2025 (7) TMI 1697 - HC - Income Tax

Assessment order passed u/s 147 and Section 144 r.w.s. 144B by the National Faceless Assessment Unit - contravention of Section 48 ibid. as same income could not be made to suffer taxation again for the Assessment year 2019-20 basing on information available in Form 26AS in the web-portal of the Income Tax Department - availability of alternative remedy for invocation of power of judicial review - assessee non producing evidence before the Assessing Officer HELD THAT - Petitioner appears to have been prevented from appearing before the Assessing Officer to substantiate his claim and to demonstrate before the Assessing Authority that the very transaction in question raised for adjudication in the Assessment Year 2018-19 the liability of which has already been discharged in the subsequent Assessment Year 2019-20. This Court in order to appreciate the factum of claim for capital gains alleged to have been escaped assessment has the occasion to peruse Judgment rendered of Nitin Nema 2023 (8) TMI 1027 - MADHYA PRADESH HIGH COURT and Sanath Kumar Murali 2025 (3) TMI 833 - KARNATAKA HIGH COURT wherein the modality for evaluation of tax liability with respect to capital gains have been discussed. This Court is of the view that the petitioner-assessee is entitled for a chance to submit documents available with him for appraisal of the Income Tax Officer for proper adjudication of liability if any during the period in question as the assessee has been consistently pleading that he has discharged liability in the succeeding assessment year. This Court finds sufficient force in the argument advanced by the learned counsel for the petitioner and to justify his claim the petitioner is to produce the documents before the AO which are subject to scrutiny by such competent Authority. After due appreciation of evidence for the purpose of consideration of transaction being taxed already for the said purpose it is deemed mete and proper to relegate the petitioner to avail the opportunity to present evidence and refer aforesaid judgments for perusal of assessing authority. Though this Court is conscious about existence of alternative remedy to assail the assessment order before the appellate authority vested to appreciate the evidence as the appeal is coterminous with the assessment proceeding having regard to the material on record and taking note of undisputed factual position as emanated from the submissions advanced by the counsel for both the parties finding that there is violation of basic tenets of natural justice this Court entertains this writ petition as availability of alternative remedy is not an absolute bar for invocation of power of judicial review. As the documents enclosed to the writ petition ex facie demonstrates that the tax liability has been discharged in the Assessment Year 2019-20 but not in the Assessment Year 2018-19 there is every likelihood of tax being assessed twice on the same transaction in order to avoid piquant situation faced by the assessee this Court is inclined to exercise its discretion by invoking powers under Article 226 of the Constitution of India. Having thus entertained the writ petition it is to impress upon that proper and sufficient opportunity being not afforded to the petitioner and/or his representative the impugned Order dated 21.03.2023 is liable to be set aside and this Court does so. Hence the matter is remitted to the assessing officer for passing fresh orders and the petitioner in order to avail opportunity of production of documents and have his say is directed to appear before the authority concerned within two weeks.

Summary

ISSUES:

Whether an income tax assessment order passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961, for a particular assessment year can validly reassess income already disclosed and taxed in a subsequent assessment year, thereby resulting in double taxation.Whether the assessee was denied the "reasonable opportunity of being heard" before passing the assessment order, constituting a violation of the principles of natural justice.Whether the High Court should entertain a writ petition challenging an assessment order despite the existence of an alternative remedy of appeal, on grounds of violation of natural justice and potential double taxation.What is the appropriate remedy when an assessee is prevented from producing evidence before the Assessing Officer due to circumstances beyond his control.

RULINGS / HOLDINGS:

The impugned reassessment order under Section 147 read with Sections 144 and 144B for the Assessment Year 2018-19 is liable to be quashed as it results in "double taxation" on the same transaction already disclosed and taxed in Assessment Year 2019-20, violating Article 265 of the Constitution of India.The assessment order was passed without affording the petitioner a "reasonable opportunity of setting out his case," thereby violating the principles of natural justice as enunciated in Tin Box Company v. CIT (2001) 9 SCC 725.Despite the existence of an alternative remedy of appeal, the writ petition is maintainable and entertained under Articles 226 and 227 of the Constitution of India due to the exceptional circumstances of violation of natural justice and the risk of double taxation.The petitioner is entitled to a fresh opportunity to produce all relevant documents before the Assessing Officer for proper adjudication; consequently, the matter is remitted for fresh consideration after affording personal hearing.

RATIONALE:

The Court applied the statutory provisions of the Income Tax Act, 1961, specifically Sections 147, 144, 144B, 142(1), and 148A(b), alongside constitutional principles under Article 265 (taxation only by law) and Articles 226 and 227 (judicial review and writ jurisdiction).Precedents relied upon include the Supreme Court decision in Tin Box Company v. CIT emphasizing the necessity of a "reasonable opportunity of being heard" before passing an assessment order, and the principle that assessment orders must be made after due procedure is followed.The Court also referenced judgments of other High Courts (Madhya Pradesh and Karnataka) concerning capital gains taxation and the inadmissibility of double taxation on the same transaction.On the issue of alternative remedies, the Court referred to the settled principle that the existence of an efficacious alternative remedy is a rule of convenience and discretion, not an absolute bar to writ jurisdiction, especially where there is a breach of natural justice, as expounded in Commissioner of Income Tax v. Chhabil Dass Agrawal (2014) 1 SCC 603 and related precedents.The Court recognized the petitioner's inability to respond timely due to "personal indisposition" as a sufficient ground to grant relief and allow production of evidence to avoid unjust double taxation.The Court clarified that it did not express any opinion on the substantive merits of the tax liability but limited its order to procedural fairness and the opportunity to be heard.