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Gujarat High Court · body

2016 DIGILAW 1986 (GUJ)

Ashit Jain v. Assistant Director Incometax

2016-09-07

A.J.SHASTRI, AKIL KURESHI

body2016
ORDER : AKIL KURESHI, J. The petitioner has challenged notices issued by the respondent-Assessing Officer produced at Annexes A1 to A6 to the petition in following background: 2. The petitioner is an individual and is doctor by profession. On or around 21.08.2008, a search action was carried out at the premises of one Heart Care Group of Companies. Pursuant to the documents seized during such search, impugned notices under Section 153C of the Income Tax Act, 1961 [‘the Act’ for short] came to be issued to the petitioner concerning the assessment years 2003-04 to 2008-09. The petitioner has challenged these notices on the ground that no document belonging to the petitioner was ever found during such search and that, therefore, the Assessing Officer had no jurisdiction to carry out block assessment in case of the petitioner in exercise of powers under Section 153C of the Act. In this context, the petitioner places heavy reliance on the decision of Division Bench of this Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax, reported in 333 ITR 436 in which, the Court while interpreting the terms “belongs or belong to” a person other than a person referred to in Section 153A, held that condition precedent for issuing notice under Section 153C of the Act is that the money, bullion, jewelery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If this requirement is not satisfied, resort cannot be had to the provisions of Section 153C of the Act. The Court drew a distinction between an article or document pertaining to as against belonging to a person. 3. The petitioner also places heavy reliance on the decision of Delhi High Court in case of Pepsi Foods (P) Ltd. v. Assistant Commissioner of Income Tax, reported in [2015] 231 Taxmann 58, in which, similar view is expressed. 4. The Revenue, on the other hand, contends that the writ petition should not be entertained since the petitioner has alternative remedy by first approaching the Assessing Officer and, if aggrieved by the view of Assessing Officer, filing further appeal, as provided under the Act. 4. The Revenue, on the other hand, contends that the writ petition should not be entertained since the petitioner has alternative remedy by first approaching the Assessing Officer and, if aggrieved by the view of Assessing Officer, filing further appeal, as provided under the Act. The Revenue also contends that during the search at the premises of Heart Care Group, sufficient material was collected which would prima facie demonstrate that unaccounted income of the petitioner was invested in the share of the company which, in turn, was utilized for the purchase of land. It is not necessary for us to dwell on these factual aspects. Counsel for the Revenue also contended that the decision of this Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra) no longer operates as a binding precedent. He drew our attention of the decision of Supreme Court in case of Commissioner of Income Tax v. Vijaybhai N. Chandrani, reported in 357 ITR 713, in which the Supreme Court expressed an opinion that the High Court should not have examined these aspects in a writ petition where the assessee had ample opportunity to controvert various factual aspects before the Assessing Officer and thereafter, to carry the matter in further appeal. 5. In response to the Revenue's last contention, counsel for the petitioner vehemently contended that having admitted the writ petition at the final hearing stage, this Court would not dismiss the same only on the ground of availability of alternative remedy. He submitted that the decision of Supreme Court in case of Commissioner of Income Tax v. Vijaybhai N. Chandrani (supra) does not overrule the ratio of the decision of this Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra). In the present case, the Revenue has not been able to demonstrate even remotely that any document pertaining to the petitioner was found during the search in case of Heart Care group. 6. It is undisputedly true that the very similar issue came up before this Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra), in which, the Court drew a distinction between the expression ‘belongs or belong to” and “pertains or pertain to”. Significantly, section 153C, as it stands presently, uses expression “pertains or pertain to” replacing the earlier expression of “belongs or belong to”. Significantly, section 153C, as it stands presently, uses expression “pertains or pertain to” replacing the earlier expression of “belongs or belong to”. Be that as it may, the decision of this Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra) was challenged by the Revenue before the Supreme Court. The Supreme Court by a detailed judgment held that such issues out not to have been examined in a writ petition when alternative remedy was available to the assessee. The Supreme Court made following observations: “13. In the instant case, it transpires from the record that the jurisdictional Assessing Authority, upon having a reason to believe that the documents seized indicate escapement of income, has issued Show Cause Notices under Section 153C to the assessee for reassessment of his income during the assessment years 2001-2002 to 2006-2007. Thereafter, upon request of the assessee, the Assessing Authority has furnished him with the copies of documents seized under Section 132A. The assessee being dissatisfied with the said documents instead of filing his explanation/reply to the Show Cause Notices, has filed a Writ Petition before the High Court impugning the said notices. 