Sri Venu Ramaiah V. Union of India and The Principal Commissioner of Income Tax (Central) and The Assistant Commissioner of Income Tax, Central Circle-2 (i/c)

WP/10291/2024

AI Insights

The case involves Sri Venu Ramaiah, the Managing Director of M/s. Raki Avenues Pvt. Ltd., who challenged the orders of the Income Tax authorities under Sections 143(3) and 263 of the Income Tax Act, 1961. The petitioner contested the assessment orders for the years 2016-17 to 2020-21, which were revised by the Principal Commissioner of Income Tax (Central) on grounds that they were prejudicial to the interests of the Revenue. The assessing officer had made additions to the petitioner's income based on unexplained unsecured loans, which the petitioner claimed were part of bogus promissory notes due to fraud by ex-employees. The court dismissed the writ petition, emphasizing the availability of an alternative remedy through the appellate authority and the lack of jurisdictional or natural justice violations in the assessing officer's actions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 801803 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 18-09-2024
• Assessment Year: misc
• Other Referred Cases: M/s. Godrej Sara Lee Ltd. Vs. The Excise and Taxation Officer Cum Assessing Authority & Ors, Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and ors., Assistant Commissioner of State Tax Vs. M/s. Commercial Steel Limited, State of Uttar Pradesh vs. Mohd. Nooh, M/s. D.N.Singh Vs Commissioner of Income Tax, Central, Patna & anr.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P PONNA RAO; P VIJAYAKUMAR
• Assessee Lawyers: VENKATA NARAYANA RAO VEDULA
• Keywords: Income tax assessment; Jurisdiction; Natural Justice; Unsecured loans; Writ of Certiorari; Bogus Promissory Notes
• Section: 143(3); 142(1); 263; 132; 153A; 69A; 156; 226; 151 CPC

Judgement Text

"IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI (Special Original Jurisdiction) WEDNESDAY, THE EIGHTEENTH DAY OF SEPTEMBER TWOTHOUSAND AND TWENTY FOUR PRESENT THE HON’BLE SRI JUSTICE RAVI NATH TILHARI ^ AND THE HON’BLE SMT. JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 10291 OF 2024 ^ Between: Sri Venu Ramaiah, S/o. Ramaiah, Age 54 Years, 54-14/6-3, A1, Road No 12 Bharathi Nagar, Vijayawada. ...PETITIONER AND 1. Union of India, rep by its Secretary, Finance Ministry of Finance North Block New Delhi 110001. 2. The Principle Commissioner of Income Tax ( Central), Tax Building MVP Colony, Visakhapatnam, 530017 3. The Assistant Commissioner of Income Tax, Central Circle-2 (i/c) Rajahmundry. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court be pleased to issue any appropriate Writ, Order or direction more particularly a writ one in the nature of Writ of Certiorari and to call-for the records pertaining to the order of the 3'^^ respondent Dt. 15.03.2024 pertaining to the assessment years 2016-17, 2017-18, 2018-19, 2019-20, 2020-21 and consequential demand notice dated 15.03.2024, U/s 156 of income tax act 1961 and this Hon'ble Court may be pleased to set-aside the same. may lA NO: 2 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the writ petition, the High Court may be pleased to suspend the assessment order Dt 15-03-2024, for the assessment years 2016-17, 2017-18, 2018-19, 2019-20, 2020-21 and consequential demand notice dated 15.03.2024, U/s 156 of income tax act 1961, pending the disposal of the main writ petition. Counsel for the Petitioner : SRI VENKATA NARAYANA RAO VEDULA Counsel for the Respondent No.1: SRI P. PONNA RAO, DEPUTY SOLICITOR GENERAL OF INDIA Counsel for the Respondent Nos.2 & 3 : SRI P. VIJAYA KUMAR, SC FOR IT The Court made the following; ORDER 1 APHC010203612024 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3481] PRESENT THE HONOURABLE SRI JUSTICE RAVI NATH TILHARI THE HONOURABLE SMT JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 10291/2024 Between: Sri Venu Ramaiah ...PETITIONER AND ...RESPONDENT(S) Union Of India and Others Counsel for the Petitioner: 1 VENKATA NARAYANA RAO VEDULA Counsel for the Respondent(S): 1. The Court made the following: ORDER: {per Hon’ble Smt. Justice Kiranmayee Mandava) The Writ Petition is directed against the order of the 3 respondent dated 15.03.2024 passed under Section 143 (3) read with Section 263 of the Income Tax Act,1961. The petitioner is Managing Director of M/s. Raki Avenues Pvt. 2. Ltd., engaged in a business of real estate. On 10.01.2020, a search and seizure operation was conducted under Section 132 of the Income Tax Act, of M/s. Raki Avenues Pvt. Ltd. and at the residential notice under Section. 