BAYER VAPI PRIVATE LIMITED KAVASSERI RAJAGOPALAN SEKHAR (MANAGING DIRECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE

SCA/19823/2019

AI Insights

Bayer Vapi Private Limited filed a petition under Article 226 of the Constitution challenging the reassessment order issued by the Assistant Commissioner of Income Tax, Vapi Circle. The reassessment was for the Assessment Year 2014-2015, based on a notice under Section 148 of the Income Tax Act, 1961, which alleged that income had escaped assessment. The petitioner argued that the reassessment was based on a mere change of opinion and lacked new tangible material. The respondent countered that the reassessment was justified as the petitioner had not fully disclosed material facts, specifically regarding TDS deductions. The court dismissed the petition, emphasizing the availability of an alternative statutory remedy and the presence of tangible material justifying the reassessment.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 769329 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 04-08-2021
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-Tax v. Kelvinator India Limited and Others, Gujarat Gas Limited v. Commissioner of Income Tax, Vishvanath Engineers v. ACIT, Commissioner of Income-Tax and Others v. Chhabil Dass Agarwal, Assistant Commissioner (CT) LTU, Kakinada and Others v. Glaxo Smith Kline Consumer Health Care Limited, Titaghur Paper Mills Co. Ltd. & Anr. Vs. State of Orissa & Ors., Mafatlal Industries Ltd. & Ors. vs. Union of India & Ors.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: NIKUNT RAVAL
• Assessee Lawyers: DARSHAN PATEL
• Keywords: Change of opinion; Income Tax; Natural Justice; Reassessment; TDS
• Section: 148; 143(3); 151

Judgement Text

"C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 19823 of 2019 FOR APPROVAL AND SIGNATURE : HONOURABLE MS. JUSTICE BELA M. TRIVEDI Sd/- and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI Sd/- ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ================================================================ BAYER VAPI PRIVATE LIMITED KAVASSERI RAJAGOPALAN SEKHAR (MANAGING DIRECTOR) Versus THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE ================================================================ Appearance: DARSHAN R PATEL(8486) for the Petitioner(s) No. 1 MR NIKUNT RAVAL for MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI Date : 04/08/2021 ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE BELA M. TRIVEDI) Page 1 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 1. The present petition has been filed by the petitioner – Bayer Vapi Private Limited invoking the extraordinary jurisdiction under Article 226 of the Constitution of India seeking the following prayer :- “(A) Issue a writ of certiorari and/or a writ of mandamus and/or any other writ direction or order to quash and set aside the impugned notice dated 28/03/2019 under section 148 of the income-tax Act, 1961 annexed hereto at Annexure-‘F’ alongwith objections rejection order dated 04/10/2019 annexed hereto at Annexure ‘J’ and Reassessment order dated 14/10/2019 annexed at Annexure ‘L’” 2. The short facts as germane for deciding the present petition are that the petitioner is a Company incorporated under the Companies Act. The petitioner had filed a statement of Income and Return for the Assessment Year 2014-2015 on 28.11.2014, in respect of which a scrutiny Assessment Order under Section 143(3) of the Income Tax Act, 1969 (hereinafter referred to the said Act) was framed on 30.12.2016. The petitioner thereafter received a Notice on 28.03.2019 under Section 148 of the said Act whereby the petitioner was called upon to show cause as to why the assessment for the Assessment Year 2014-2015 should not be re-opened. The petitioner vide the letter dated 26.04.2019 responded to the said notice Page 2 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 and requested for furnishing the reasons. The respondent supplied the reasons for reopening vide the letter dated 30.05.2019. Being aggrieved by the said reasons, the petitioner had filed its objections vide the letter dated 31.07.2019. The respondent by a Speaking Order rejected the said objections and also simultaneously issued a Final Showcause Notice dated 04.10.2019 (Annexure ‘J’). As per the case of the petitioner, it had requested for adjournment vide the letter dated 11.10.2019, however the respondent reframed the assessment vide the impugned order 19.10.2019 (Annexure ‘L’). The aggrieved petitioner has therefore filed the present petition. 3. The respondent, raising a preliminary objection against the maintainability of the petition on the ground of existence of an alternative remedy, has filed a reply denying the allegations and averments made in the petition, to which the petitioner has filed an affidavit-in- rejoinder. 