Karnataka H.C : Whether, the impugned notices vide Annex. C, C1 to C6 issued by the first respondent under s. 154 r/w s. 245F of the IT Act, 1961, are in accordance with law?

High Court Of Karnataka

Queens Saree Collection & Ors. vs. Income Tax Settlement Commission & Anr.

Sections 116, 154, 245F, ART. 226, ART. 227

Asst. Year 1993-94, 1995-96, 1996-97

N.K. Patil, J.

Writ Petn. Nos. 27530 to 27539 of 2003

23rd June, 2004

Counsel Appeared

D.L.N. Rao & Smt. S.R. Anuradha, for the Petitioners : M.V. Seshachala & N. Devadass, for the Respondents

ORDER

N.K. patil, J. :

The petitioners, questioning the legality and validity of the impugned notices dt. 31st March, 2003, vide Annex. C, C1, C2, C3, C4, C5 and C6 on the file of the first respondent, have presented the instant writ petitions. Further, the petitioners have sought for a direction, directing the first respondent to dismiss the miscellaneous petitions filed by the second respondent herein as not maintainable.

The brief facts of the case are as hereunder : The petitioners 1 to 4 are registered firms; petitioner Nos. 5 to 8 and 10 are individuals and petitioner No. 9 is an HUF. During the assessment of the petitioners for the asst. yrs. 1993-94, 1995-96 and 1996-97, the petitioners have filed applications before the first respondent for settling their case. The Commission, by a common order dt. 29th Jan., 2001, has disposed of the applications filed by the petitioners for settlement. Be that as it may.

The first respondent herein issued the impugned notices seeking to rectify the earlier order dt. 29th Jan., 2001, referred above. The petitioners, aggrieved by the impugned notices, felt necessitated to approach this Court by presenting the instant writ petitions.

The principal submission canvassed by the learned counsel appearing for the petitioners is that, the Settlement Commission has no jurisdiction to issue the impugned show-cause notices as it has no power to review its own order under the guise of notification (rectification). The first respondent, being a quasi-judicial body constituted under the IT Act, 1961 (‘Act’ for short), derives its powers only under the Act. Under s. 245-I of the Act, the orders of the first respondent is conclusive and the Act does not empower the Settlement Commission to review its own orders once passed. Further, she vehemently submitted that, the impugned notices issued by the first respondent purports to rectify and amend its order dt. 29th Jan., 2001, passed under s. 245D(4) in the garb of the recent decision of the Hon’ble Supreme Court, which is impermissible. Further, the learned counsel appearing for the petitioners vehemently submitted that, the first respondent has become functus officio and has no jurisdiction to entertain the miscellaneous petitions filed by the second respondent and issue notices to the petitioners. Therefore, the first respondent has no power to rectify its own order under s. 154 r/w s. 245F of the Act. She submitted that it is a settled principle of law that, subsequent changes in law due to amendments and decisions are not a ground for review and any petition filed for amendment of an order due to the change in law is liable to be dismissed.

Therefore, the first respondent has erred in law in issuing the impugned notices as it has no jurisdiction and ought to have dismissed the miscellaneous petitions filed by the competent authority and the waiver of interest granted by the first respondent is in consonance with the guidelines issued by the CBDT. The first respondent failed to appreciate that, as on the date of passing the order under s. 245D(4), the first respondent had powers to waive interest under ss. 234A, 234B and 234C and the decisions of the Hon’ble Supreme Court are subsequent to the order passed by the first respondent. Hence, the said decisions are not applicable to the facts of the instant case or binding on the first respondent Therefore, the proceedings initiated and concluded by issuing the impugned notices is one without any authority of law. Hence, they are liable to be set aside. To substantiate her submission, as stated above, she placed reliance on the decisions in the case of Capital Cables (India) (P) Ltd. vs. ITSC (2004) 189 CTR (Del) 103 : (2004) 267 ITR 528 (Del), in the case of Netai Chandra Rarhi & Co. & Ors. vs. ITSC & Ors. (2004) 186 CTR (Cal) 706 : (2003) 263 ITR 186 (Cal) and in the case of Shantesh Gureddi vs. State of Karnataka & Anr. ILR 2003 Kar 3862. Relying on the aforesaid decisions, she submitted that, in view of the well-settled law laid down by the Division Bench of the Delhi High Court, decision of the learned single Judge of the Calcutta High Court as well as this Court referred above, the impugned notices issued by the first respondent are liable to be set aside as one without jurisdiction. Per contra, the learned counsel appearing for the respondents, inter alia, contended and substantiated the impugned notices issued by the competent authority, namely, the first respondent herein, as envisaged under s. 154 of the Act r/w s. 245F of the Act. They submitted that, no error or illegality as such has been committed by the respondents in issuing the impugned notices. They submitted that, if the petitioners are aggrieved by the impugned notices, it is always open for the petitioners to file objections to the same and if objections are filed to the said notices, the same will be considered and appropriate orders will be passed in accordance with law. To substantiate the said stand, the learned senior standing counsel appearing for respondents placed reliance on the decision in the case of Andrew Nettikkadan vs. Asstt. CIT & Ors. (2004) 187 CTR (Ker) 602 : (2004) 266 ITR 708 (Ker) and submitted that the petitioners have not made out any good grounds to invoke the extraordinary jurisdiction of this Court as envisaged under Arts. 226 and 227 of the Constitution of India. Therefore, the writ petitions filed by the petitioners are liable to be dismissed in limine.