153 A 1961, in the case premises of the petitioner. Pursuant to the same of the Income-tax Act, dated 17-02-2021 was issued to the petitioner requiring petitioner to file his return of income for assessment year 2016-17 to In response thereto the petitioner filed his return of income for assessment years 2016-17 to 2019-20. The assessment under Sec. 153A of the Act was completed on 28.09.2021 accepting the returned income, for all the assessment years vide separate orders. the 2019-20. nd 3. The Principal Commissioner of Income Tax (Central), the 2 respondent herein, exercising his jurisdiction under Section 263 of the I.T.Act, after calling for records of the petitioner, for the subject assessment years, revised all the orders of assessment vide separate orders, observing that the order of assessment dated 28.09.2021 passed under Section 153A of Income tax Act is prejudicial to the interests of the Revenue, he accordingly set aside the order of assessment with a direction to the assessing officer to re-do the assessment afresh after providing reasonable opportunity to the petitioner. Pursuant to the said order of the 2\"^^ respondent, the assessing officer had issued notices under Section 142 (1) of the Income Tax Act, calling for information inter-alia, with regard to un-secured hand loans, mode of acceptance of the said loan and for confirmation letters from the said 3 creditors. In response to the notice, the petitioner vide his letter dated 11.12.2023, has stated that the amounts referred to in the notice would not relate to him and that the same forms part of the bogus promissory notes attributable to the fraud played by the ex-employees. The assessing officer has required the petitioner to furnish the details of the said ex-employees. The petitioner did not furnish any of the details. The assessing officer observed that, as noticed from the seized material, the petitioner had accepted unsecured cash loans from 192 lenders. However, the petitioner had failed to establish his contention that the said amounts form part of the bogus promissory notes and are attributable to the fraud played by his employees. The assessing officer has proposed to complete the assessment to the best of his judgment based on the material before him since the petitioner failed to respond to the notices issued. However, before doing one more notice dated 28-02-24 was issued by the assessing officer, to which the petitioner submitted his reply dated 4-3-2024, stating that no addition in the facts of the case was warranted in as much as the proposal for addition Li/s 69A of the Act, is based on xerox of copies of the promissory notes and that the alleged unsecured loan does not qualify as “money” and it cannot be treated as “income” either. The petitioner’s further submission was that the CIT has initiated the proceedings under sec.263 of the Act without generating the DIN number. It is contended the proceedings without a valid DIN are ex- so. 4 void. The assessing officer after considering the submissions of the assessee, made the following addition of un-explained money in respect of the each assessment year and correspondent interest was also added to the taxable income of the petitioner. SI. No Financial year Amount 1. 2015-16 90,00,000/- 2. 2016-17 728,00,000/- 3,62,30,000/- 2,54,00,000/- 3. 2017-18 4. 2018-19 5. 2019-20 1,48,00,000/- Total Rs.16,86,30,000/- The assessing officer has thus completed the assessment by making the unsecured loans as unexplained money in terms of the provisions of Section 69Aof the Income Tax Act, 1961. 4. Assailing the said order, the instant Writ Petition is filed. Before going into the merits of the issues, we have requested the respective counsel to make their submissions on the entertainability of the writ petition. 