4. Learned Advocate Mr. Darshan R. Patel appearing for the petitioner placing reliance on the decision of the Supreme Court in the case of Commissioner of Income-Tax v. Kelvinator India Limited and Others reported in [2010] 320 ITR 561 (SC) vehemently submitted that the scrutiny assessment having already been framed by the respondent Page 3 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 under Section 143(3) vide the order dated 30.12.2016, the reopening of the assessment vide the impugned notice, on the basis of change of opinion of the assessing officer was not permissible. He further submitted that the petitioner-assessee had disclosed truly and fully all the material necessary for the Assessment Year under consideration, however the reopening was sought to be done by the respondent without any new tangible material on record. He also submitted that the showcause notice was illegal in absence of a previous sanction as contemplated under Section 151 of the said Act. As regards the framing of the impugned order of reassessment, Mr. Patel submitted that the same was passed without considering the request of the petitioner seeking adjournment and therefore, was in violation of the principles of natural justice, and under the circumstances, the petitioner was not required to avail the alternative remedy under the Act in view of the decision of this Court in the case of Gujarat Gas Limited v. Commissioner of Income Tax reported in 245 ITR 84 and in the case of Vishvanath Engineers v. ACIT reported in 352 ITR 549 (Guj). 5. Per contra, the learned Standing Counsel Mr. Nikunt Raval for the respondent has raised a preliminary objection against the maintainability of the petition relying upon the decision of the Supreme Court in the Page 4 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 case of Commissioner of Income-Tax and Others v. Chhabil Dass Agarwal reported in [2013] 357 ITR 357 (SC) to contend that the assessment order having been framed, the petitioner was required to exhaust the alternative remedy by filing an Appeal. He further submitted that the adjournment letter dated 11.10.2019 sent by the petitioner was received in the office of the respondent on 14.10.2019, on which date the impugned order of assessment was already passed, and even if the said order was treated as an ex-parte order, the petitioner is required to avail the statutory remedy available under the Act. Mr. Raval also submitted that the assessment of the concerned year was sought to be re-opened, as the petitioner had not truly and fully disclosed the material facts and even otherwise as per the explanation to the Section 147, mere production of documents would not necessarily amount to true and full disclosure of material facts. He also submitted that the Assessing Officer while passing the order under Section 143(3) on 30.12.2016, had not taken into consideration the material, i.e. Appendix 6 and Appendix 8 (Annexure I and II) of the Tax Audit Report form 3CD, from which it appeared that the TDS was not deducted, and when the petitioner had failed to deduct the TDS, he was liable for payment of interest as contemplated under the provisions contained in the Act. He also submitted that Page 5 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 the requisite sanction under Section 151 was also obtained by the Assessing Officer before reopening the assessment. 6. At the outset it is required to be noted that as per the settled legal position, when a statutory alternative remedy is available to the petitioner, the Courts should be loathe in entertaining the petition under Article 226 of the Constitution of India. It is needless to say that the Income Tax Act provides for a complete machinery to challenge an order of assessment, and therefore the impugned order of reassessment should have been challenged by the petitioner only by way of filing an appeal as prescribed under the Act. The Supreme Court in a very recent decision in the case of Assistant Commissioner (CT) LTU, Kakinada and Others v. Glaxo Smith Kline Consumer Health Care Limited reported in AIR 2020 SC 2819, while considering the question as to whether the High Court under Article 226 of the Constitution of India ought to entertain a challenge to an assessment order on the ground that the statutory remedy of appeal against that order had stood foreclosed by law of limitation, observed as under :- “11. In the backdrop of these facts, the central question is: whether the High Court ought to have entertained the writ petition filed by the respondent? As regards the Page 6 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 power of the High Court to issue directions, orders or writs in exercise of its jurisdiction under Article 226 of the Constitution of India, the same is no more res integra. Even though the High Court can entertain a writ petition against any order or direction passed/action taken by the State under Article 226 of the Constitution, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law (see Baburam Prakash Chandra Maheshwari vs. Antarim Zila Parishad now Zila Parishad, Muzaffarnagar8 and also Nivedita Sharma vs. Cellular Operators Association of India & Ors.9). In Thansingh Nathmal & Ors. vs. Superintendent of Taxes, Dhubri & Ors.10, the Constitution Bench of this Court made it amply clear that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise selfimposed restraint and not entertain the writ petition, if an alternative effective remedy is available to the aggrieved person. In paragraph 7, the Court observed thus: “7. Against the order of the Commissioner an order for reference could have been claimed if the appellants satisfied the Commissioner or the High Court that a question of law arose out of the order. But the procedure