I have heard the learned counsel appearing for the petitioners and the learned senior standing counsel appearing for respondents. After careful perusal of the impugned notices vide Annex. C, C1 to C6, by competent authority, and after thorough evaluation of the material available on record threadbare including the statement of written arguments filed by the learned counsel appearing for petitioners and also taking into consideration the contentions urged by the respective counsel appearing for the parties, the only question that arises for consideration is as to : Whether, the impugned notices vide Annex. C, C1 to C6 issued by the first respondent under s. 154 r/w s. 245F of the IT Act, 1961, are in accordance with law?

After hearing the learned counsel appearing for the parties for considerable length of time, and after careful perusal of the impugned notices and the relevant provision of s. 154 r/w s. 245F of the Act, I do not find any error of law much less material irregularity in issuing the impugned notices vide Annex. C, C1 to C6. To understand the provisions of s. 154 and s. 245F of the Act, it is worthwhile to extract the said provisions as hereunder : “Sec. 154—Rectification of mistake—(1) With a view to rectifying any mistake apparent from the record an IT authority referred to in s. 116 may. — (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation or deemed intimation under sub-s (1) of s. 143. …….. (1A)…. (a) …. (b)…. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard. (4)….. (5)….. (6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the AO shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be issued under s. 156 and the provisions of this Act shall apply accordingly. (7) …….. Sec. 245F : (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an IT authority under this Act. (2) to (6) …… (7) The Settlement Commission shall, subject to the provisions of this Chapter, have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings.”

After careful reading of s. 154 of the Act, it can be very well seen that, the statute has provided power to the competent authority, in case of an amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall be done only after giving notice to the assessee of its intention to do so and that reasonable opportunity of being heard is given to the assessee. In the instant case, it can be seen that, fifteen days’ time has been given to the petitioners from the date of receipt of the said notice to file objections. The contention of the learned counsel appearing for the petitioners is that, in pursuance of the applications filed by them before the Settlement Commission, the competent authority after consideration, has passed the order as early as on 29th Jan., 2001, and that order has reached finality and hence, at this stage, invoking s. 154 r/w s. 245F of the Act by issuing the impugned notices is not permissible in view of the well settled law laid down by the Division Bench of the Delhi High Court, the decision of the learned single Judge of the Calcutta High Court as well as this Court referred above. The said contention of the learned counsel appearing for the petitioners holds no water and has no bearing on the facts and circumstances of the instant case. It is significant to note, after careful evaluation of the entire material available on file and the judgments referred by the learned counsel appearing for the petitioners that, in the decision of the Division Bench of Delhi High Court and the decision of the learned single Judge of the Calcutta High Court, the competent authority has passed the final order and not against the show-cause notice. But in the instant case, notice has been issued to the petitioners to have their say in the matter and fifteen days’ time from the date of receipt of the notice has been given to the petitioners to file their objections, if any. Therefore, reliance placed by the learned counsel appearing for the petitioners on the aforesaid decisions has no bearing on the facts and circumstances of the present case. Therefore, interference in the impugned show-cause notices by exercising the extraordinary jurisdiction as envisaged under Arts. 226 and 227 of the Constitution of India is uncalled for. Hence, I do not find any justification to interfere with the said notices and express any views on the merits or demerits of the petitioners’ case as the contentions advanced by the petitioners would prejudice the rights of the respective parties. If the petitioners are aggrieved by the impugned notices, as rightly pointed out by the learned counsel appearing for respondents, it is always open for the petitioners to redress their grievances by filing objections to the same before the competent authority.