5. The learned counsel for the petitioner Sri Venkata Narayana Rao Vedula, contends that as against the order of the assessment, though alternative remedy of appeal is provided to the Commissioner of Income tax(Appeals), the writ petition is maintainable since order of the assessing officer is without jurisdiction in as much as the assessing officer did not decide 6. an 5 the issue with regard to the admissibility of the xerox copies of the promissory notes. He contends that the only basis for making the additions under Section 69A of the Act, are the photocopies of the promissory notes which the petitioner has claimed to be bogus. The learned counsel for the petitioner further contends that the onus is on the department to establish the taxability of the said income. He contends that without discharging the said liability, the order of assessment is non est and cannot be sustained. In support of his contention that the alternative remedy of appeal would not be a bar for entertaining the writ petition he relies on the decision of the Hon’ble Supreme Court in the case of M/s. Godrej Sara Lee Ltd., Vs. The Excise and Taxation Officer Cum Assessing Authority & Ors, wherein the Hon’ble Apex Court by referring to the decisions of the Hon’ble Supreme Court in the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and ors., and the decision in the case of Assistant Commissioner of State Tax Vs., M/s. Commercial Steel Limited., observed as follows: “4. Before answering the questions, we feel the urge to say a few words on the exercise of writ powers conferred by Article 226 of the Constitution having come across certain orders passed by the high courts holding writ petitions as “not maintainable” merely because the alternative remedy provided by the relevant statutes has not been pursued by the parties desirous of invocation of the writ jurisdiction. The power to issue prerogative writs under Article 226 is plenary in nature. Any limitation on the exercise of such power must be traceable in the Constitution itself Profitable reference in this 6 regard may be made to Article 329 and ordainments of other similarly worded articles In the Constitution. Article 226 does not, in terms, impose any limitation or restraint on the exercise of power to issue writs. While it is true that exercise of writ powers despite availability of a remedy under the very statute which has been invoked and has given rise to the action impugned in the writ petition ought not to be made in a routine manner, yet, the mere fact that the petitioner before the high court, in a given case, has not pursued the alternative remedy available to him/it cannot mechanically be construed as a ground for its dismissal. It is axiomatic that the high courts (bearing in mind the facts of each particular case) have a discretion whether to entertain a writ petition or not. One of the self- imposed restrictions on the exercise of power under Article 226 that has evolved through judicial precedents is that the high courts should normally not entertain a writ petition, where an effective and efficacious alternative remedy is available. At the same time, it must be remembered that mere availability of an alternative remedy of appeal or revision, which the party invoking the jurisdiction of the high court under Article 226 has not pursued, would not oust the jurisdiction of the high court and render a writ petition “not maintainable\". In a long line of decisions, this Court has made it clear that availability of an alternative remedy does not operate as an absolute bar to the “maintainability” of a writ petition and that the rule, which requires a party to pursue the alternative remedy provided by a statute, is a rule of policy, convenience and discretion rather than a rule of law. Though elementary, it needs to be restated that “entertainability” and “maintainability\" of a writ petition are distinct concepts. The fine but real distinction between the two ought not to be lost sight of The objection as to “maintainability” goes to the root of the matter and if such objection were found to be of substance, the courts would be rendered incapable of even receiving the lis for adjudication. On the other hand, the question of “entertainability” is entirely within the realm of discretion of the high courts, writ remedy 7 being discretionary. A writ petition despite being maintainable may not be entertained by a high court for very many reasons or relief could even be refused to the petitioner, despite setting up a sound legal point, if grant of the claimed relief would not further public interest. Hence, dismissal of a writ petition by a high court on the ground that the petitioner has not availed the alternative remedy without, however, examining whether an exceptional case has been made out for such entertainment would not be proper. 