provided by the Act to invoke the jurisdiction of the High Court was bypassed, the appellants moved the High Court challenging the competence of the Provincial Legislature to extend the concept of sale, and Page 7 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 invoked the extraordinary jurisdiction of the High Court under Article 226 and sought to reopen the decision of the Taxing Authorities on question of fact. The jurisdiction of the High Court under Article 226 of the Constitution is couched in wide terms and the exercise thereof is not subject to any restrictions except the territorial restrictions which are expressly provided in the Articles. But the exercise of the jurisdiction is discretionary: it is not exercised merely because it is lawful to do so. The very amplitude of the jurisdiction demands that it will ordinarily be exercised subject to certain self imposed limitations. Resort that jurisdiction is not intended as an alternative remedy for relief which may be obtained in a suit or other mode prescribed by statute. Ordinarily the Court will not entertain a petition for a writ under Article 226 , where the petitioner has an alternative remedy, which without being unduly onerous, provides an equally efficacious remedy. Again the High Court does not generally enter upon a determination of questions which demand an elaborate examination of evidence to establish the right to enforce which the writ is claimed. The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved Page 8 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up.” (emphasis supplied) We may usefully refer to the exposition of this Court in Titaghur Paper Mills Co. Ltd. & Anr. Vs. State of Orissa & Ors., wherein it is observed that where a right or liability is created by a statute, which gives a special remedy for enforcing it, the remedy provided by that statute must only be availed of. In paragraph 11, the Court observed thus: “11. Under the scheme of the Act, there is a hierarchy of authorities before which the petitioners can get adequate redress against the wrongful acts complained of. The petitioners have the right to prefer an appeal before the Prescribed Authority under subsection (1) of Section 23 of the Act. If the petitioners are dissatisfied with the decision in the appeal, they can prefer a further appeal to the Tribunal under subsection (3) of Section 23 of the Act, and then ask for a case to be stated upon a question of law for the opinion of the High Court under Section 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of Page 9 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford [(1859) 6 CBNS 336, 356] in the following passage: There are three classes of cases in which a liability may be established founded upon statute. . . . But there is a third class, viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it…. The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to. The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspapers Ltd. (1919 AC 368) and has been reaffirmed by the Privy Council in AttorneyGeneral of Trinidad and Tobago v. Gordon Grant & Co. Ltd. (1935 AC 532) and Secretary of State v. Mask & Co. (AIR 1940 PC 105). It has also been held to be equally applicable to enforcement of rights, and has been followed by this Page 10 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 Court throughout. The High Court was therefore justified in dismissing the writ petitions in limine.” (emphasis supplied) In the subsequent decision in Mafatlal Industries Ltd. & Ors. vs. Union of India & Ors.12, this Court went on to observe that an Act cannot bar and curtail remedy under Article 226 or 32 of the Constitution. The Court, however, added a word of caution and expounded that the constitutional Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise its jurisdiction consistent with the provisions of the enactment. To put it differently, the fact that the High Court has wide jurisdiction under Article 226 of the Constitution, does not mean that it can disregard the substantive provisions of a statute and pass orders which can be settled only through a mechanism prescribed by the statute.” 7. The Supreme Court in the case of Commissioner of Income-Tax and Others v. Chhabil Dass Agarwal (supra) has also made very pertinent observations with regard to exercise of jurisdiction under Article 226 when an alternative efficacious remedy is available to the petitioner. The said observations read as under :- “15. Before discussing the fact proposition, we would notice the principle of law as laid down by this Court. It is settled law that non-entertainment of petitions under Page 11 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. Undoubtedly, it is within the discretion of the High Court to grant relief under Article 226 despite the existence of an alternative remedy. However, the High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226. (See: State of U.P. vs. Mohammad Nooh, AIR 1958 SC 86; Titaghur Paper Mills Co. Ltd. vs. State of Orissa, (1983) 2 SCC 433; Harbanslal Sahnia vs. Indian Oil Corpn. Ltd., (2003) 2 SCC 107; State of H.P. vs. Gujarat Ambuja Cement Ltd., (2005) 6 SCC 499). 