Madras H.C : Expression ‘resulted into an order prejudicial to interest of revenue’, in order of Commissioner was sufficient for invoking power under section 263 and assessee ought not to have approached writ court at stage of show-cause notice

High Court Of Madras

Hemanth Kumar Bothra vs. CIT, Chennai-Xi

Section : 263, 45

Mrs. Chitra Venkataraman And T.S. Sivagnanam, JJ.

Writ Appeal No. 113 Of 2014

M.P. No. 1 Of 2014

January  28, 2014

JUDGMENT

T.S. Sivagnanam, J. – This Writ Appeal is directed against the order dated 28.11.2013 passed in W.P.No.5663 of 2013.

2. The appellant is the writ petitioner and the writ petition was filed for issuance of writ of certiorari to quash the notice issued by the first respondent dated 18.02.2013 under Section 263 of the Income Tax Act. The appellant challenged the show cause notice by contending that the show cause notice does not indicate the expression “erroneous” and as such very proceedings is liable to be quashed. Further, the learned counsel placed certain factual details to canvass his case that the appellant was in possession of the property for more than three years and as such he is entitled for long term capital gain.

3. The Revenue filed counter affidavit and raised a preliminary objection that the writ petition is not maintainable as against the show cause notice; that apart, the factual averments made by the petitioner were also denied.

4. The learned Single Judge after considering the submissions of the appellant recorded a finding that the first respondent produced primary materials to show that the assessment order was erroneous and it caused prejudice to the interest of the revenue and the fact the word “erroneous” was not mentioned in the order would not be sufficient to quash the order. The learned Single Judge placed reliance on the decision of the Supreme Court in the case of Malabar Industrial Co. v. CIT [2000] 243 ITR 83/109 Taxman 66, wherein, the Honourable Supreme Court pointed out that the phrase “prejudicial to the interest of the revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer; when there are primary materials before this Court to show that the Income Tax Officer considered the sale and treated it as long term notwithstanding the fact that it was a short term capital gain, prima facie it cannot be said that the Commissioner was not correct in issuing the show cause notice. Therefore the learned Single Judge held that it is open to the petitioner to take all the contentions available before the Assessing Authority. The learned Single Judge relied on the decision of the Honourable Supreme Court in the case of Special Director v. Mohd. Ghulam Ghouse [2004] 3 SCC 440, wherein, the Honourable Supreme Court indicated that in normal circumstances, the writ petition against show cause notice is not maintainable and the party should respond to the notice and permit the authorities to pass orders. Further the learned Single Judge relied on the decision of the Honourable Supreme Court in the case of CIT v. Vijaybhai N. Chandrani [2013] 35 taxmann.com 580, wherein the Honourable Supreme Court held that assessee has invoked the writ jurisdiction of the High Court without exhausting the alternate remedies provided under the Act; at this stage, the High Court ought not to have entertained the writ petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the Assessing Authority, if for any reason, it is aggrieved by the said decision, to question the same before the forum provided under the Act.

5. Mr. R. Sivaraman, learned counsel appearing for the appellant reiterated the submissions made before the writ court and submitted that in the absence of the word “erroneous” in the notice issued under Section 263 of the Act by the Commissioner, the learned Single Judge ought to have interfered with notice.

6. We do not agree with the said submission of the learned counsel appearing for the appellant. Admittedly, the jurisdiction of the first respondent in issuing the notice under Section 263 of the Act is not under challenge. All that the petitioner seeks to contend is that the word “erroneous” is absent in the notice issued under Section 263 of the Act.

7. On a perusal of the notice issued under Section 263 of the Act, it is seen that the Commissioner has stated that on perusal of the assessment records in the case of the appellant for the assessment year 2009-10 shows that the assessment was completed under Section 143(3) of the Act vide order dated 19.12.2011; the immovable property sale proceeds of Rs.2,30,00,000/- were treated as Long Term Capital Gains instead of Short Term Capital Gain, which has resulted into an order which is prejudicial to the interests of revenue. The expression “resulted into an order which is prejudicial to the interest of revenue” has to be held to be sufficient for the purpose of invoking the power under Section 263 of the Act. As pointed out by the learned Single Judge, the petitioner ought not to have approached the Writ Court at the stage of show cause notice. It is appropriate for the assessee to submit his reply to the said notice and raise all the contentions available before the Assessing Authority.

8. In view of the above findings, we find no ground to interfere with the order of the learned Single Judge.

9. We are surprised to note that the grounds raised in memorandum of grounds of appeal filed by the appellant and signed by the counsel for the appellant are totally irrelevant and the ground raised do not pertain to any of the grounds argued by the learned counsel for the appellant. When a query was put to the counsel in this regard, the counsel agrees that the grounds raised are totally irrelevant to the facts of the case and has no explanation to offer.

10. In the result, the Writ Appeal stands dismissed. No costs. Consequently, connected M.P., is closed.

[Citation : 363 ITR 33]