10. Yet another reason as to why the writ petitions filed by the petitioners are liable to be dismissed is, in view of the well-settled law laid down by the apex Court in the case of Special Director & Anr. vs. Mohd. Ghulam Ghouse & Anr. AIR 2004 SCW 416. It is worthwhile to extract the principle laid down by the Supreme Court at paras 5 and 6. Paras 5 and 6 read thus: “5. This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show-cause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless, the High Court is satisfied that the show-cause notice was totally non est in the eye of law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine and the writ petitioner should invariably be directed to respond to the show-cause notice and take ail stands highlighted in the writ petition. Whether the show-cause notice was founded on any legal premises is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the Court. Further, when the Court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose are not denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is accorded to the writ petitioner even at the threshold by the interim protection, granted.

6. In the instant case, the High Court has not indicated any reason while giving interim protection. Though, while passing interim orders, it is not necessary to elaborately deal with the merits, it is certainly desirable and proper for the High Court to indicate the reasons which has weighed with it in granting such an extraordinary relief in the form of an interim protection. This admittedly has not been done in the case at hand.” If the ratio of the principles of law laid down in the case referred above is applied to the facts and circumstances of the present case, I am of the view that interference in the impugned notices issued by the respondents is uncalled for and it is a matter that has to be considered by the competent authority as envisaged under the mandatory provisions of the Act. In view of the well-settled law laid down by the apex Court, the duty of the Courts is to act in accordance with the statute and not to rewrite the statute.

11. The instant writ petitions are not maintainable under Arts. 226 and 227 of the Constitution of India against a show-cause notice in view of the law laid down by the apex Court in the case of Executive Engineer, Bihar State Housing Board vs. Ramesh Kumar Singh & Ors. AIR 1996 SC 691. Para 10 of the said judgment reads as hereunder : “Para 10. We are concerned in this case, with the entertainment of the writ petition against a show- cause notice issued by a competent statutory authority. It should be borne in mind that there is no attack against the vires of the statutory provisions governing the matter. No question of infringement of any fundamental right guaranteed by the Constitution is alleged or proved. It cannot be said that Ext P-4 notice is ex facie a “nullity” or totally “without jurisdiction” in the traditional sense of that expression, that is to say, that even the commencement or initiation of the proceedings, on the face of it and without anything more, is totally unauthorised. In such a case, for entertaining a writ petition under Art. 226 of the Constitution of India, against a show-cause notice, at that stage, it should be shown that the authority has no power or jurisdiction, to enter upon the enquiry in question. In all other cases, it is only appropriate that the party should avail of the alternate remedy and show cause against the same before the authority concerned and take up the objection regarding jurisdiction also, then. In the event of an adverse decision, it will certainly be open to him, to assail the same either in appeal or revision, as the case may be, or in appropriate cases.”

12. It is crystal clear in view of the well-settled law laid down by the Hon’ble Supreme Court, as stated supra, in large number of cases that the Hon’ble Supreme Court has deprecated the practice of the High Courts entertaining the writ petitions questioning the legality of the show-cause notices, stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. The Courts should bear in mind that, there is no attack against the vires of the statutory provisions governing the matter and the impugned notices cannot be said that they are ex facie a “nullity” or totally “without jurisdiction”. It is duty cast on the petitioners to show that the authority has no power or jurisdiction to enter upon the enquiry. Mere taking a stand will not suffice for this Court to declare that the proceedings are vitiated and the competent authority has no jurisdiction to enter upon the enquiry. The power of rectification is one such power as envisaged under the mandatory provisions of the Act, as stated supra. Therefore, there is no jurisdictional error which may vitiate the institution of the proceedings. It is clear that the Parliament has given to the Settlement Commission all those powers which are vested in the authorities as envisaged under s. 116 of the IT Act. The power of rectification is one of such powers. Therefore, the petitioners, in my considered view, have failed to make out a case for exercising extraordinary jurisdiction under Arts. 226 and 227 of the Constitution of India.

13. Having regard to the well-settled principles of law laid down by the apex Court as well as this Court in host of judgments and taking into consideration the facts and circumstances, as stated supra, I do not find any justification to interfere in the impugned show-cause notices issued by the respondents. Accordingly, the writ petitions filed by the petitioners are dismissed.

[Citation : 270 ITR 401]

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