High Court Of Bombay
Ajanta Pharma Ltd. vs. Assistant Commissioner Of Income Tax & Ors.
Sections Art. 22, 148
Asst. Year 1998-99 to 2000-01
R.M.S. Khandeparkar & J.P. Devadhar, JJ.
Writ Petn. Nos. 1705, 1776 & 1818 of 2003
29th November, 2003
Counsel Appeared
J.D. Mistri with Sanjiv M. Shah & G.G. Agarwal, for the Petitioner : R.V. Desai with P.S. Jetley & Mrs. S.V. Bharucha i/b T.C. Kaushik, for the Respondents
JUDGMENT
R.M.S. Khandeparkar, J. :
Heard. Perused the records.
2. Since common questions of law and facts arise in all these petitions, they were heard together and are being disposed of by this common judgment.
3. Rule. By consent, the rule is made returnable forthwith. The respondents waive service in all the aforesaid writ petitions.
4. By these present petitions, the petitioners seek to challenge the action on the part of the respondent No. 1 in relation to issuance of notices dt. 28th Jan., 2003 under s. 148 of the IT Act, 1961 (hereinafter called as “the said Act”), and the accompanying reasons recorded for the same seeking to reassess the income for the asst. yrs. 1998-99, 1999-2000 and 2000-2001 by reopening the original assessment orders dt. 27th Dec., 2000, 8th March, 2002 and 30th April, 2002, respectively. The legality and validity of the said notices and the reasons appended thereto are sought to be challenged primarily on the ground that the action on the part of the respondent No. 1 in issuance of the said notices is ex facie illegal and without jurisdiction, and the same is ex facie revealed from the reasons appended to the said notice. The notice is also challenged on various other grounds.
5. At the outset, the learned advocate appearing for the respondents has raised preliminary objection regarding nonmaintainability of the petitions on the ground that the same are premature inasmuch as that the petitioners have efficacious alternative remedy in the form of reply to the said notices and even in relation to the point pertaining to the lack of jurisdiction or absence of power to issue the notices in a given set of facts can be raised in such reply, and the order passed thereon can be subjected either to appeal or even for intervention by this Court in writ jurisdiction, and in that regard, heavy reliance is placed in the decision of the apex Court in GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC).
6. The decision of the apex Court in GKN’s case (supra) was in an appeal arising from the decision of Delhi High Court in GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (Del) 13 : (2002) 257 ITR 702 (Del). That was a petition challenging the notices issued to GKN by IT authorities under s. 148 of the said Act. The Delhi High Court, observing that the petitioner was not justified in invoking the extraordinary jurisdiction of the Court at that stage, and, therefore, the petition being premature, dismissed the same. Plain reading of the decision of Delhi High Court would, therefore, disclose that the petition was dismissed merely observing that the exercise of extraordinary jurisdiction was not called for at the stage when the petitioners had approached the High Court merely on receipt of the notices under ss. 148 and 143(2) of the said Act. The decision does not disclose any other reason for dismissing the petition.
7. In an appeal against the said decision, the apex Court while dismissing the same observed thus: “We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under s. 148 of the IT Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.”
8. Before making the above observations, the apex Court took note of the following factors: (i) that the High Court had taken the view that the appellants could have taken all objections in their replies to the notices and that, therefore, at that stage, the writ petition was premature. (ii) that the counsel appearing for the appellant had brought to the notice of the apex Court that the impugned notices related to seven assessment years and that during the pendency of the appeals before the apex Court, the assessment for two years i.e., 1995-96 and 1996-97 was completed against which the appeals were filed before the appellate authority, however, the notices relating to the other five assessment years, viz., 1992-93, 1993-94, 1994-95, 1997-98 and 1998-99 were the subject-matter of the appeals before the apex Court. Plain reading of the decision of the apex Court in GKN’s case (supra) would, therefore, disclose that it had refused to interfere in the order of the High Court of Delhi dismissing the writ petition on the ground that the same was premature as the petitioners had approached the High Court immediately on receipt of the notice without availing an opportunity of filing the reply and the objections to the notice. Simultaneously, it was observed that “proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices when a noticee receives a notice under s. 148 of the said Act.” The apex Court has further observed that the noticee is entitled to insist for adjudication of the objections to the issuance of notice and to invite a speaking order from the adjudicating authority in relation to such objections, whereupon, the AO would be enjoined to dispose of such objections by a speaking order. In other words, the apex Court has held that when the authorities issue notices under s. 148 of the said Act, the proper course of action for the assessee is first to file a reply and raise all his objections and invite a speaking order on such objections.
