SYNOPSIS
When an alternative remedy is
available under the Act, writ petition is not maintainable. However, in
various decisions the Hon’ble Supreme Court and High Courts have held
that if a issued is patently illegal or without jurisdiction,
notwithstanding the alternative remedy, writ is maintainable. In this
article, the author analyses of the recent SC ruling in the case of
Vijaybhai N. Chandrani which in his view is inconsistent with this
position and therefore requires reconsideration.
Brief Factual Background of the case before the Hon’ble Supreme Court:
Recently,
the Hon’ble Supreme Court in the case of CIT vs. Vijaybhai N. Chandrani
[Civil Appeal No. 5888 to 5903 of 2013 dated 18.7.2013] has held that
writ petition before the Hon’ble High Court is not maintainable when
alternate remedy is available under the Income-tax Act, 1961 (‘the
Act’). The brief background of the case is given hereunder:
In
the case of Vijaybhai (supra), the assessee purchased a plot of land
from Samutkarsh Co-operative Housing Society being developed by Savvy
Infrastructure Ltd. In 2008, a search was conducted u/s. 132 of the Act
in the premises of the Society and Savvy Infrastructure Ltd. During the
search, Assessing Officer (‘AO’) seized certain documents u/s. 132A of
the Act. One of the documents was loose sheet of paper containing list
of members under the heading “Samutkarsh Members Details”. One of the
names was that of the assessee and certain details were mentioned
against each name in different columns. On the basis of these documents
the AO issued notices u/s. 153C to the assessee to furnish his returns
of income for assessment years 2001-2002 to 2006-2007. Upon receipt of
the said notice, the assessee requested the AO to provide copies of the
seized material. The AO supplied copies of three loose sheets of paper
which, according to the assessee, did not belong to him. Under these
circumstances, the assessee moved a writ petition before the Hon’ble
Gujarat High Court challenging the aforesaid notices.
The
Hon’ble Gujarat High Court quashed the notices by holding that as the
said documents undoubtedly did not belong to the assessee the condition
precedent for issuance of notice was not fulfilled and therefore the
action taken u/s. 153C of the Act stood vitiated. Though the Hon’ble
Supreme Court did not express any opinion on the correctness or
otherwise of the construction that was placed by the High Court on
Section 153C of the Act, it held that as alternate remedy was available
to the assessee, 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. Upon receipt of a decision from the AO, if for any
reason assessee was aggrieved by the said decision, the same could be
questioned before the forum provided under the Act. Accordingly, the
order of the Hon’ble Gujarat High Court was reversed.
Supreme
Court decisions on maintainability of writ petition – against
action/notice without jurisdiction – when alternative remedy is
available
It is a settled position that, generally, when
alternative remedy is available under the Act, writ petition is not
maintainable. However, in various decisions the Hon’ble Supreme Court
and High Courts have held that if the notice issued is patently illegal
or without jurisdiction, notwithstanding the alternative remedy, writ is
maintainable. Some key decisions laying down the said ratio are quoted
hereunder:
• Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC)
“Mr.
Sastri mentioned more than once the fact that the company would have
sufficient opportunity to raise this question, viz., whether the
Income-tax Officer had reason to believe that under-assessment had
resulted from non-disclosure of material facts, before the Income-tax
Officer himself in the assessment proceedings and, if unsuccessful
there, before the Appellate Officer or the Appellate Tribunal or in the
High Court under section 66(2) of the Indian Income-tax Act. 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.” (Emphasis supplied).
• Foramer vs. CIT [2001] 247 ITR 436 (All) affirmed by Supreme Court in [2003] 264 ITR 566 (SC)
“As
regards alternative remedy, we are of the opinion since the notice
under section 148 is without jurisdiction, the petitioner should not be
relegated to his alternative remedy vide Calcutta Discount Co. Ltd. v.
ITO [1961] 41 ITR 191 (SC)…. .”
• UOI & Anr vs. Kunisetty Satyanarayana [2007] 001 CLR 0067 (SC)
“No
doubt, in some very rare and exceptional cases the High Court can quash
a charge-sheet or show-cause notice if it is found to be wholly without
jurisdiction or for some other reason if it is wholly illegal.”