16. The Constitution Benches of this Court in K.S. Rashid and Sons vs. Income Tax Investigation Commission, AIR 1954 SC 207; Sangram Singh vs. Election Tribunal, Kotah, AIR 1955 SC 425; Union of India vs. T.R. Varma, AIR 1957 SC 882; State of U.P. vs. Mohd. Nooh, AIR 1958 SC 86 and K.S. Venkataraman and Co. (P) Ltd. vs. State of Madras, AIR 1966 SC 1089 have held that though Article 226 confers a very wide powers in the matter of issuing writs on the High Court, the remedy of writ absolutely discretionary in character. If the High Court is satisfied Page 12 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 that the aggrieved party can have an adequate or suitable relief elsewhere, it can refuse to exercise its jurisdiction. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted. (See: N.T. Veluswami Thevar vs. G. Raja Nainar, AIR 1959 SC 422; Municipal Council, Khurai vs. Kamal Kumar, (1965) 2 SCR 653; Siliguri Municipality vs. Amalendu Das, (1984) 2 SCC 436; S.T. Muthusami vs. K. Natarajan, (1988) 1 SCC 572; Rajasthan SRTC vs. Krishna Kant, (1995) 5 SCC 75; Kerala SEB vs. Kurien E. Kalathil, (2000) 6 SCC 293; A. Venkatasubbiah Naidu vs. S. Chellappan, (2000) 7 SCC 695; L.L. Sudhakar Reddy vs. State of A.P., (2001) 6 SCC 634; Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha vs. State of Maharashtra, (2001) 8 SCC 509; Pratap Singh vs. State of Haryana, (2002) 7 SCC 484 and GKN Driveshafts (India) Ltd. vs. ITO, (2003) 1 SCC 72).” 8. In the instant case, the Assessing Officer after following the principles of natural justice and following the due procedure had passed a Speaking Order on 04.10.2019 in response to the objections raised by the petitioner against reopening of the assessment for the Assessment Year 2014-2015. The Assessing Officer thereafter passed the impugned Assessment Order on 14.10.2019 after affording Page 13 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 the opportunity of hearing by calling upon the petitioner to show cause as to why the deductions under Section 43B and under Section 40(a)(ia) as mentioned in the order dated 04.10.2019, should not be made. Under the circumstances, and in view of the legal position stated hereinabove, a complete machinery having been provided under the Act for reassessment and for obtaining relief in respect of impugned order passed by the respondent, the petitioner Assessee could not be permitted to abandon the said remedy and to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Though it is sought to be pointed out by Mr. Patel that the adjournment application submitted by him was not considered by the respondent before passing the impugned order of reassessment, the same cannot be accepted at this juncture, in view of the contention raised by the respondent in the affidavit-in-reply that the said request for adjournment was received by the office of the respondent on 14.10.2019 when the impugned order was already passed. Be that as it may, even if the said request was not considered by the respondent, the same could be treated at the most as an irregularity which would not warrant interference of this Court for setting aside the assessment order, more particularly, when an efficacious and alternative statutory remedy is provided under the Act. Page 14 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 9. Since we are not inclined to entertain the petition on the ground of existence of alternative remedy, as such we need not go into the merits of the petition, however Mr. Darshan R. Patel relying upon the decision in the case of Commissioner of Income-Tax v. Kelvinator India Limited and Others (supra) has vehemently submitted that the Assessing Officer can not reopen an assessment on mere change of opinion, we may deal with the said issue also. In the said case the Supreme Court while dealilng with the changes made to Section 147 of the said Act w.e.f. 1st April, 1989 observed as under :- “6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words \"reason to believe\" failing which, we are Page 15 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of \"mere change of opinion\", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re- assessment has to be based on fulfillment of certain pre-condition and if the concept of \"change of opinion\" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of \"change of opinion\" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is \"tangible material\" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.” 10. In view of the above, it is quite clear that the Assessing Officer has power to reopen if there is tangible material to believe that there was an escapement of income from assessment and that when such material has a live link with the formation of the belief. In the instant case, as stated by the respondent in the affidavit- in-reply, the petitioner had not deducted the TDS as detailed in Annexure 6 to form 3CD and therefore, the Page 16 of 17 C/SCA/19823/2019 JUDGMENT DATED: 04/08/2021 same was not taken into consideration by the Assessing Officer while passing the order under Section 143(3) of the Act. When the said material was not considered at the time of original assessment on 30.12.2016, the consideration of the same by the respondent could not be said to be a change of opinion or review of earlier order. 11. In that view of the matter, the petition being devoid of merits is dismissed. Sd/- (BELA M. TRIVEDI, J) Sd/- (A. C. JOSHI, J) Caroline Page 17 of 17 "