Referring to the said decision of the apex Court, it was strenuously argued on behalf of the respondents that the petitioners, in the cases in hand, having ample opportunity to file reply and to raise objections regarding jurisdiction before the adjudicating authority and having not done so, and having approached this Court directly against the issuance of notice under s. 148 of the said Act, the petitions are to be dismissed as premature. The learned advocate appearing for the petitioners, however, on the other hand, drawing attention to the decisions of the apex Court in the matters of Calcutta Discount Co. Ltd. vs. ITO & Anr. (1961) 41 ITR 191 (SC), Comunidado of Chicalim vs. ITO & Ors. (2000) 162 CTR (SC) 252 : (2001) 247 ITR 271 (SC), Union of India & Anr. vs. Raghubir Singh (1990) 87 CTR (SC) 186 : (1989) 178 ITR 548 (SC), N.D. Bhatt, IAC & Anr. vs. I.B.M. World Trade Corporation (1993) 115 CTR (Bom) 103 : (1995) 216 ITR 811 (Bom), and in an unreported decision of this Court in Writ Petition No. 829 of 2003 (Caprihans India Ltd. vs. Tarun Seem & Ors.) delivered on 24th July, 2003 [since reported at (2003) 185 CTR (Bom) 157—Ed.] has submitted that in the cases in hand, the respondents alongwith the notice had also served upon the petitioners the alleged reasons in support of the notice under s. 148 of the said Act and the same apparently disclose total absence of jurisdiction to the authorities to initiate proceedings under s. 148 of the said Act, inasmuch as that the alleged reasons do not disclose any reason which can reveal a case of escaped income for issuance of notice under the provisions of s. 148 of the said Act, and ex facie the same disclose total lack of application of mind on the part of the authorities before invoking powers under s. 148 of the said Act. He further submitted that the decision of the Constitutional Bench of the apex Court has clearly ruled that when the authority acts without jurisdiction compelling a party to follow lengthy proceedings and to face unnecessary harassment at the instance of such authority, then in such a case, it can be a fit case for invoking writ jurisdiction and for issuance of appropriate writ for quashing such proceedings right in the beginning thereof. He has further submitted that the decision of the apex Court in GKN’s case (supra) does not lay down the law to the effect that the jurisdiction of the High Court under Art. 226 of the Constitution of India is barred to entertain such matters unless the parties approach the AO with their replies and objections on receipt of the notice under s. 148 of the said Act.
11. The apex Court in Calcutta Discount Co. Ltd. (supra), while dealing with the matters relating to the notice which was issued under s. 34 of the Indian IT Act, 1922, and dealing with the point of jurisdiction of the High Court to entertain such matters, has observed that at the stage when the ITO issues the notice he does not act judicially or quasi-judicially and, therefore, a writ of certiorari or prohibition may not be issued, yet has further ruled that “it is well-settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well- settled, will issue appropriate orders or directions to prevent such consequences.” It was further observed that “the existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action.”
12. Further, the Division Bench of this Court in N.D. Bhatt’s case (supra) while dealing with the scope of powers of the assessing authority under s. 148 in relation to the reasons for reopening has held that “it is also well-settled that the reasons for reopening are required to be recorded by the assessing authority before issuing any notice under s. 148 by virtue of the provisions of s. 148 (2) at the relevant time. Only the reasons so recorded can be looked at for sustaining or setting aside a notice issued under s. 148.” Yet another Division Bench of this Court to which one of us (J.P. Devadhar, J.) was a party, in Caprihans India Ltd. vs. Tarun Seem & Ors. in Writ Petition No. 829 of 2003 while dealing with the similar objection on the part of the Department to the maintainability of the petition filed by Caprihans India Ltd. and referring to the decision of the apex Court in GKN’s case (supra) had clearly held that “the apex Court added a clarification to the effect that when a notice under s. 148 is issued, the proper course of action for the noticee was to file a return and seek reasons and the AO was thereafter bound to furnish reasons within reasonable time. That, on receipt of reasons, the noticee has to file objections to the issuance of notice and thereupon the AO has to dispose of the same by passing a speaking order.” At the same time referring to the facts of the case in Caprihans India Ltd.’s case (supra), the Division Bench proceeded to observe that “it is true that the assessee should have filed its return pursuant to the notice under s. 148 and, on that basis, the assessee should have sought reasons for issuing such notices as laid down by the Supreme Court in GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC). That was not done. We would have rejected the petition on this ground. However, in the peculiar facts and circumstances of this case, we are not inclined to dismiss the petition in limine because the reasons now disclosed by the AO, on the face of it, show that there is nothing in the reasons to indicate failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.” It was further observed that “the Court finds ex facie that AO has sought to reopen the assessment on certain erroneous assumptions.”