14. In our considered view, 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. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In Bellary Steels & Alloys Ltd. v. CCT, (2009) 17 SCC 547 , this Court had allowed the assessee therein to withdraw the original Writ Petition filed before the High Court as the said proceedings came to be filed against the show-cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show cause notice. This Court further observed as follows: “3.… In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue.” 15.… … … … 16. This Court further observed as follows: “3.… In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue.” 15.… … … … 16. 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.” 7. Having relegated the assessee to the statutory remedy available under the Act, the Supreme Court further observed as under: “17. In view of the above, without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C, we set aside the impugned judgment and order. 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.” 8. Two things therefore can be seen from this judgment. First is that under very similar circumstances, the Supreme Court objected to the High Court examining the question of the Assessing Officer's exercise of powers under Section 153C of the Act in a writ petition. Second thing is that the decision in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra) was neutralized. First is that under very similar circumstances, the Supreme Court objected to the High Court examining the question of the Assessing Officer's exercise of powers under Section 153C of the Act in a writ petition. Second thing is that the decision in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra) was neutralized. The Supreme Court did not disapprove the judgment by holding that the interpretation adopted by the High Court was erroneous. It merely provided that the Assessing Officer shall proceed without being influenced by the observations made by the High Court under the said judgment. In other words, the Supreme Court freed the Assessing Officer from the obligation to be bound by the finding and the ratio of the judgment of the High Court. The simple question is, if the Assessing Officer was not bound by such judgment would the High Court in a later case continue to be so bound? The answer has to be in the negative. This is precisely the reason why, while discussing the judgment of the High Court with the reference to the facts in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra), the Supreme Court also dealt with large number of other appeals arising from the same court, in which, the judgment in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra) was followed. In effect therefore, the Supreme Court obliterated the effect of the ratio of the judgment of this Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra). While doing so, the Supreme Court consciously recorded that the judgment is set aside “without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C”. In that view of the matter, the issue is once again at large before the High Court and the question would not be governed by the ratio on decision of High Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra). 9. In that view of the matter, the issue is once again at large before the High Court and the question would not be governed by the ratio on decision of High Court in case of Vijaybhai N. Chandrani v. Assistant Commissioner of Income Tax (supra). 9. Quite apart from this, when under similar if not identical circumstances, the Supreme Court found that the High Court ought not to have interfered in a writ petition at an early stage of issuance of notice under Section 153C of the Act, we do not see any reason why we should not adopt the same course in the present proceedings. We agree with the suggestion of the counsel for the petitioner that writ jurisdiction under Article 226 of the Constitution is not shut out completely by the observations of the Supreme Court in case of Vijaybhai N. Chandrani (supra) or, any other judgment for that matter and exercise thereof is always a question of discretion. This would, however, not be the same thing as to suggest that in the present pet wever, e should not follow the line ad gepted by the Supreme Court in similar if not identical circumstances without there being any reason for distinction. Likewise, the question of relegating a party to the alternative remedy at a belated stage is also the question of discretion and not an inviolable rule. As a prudent exercise of dscretion, the Court may not entertain a ground of alternative remedy once the petition has been admitted. This would, however, not mean that if in a given case, facts so present exhausting such remedy becomes imperative, the Court cannot chose such a course simply because the petition had already been admitted. 10. In the result, while dismissing the petition and vacating the interim relief, we permit the petitioner to file response or further reply if desired before the Assessing Officer by 10.10.2016 till which stage, the Assessing Officer shall not proceed further. 11. Petition is disposed of. Rule is discharged. Interim relief is vacated.