Orders Appealable, Writ Jurisdiction Need Not Be Invoked If Alternate Remedy Is Available: Allahabad High Court

Orders Appealable, Writ Jurisdiction Need Not Be Invoked If Alternate Remedy Is Available: Allahabad High Court

Cites the decisions of the Supreme Court in several similar cases

The Allahabad High Court has refused to quash an order and consequential notice under Sections 147 and 148 of the Income Tax Act, 1961 in writ proceedings under Article 226 of the Constitution of India.

The bench comprising Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava held that all permissible grounds of defence remained open to the assessee at the stage of proceedings under Section 148. It stated that the order under Section 148A(d) was not final adjudication on the assessees’ escapement of income assessment.

The court observed that the IT Act was framed to exclude the determination of the correctness of the information at the stage of proceedings under Section 148A owing to the existence of an alternate remedy/appeal under Section 246-A.

The petitioner was issued a notice under Section 148A(b). Subsequently, the assessing officer (AO) passed the order under 148A(d), issuing a consequent notice under Section 148. The petitioner filed the Income Tax Return (ITR) declaring Rs.12,69,380 as total income.

The petitioner was issued an intimation for completion of the assessment under Section 144-B. Various notices under Section 142(1) were also issued, to which the petitioner responded by annexing the documents. These included a copy of the assessment order under Section 143(1) and a contract note of purchase and sale. However, an order under Section 147 read with Section 144-B of the IT Act was passed and a demand notice was issued. These were challenged before the court along with the notice.

The petitioner contended that he was squarely covered by the first proviso to Section 147, as it stood prior to the amendment by the Finance Act, 2021. There was no allegation of escapement of income for initiating reassessment proceedings after the expiry of four years from the relevant 31 March 2020 Assessment Year.

While relying on the decision of the Supreme Court in the Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd case, and the judgment of the Allahabad High Court in the Awlish Kumar Singh Vs. Union of India case, it was argued that reassessment proceedings could not be initiated based on change of opinion and to review the already concluded assessment.

Also, the jurisdiction of the authority passing the order was challenged on the ground that AO did not comply with Section 149(1)(b).

On the other hand, the IT department argued that the response of the petitioner was duly considered while passing the order under Section 147. While citing the decision of the Allahabad High Court in the Deepak Kumar Yadav vs. Principal Commissioner of Income Tax and another case, it stated that consideration at the stage of passing an order under Section 148A(d) was limited to the ascertainment of information with the AO that the assessees’ income escaped tax assessment.

It added that the petitioner could challenge the final order passed under Section 147 as the question of whether the income of the assessee escaped assessment was decided after the issuance of notice under Section 148.

Chief Justice Diwaker and Justice Srivastava observed that the response filed by the petitioner was found unsatisfactory in the order passed under Section 147. It was evident that the revenue department had information suggesting that the income chargeable to tax escaped assessment for the Assessment Year 2015-2016. That was the reason for consequential proceedings under Section 148.

While elaborating on the legislative intent for not introducing further inquiry at that stage, the bench held, “Under the Act, a detailed procedure has been provided under Section 148 for issuance of notice whereafter the assessing authority has to determine whether the income has escaped assessment. The defence of the assessee, on all permissible grounds, remains open to be pressed at such stage. The ultimate determination made by the assessing authority under Section 147 for reassessment is otherwise subject to appeal under Section 246-A.”

The judges further ruled that the scope of the decision under Section 148A(d) was limited to the existence or otherwise of information suggesting income chargeable to tax had escaped assessment.

The bench stated, “The merits of the information referable to Section 148A remains subject to the reassessment proceedings initiated vide notice under Section 148. The issues which require determination at the stage of reassessment proceedings and in respect of which departmental remedy is otherwise available, are not required to be determined at the stage of decision by the assessing authority under Section 149A(d).”

Thus, while rejecting the writ petition the court relied on the decision of the top court in the Anshul Jain vs. Principal Commissioner, Income Tax case.

The judges held that the order under Section 148A(d) and consequent notice under Section 148 could not be interfered with under Article 226 of the Indian Constitution. That was because any order passed in the proceedings pursuant to the notice under Section 148 was appealable under Section 246-A.