It is well-settled that no judgment can be read as a statute. Every decision is an authority for what it actually decides and not what follows from it, and that has been repeatedly stated by the apex Court in various decisions. The elaborate decisions on the said point are in the matter of Union of India & Ors. vs. Dhanwanti Devi & Ors. (1996) 6 SCC 44 and Islamic Academy of Education & Anr. vs. State of Karnataka & Ors. AIR 2003 SCW 4240. If one reads the decision of the apex Court in GKN’s case (supra), as rightly submitted by the learned advocate for the petitioners, it nowhere lays down the law to the effect that the party is totally debarred from approaching this Court under Art. 226 of the Constitution of India when an exercise of powers by the authority under s. 148 of the said Act ex facie appears to be without jurisdiction. Undoubtedly, whether such an exercise is with or without jurisdiction will have to be revealed from the notice and reasons on the face thereof. At the same time, it is also well-settled and the decision of the Constitution Bench of apex Court in Calcutta Discount Co.’s case (supra) is very clear on the point that mere availability of an alternative relief can be no bar for exercise of a writ jurisdiction when the authorities seek to assume jurisdiction which they do not possess or act in totally arbitrary manner. The decision in GKN’s case (supra) certainly reminds the assessee that when a notice under s. 148 is issued, the proper course of action is to file a reply with his objections including those in relation to the absence of jurisdiction. However, it does not lay down the law to the effect that when such an objection is in relation to absence of jurisdiction and the same is revealed ex facie or apparent on the face of notice or reasons in support thereof, the assessee has compulsorily to invite an order from the AO in relation to the absence of jurisdiction. It is another case that when certain facts are to be ascertained or various other materials are to be gone through to arrive at a finding about the absence of jurisdiction, in which case, certainly, the assessee will have to approach the AO. It is so because, the jurisdiction under Art. 226 of the Constitution of India being an extraordinary jurisdiction cannot be allowed to be availed as a matter of course. In order to decide an issue of jurisdiction, findings of the authority on the factual aspect may be necessary. In that case, certainly primarily the assessee will have to approach the AO. That does not mean that the assessee is invariably bound to approach the AO in each and every case. There can be the cases, like the one in hand, where he may be entitled to approach the Court directly under Art. 226 of the Constitution of India.
16. The Madras High Court in L.V. Veeri Chettiar & Anr. vs. STO AIR 1971 Mad 155 has held that when a taxing authority acts despite the absence of basic jurisdictional facts, the assessee does not have to exhaust the available statutory remedy before seeking a writ and the High Court can stay assessment proceedings at its inception. We have no hesitation in expressing our agreement with the said ruling of the Madras High Court. In fact, the law in that regard is well-settled by the various decisions of the Supreme Court which include the rulings in the matters of State of Uttar Pradesh vs. Mohammad Nooh AIR 1958 SC 86 and Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors. AIR 1999 SC 22. In Mohammad Nooh’s case (supra) it was held by the apex Court that : “If an inferior Court or Tribunal of first instance acts wholly without jurisdiction or patently in excess of jurisdiction or manifestly conducts the proceedings before it in a manner which is contrary to the rules of natural justice and all accepted rules of procedure and which offends the superior Court’s sense of fair play the superior Court may, we think, quite properly exercise its power to issue the prerogative writ of certiorari to correct the error of the Court or Tribunal of first instance even if an appeal to another inferior Court or Tribunal was available.”