From
the above decisions, it is very clear that as a matter of practice writ
petition is not maintainable if alternative remedy is available under
the Act. However, in exceptional cases when the notices issued are
patently illegal or without jurisdiction, the Hon’ble Supreme Court has
held that writ petition is maintainable.
Notice u/s. 153C in the case of Vijaybhai (supra) – without jurisdiction – liable to be quashed
In
the case of Vijaybhai (supra), the Hon’ble Gujarat High Court drew
distinction between the provisions of section 153C and section 158BD.
Whereas section 158BD seeks to tax any “undisclosed income” which “belongs”
to a person other than the person in whose case search has been carried
out, section 153C seeks to tax such other person only where “money, bullion, jewellery or other valuable article or thing or books of account or documents seized” “belongs” to him. The Hon’ble High Court held “….it is an admitted position as emerging from the record of the case, that the documents
in question, namely the three loose papers recovered during the search
proceedings do not belong to the petitioner. ….it is nobody’s case that
the said documents belong to the petitioner. It is not even the case of
Revenue that the said three documents are in the handwriting of the
petitioner. In the circumstances, when the condition precedent for
issuance of notice is not fulfilled any action taken under s. 153C of
the Act stands vitiated.” In the instant case, since it was an
admitted fact that the documents seized did not belong to the assessee,
the High Court held the notices issued u/s. 153C to be without
jurisdiction. In light of the above, having regard to the judgments
noted earlier, it is respectfully submitted that the Hon’ble Supreme
Court should have upheld the judgment of the Gujarat High Court.
An
alternate remedy against an order passed pursuant to a notice cannot be
considered as an alternate remedy available against the notice which is
patently without jurisdiction
The Hon’ble Supreme Court did
not affirm the decision of Hon’ble Gujarat High Court supposedly on the
ground that the assessee had alternate remedies under the Act against
the notices issued. The Hon’ble Supreme Court held:
“…… at the
said stage of issuance of the notices under Section 153C, the assessee
could have addressed his grievances and explained his stand to the
Assessing Authority by filing an appropriate reply to the said notices
instead of filing the Writ Petition impugning the said notices. ….
In the present case, the assessee has invoked the Writ jurisdiction of the High Court at the first instance without first exhausting the alternate remedies provided under the Act. In our considered opinion, at the said stage of proceedings, the High Court ought not 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. ….
Further, we grant time to the assessee, if it so desires, to file reply/objections, if any, as contemplated in the said notices within 15 days’ time from today. If such reply/objections is/are filed within time granted by this Court, the Assessing Authority shall first consider the said reply/objections and thereafter direct the assessee to file the return for the assessment years in question. We make it clear that while framing the assessment order, the Assessing Authority will not be influenced by any observations made by the High Court while disposing of the Writ Petition. If, for any reason, the assessment order goes against the assessee, he/it shall avail and exhaust the remedies available to him/it under the Act, 1961. ….”
Thus, in the absence of the underlined part in the aforesaid judgment, as has happened in several writs challenging notices u/s. 148, the assessee would be able to approach the High Court after the AO’s order dealing with or rejecting the objections of the assessee against issue of notices u/s. 153C. As evident from the underlined part of the judgment quoted above, it is respectfully submitted that it appears that the Hon’ble Supreme Court:
a) was either under an impression that there is a remedy under the Act against issue of notice u/s. 153C; or
b) has failed to appreciate the difference between an alternate remedy available against an order passed pursuant to a notice in contradistinction with an alternate remedy available against the issuance of the notice itself.
Conclusion:
In the light of the above, it is most humbly and respectfully submitted that the aforesaid judgment of Hon’ble Supreme Court requires reconsideration as:
(i) the notice issued u/s. 153C was clearly without jurisdiction.
(ii) there is no alternate remedy available under the Act against the issuance of notice u/s. 153C.
(iii) in any case, as held by the Hon’ble Supreme Court in number of cases notwithstanding the availability of an alternate remedy, a writ is clearly maintainable against an action/notice which is issued patently without jurisdiction.
