue the statutory remedies. The Court recognized the petitioner's concern about prolonged litigation but noted that the appellate authorities are bound to consider the binding decisions and can grant appropriate relief expeditiously. Treatment of competing arguments: The petitioner urged that the delay in appellate proceedings would cause hardship. The Court acknowledged this but maintained that the statutory appellate process is the appropriate forum to raise such issues, and the High Court should not preempt it. Conclusions: The writ petitions were dismissed on the ground of availability of alternative remedies, with directions to pursue the appeals and revisions expeditiously. Issue 3: Stay of Assessment Orders and Prohibition Against Giving Effect to Notices Pending Appeal Relevant legal framework and precedents: The Court has inherent powers to grant interim relief to prevent irreparable harm pending adjudication. However, such relief is generally granted sparingly and on a case-by-case basis. Court's interpretation and reasoning: While declining to entertain the writ petitions, the Court recognized that if the petitioner's contentions regarding illegality of the notices and assessment orders are prima facie correct, the assessment orders should not be given effect to until the appeals and revision proceedings are decided. Key evidence and findings: The petitioner's contention that the notices and assessment orders are contrary to binding precedents was accepted as a prima facie case warranting interim protection. Application of law to facts: The Court directed that the impugned assessment orders shall remain stayed until disposal of the appeals and revision applications. The petitioner was permitted to raise all contentions before the appellate and revisional authorities. Treatment of competing arguments: The revenue did not oppose interim relief but relied on the appellate process. The Court balanced the interests by granting a stay while preserving the statutory appellate process. Conclusions: The assessment orders were stayed pending appeal, and the petitioner was directed to pursue statutory remedies. Issue 4: Validity of Instruction No. 01 of 2022 issued by the Income Tax Department Relevant legal framework and precedents: Administrative instructions must conform to statutory provisions and cannot override or contravene the law. The petitioner challenged the Instruction No. 01 of 2022 as ultra vires the Income Tax Act. Court's interpretation and reasoning: The Court noted the petitioner's challenge but did not undertake detailed adjudication of this issue in the present petitions, as the primary focus was on the notices and assessment orders. Key evidence and findings: The petitioner sought a declaration that the Instruction is ultra vires and bad in law. Application of law to facts: The Court did not find it necessary to decide on this point separately, implicitly leaving the issue open for consideration in appropriate proceedings. Treatment of competing arguments: No detailed submissions or findings were recorded on this issue. Conclusions: The challenge to the Instruction was noted but not adjudicated in the present petitions. 3. SIGNIFICANT HOLDINGS The Court made the following crucial legal determinations and established core principles: "Once the petitioner has availed of an alternate remedy as provided under the Income Tax Act, namely of a substantive appeal being filed, and if the assessment order as also the notices issued to the petitioner prior thereto under Section 148A and under Section 148 are contrary to the substantive provisions of Section 151A and Section 151 of the Act, as interpreted by this Court in Hexaware and Siemens (supra), the Appellate Authority as also the Revisionary Authority being bound by the said decisions of the jurisdictional High Court, need to consider such legal position." "We are of the opinion that an approach ought not to be followed that when the appellate authority is already seized with the proceedings, we entertain writ petitions to adjudicate, what can certainly be adjudicated by the appellate authority, considering the said decisions of this Court." "Till the proceeding before the Appellate Authority or Revisionary Authority are decided, the impugned assessment order shall remain stayed." "It is open to the petitioner to raise contentions in regard to the illegality of the notice issued to the petitioner under Section 148, in the light of the decisions of this Court in Hexaware and Siemens (supra)." These holdings affirm the principle that statutory remedies must be exhausted before invoking writ jurisdiction, that appellate authorities are bound by the jurisdictional High Court's precedents, and that interim relief in the form of stay of assessment orders can be granted pending disposal of appeals.
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