17. While bearing in mind the well established principle of law, as stated above, the Division Bench of this Court in the case of Caprihans India Ltd. (supra) had refused to dismiss the petition in limine. The contentions similar to those raised in the present petitions on behalf of the respondents were also raised therein, but were rejected. It is pertinent to note that it was clearly observed while rejecting the said preliminary objection that the proper course of action on receipt of the notice for an assessee would be to approach the authorities, as has been clarified by the apex Court in GKN’s case (supra), but the case where exercise of powers of the AO under s. 148 ex facie appears to be on erroneous assumption, nothing can forbid this Court from exercising the powers under Art. 226 of the Constitution of India.
18. In the cases in hand, it is the contention of the petitioners that there is nothing in the reasons appended to the notices to indicate or reveal that any income had escaped from the assessment for any of the assessment years under reference and that, therefore, the exercise of jurisdiction by the authority under s. 148 of the said Act is without jurisdiction, and that the conclusion regarding escapement of income is sought to be drawn on the basis of alleged failure on the part of the petitioners to correlate the trading export sales with the invoice-wise purchase of trading goods exported by the petitioners, and failure to give details of purchases of trading goods exported by the petitioners.
19. The notices are issued to the petitioners accompanied by the reasons alleging that though the petitioners had filed returns for the relevant assessment years claiming deduction under s. 80HHC and that the assessment under s. 143(3) of the said Act was made by the said orders dt. 27th Dec., 2000, 8th March, 2002 and 30th April, 2002, however, the petitioners had not filed invoice-wise details of purchases of trading goods exported and did not correlate the trading export sales with invoice-wise purchase of trading goods exported and thus suppressed the purchases i.e., the direct cost on the export of trading goods and had increased the profits and hence sought the deduction under s. 80HHC in respect of export of trading goods which resulted in escapement of income. The affidavit-in-reply filed by the Asstt. CIT in these writ petitions discloses a statement to the effect that his predecessor had reasons to believe that the assessee-company had suppressed the purchases i.e., direct cost on export of trading goods and increased the profits and thereby had claimed excess deduction under s. 80HHC and the petitioners had failed to disclose fully and truly all material facts necessary for assessment by not submitting the supporting documents or invoices to substantiate the details of purchases and also supporting documents with regard to trading goods which had resulted into escapement of income during the assessment. Bare reading of the reasons in support of the notice disclose that the conclusion regarding escapement of the income was on the basis that non-disclosure of the invoice-wise details of purchases of trading goods exported and the failure to correlate the trading export sales with invoice-wise purchase of trading goods exported, whereas, the affidavit-in-reply claims nondisclosure of the materials in support of such details. In other words, the details were in fact disclosed by the petitioners and, therefore, the reasons given for issuance of notice are contrary to the materials placed before the Department by the petitioners. It is also pertinent to note that the petitioners have categorically stated about the disclosure of details of trading goods exported along with direct cost of purchases for the assessment year along with their return and the said fact also finds corroboration from the affidavit of the Asstt. CIT wherein he has made a grievance only of non-furnishing of documents in support of those details. Not only that, the Department has clarified that non-furnishing of material facts was by way of non-furnishing of documents in support of details furnished to the Department. Apparently, the reasons for issuance of notice did not disclose to be borne out from the records. In other words, the so-called reasons are totally flimsy, as has been contended on behalf of the petitioners, and, by no stretch of imagination, can be said to be sufficient to draw the conclusion about escapement of income which could empower the authorities to invoke powers under s. 148 of the said Act. Obviously, therefore, there was no material on the basis of which the Department could have reopened the case in exercise of powers under s. 148 of the said Act.
Considering the reasons in support of notices, the same do not disclose any suppression of any income or materials in support of the return filed by the petitioners in relation to any of the assessment years referred to above so as to warrant an action under s. 148 of the said Act. For the reasons stated above, therefore, there is neither anysubstance in the preliminary objection raised by the respondents to the maintainability of the petitions nor there is any case made out for exercise of powers under s. 148 of the said Act by the authority nor can it be said that the authority had jurisdiction under s. 148 of the said Act in the facts and circumstances of the case. The said notices are ex facie bad in law and clearly in absence of powers vested in it under s. 148 of the said Act, and hence cannot besustained. Being so, the petitions succeed. The impugned notices are quashed and set aside. Rule is made absolute in terms of prayer cl. (a) in each of the petitions with no order as to costs.
[Citation : 267 ITR 200]