5. A little after the dawn of the Constitution, a Constitution Bench of this Court In its decision reported in 1958 SCR 595 (State of Uttar Pradesh vs. Mohd. Nooh) had the occasion to observe as follows: “10. In the next place it must be borne in mind that there is no rule, with regard to certiorari as there is with mandamus, that it will He only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right of appeal has been conferred by statute, (Halsbury’s Laws of England, 3rd Edn., Vol. 11, p. 130 and the cases cited there). The fact that the aggrieved party has another and adequate remedy may be taken into consideration by the superior court in arriving at a conclusion as to whether it should, in exercise of its discretion, issue a writ of certiorari to quash the proceedings and decisions of inferior courts subordinate to it and ordinarily the superior court will decline to interfere until the aggrieved party has exhausted his other statutory remedies, if any. But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies. **★« 6. At the end of the last century, this Court in paragraph 15 of the its decision reported in (1998) 8 SCC 1 (Whirlpool Corporation vs. 8 Registrar of Trade Marks. Mumbai and Others) carved out the exceptions on the existence whereof a Writ Court would be Justified in entertaining a writ petition despite the party approaching it not having availed the alternative remedy provided by the statute. The same read as under: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is violation of principles of natural justice; (Hi) where the order or the proceedings are wholly without jurisdiction; or (iv) where the vires of an Act is challenged. 7. Not too long ago, this Court in its decision reported in 2021 SCC OnLine SC 884 (Assistant Commissioner of State Tax vs. M/s. Commercial Steel Limited) has reiterated the same principles in paragraph 11. 8. That apart, we may also usefully refer to the decisions of this Court reported in (1977) 2 SCC 724 (State of Uttar Pradesh & ors. vs. Indian Hume Pipe Co. Ltd.) and (2000) 10 SCC 482 (Union of India vs. State of Haryana). What appears on a plain reading of the former decision is that whether a certain item falls within an entry in a sales tax statute, raises a pure question of law and if investigation into facts is unnecessary, the high court could entertain a writ petition in its discretion even though the alternative remedy was not availed of; and, unless exercise of discretion is shown to be unreasonable or perverse, this Court would not interfere. In the latter decision, this Court found the issue raised by the appellant to be pristinely legal requiring determination by the high court without putting the appellant through the mill of statutory appeals in the hierarchy. What follows from the said decisions is that where the controversy is a purely legal one and it does not involve disputed questions of fact but only 9 questions of law, then it should be decided by the high court instead of dismissing the writ petition on the ground of an alternative remedy being available. 9. Now, reverting to the facts of this appeal, we find that the appellant had claimed before the High Court that the suo motu revisional power could not have been exercised by the Revisional Authority in view of the existing facts and circumstances leading to the only conclusion that the assessment orders were legally correct and that the final orders impugned in the writ petition were passed upon assuming a jurisdiction which the Revisional Authority did not possess. In fine, the orders impugned were passed wholly without jurisdiction. Since a jurisdictional issue was raised by the appellant in the writ petition questioning the very competence of the Revisional Authority to exercise suo motu power, being a pure question of law, we are of the considered view that the plea raised in the writ petition did deserve a consideration on merits and the appellant’s writ petition ought not to have been thrown out at the threshold. ” 7. Further, the petitioner in support of his contention that the addition made by the assessing officer is not warranted in the facts of the case, has relied upon the decision of the apex court in the case of M/s. D.N.Singh Vs Commissioner of Income Tax, Central, Patna & anr. Per contra, the learned Senior Standing Counsel for the Income- Tax Department, Sri Vijay Kumar Punna, appearing for the department contends that the impugned order of assessment is consequential to the order of the Commissioner passed under Section 263 of the Act. Further the order passed'under Sec.263 has become final. Without challenging the said order of 8. 10 the Commissioner, passed under Section 263 of the Act, the writ petition would not be maintainable. And further contends that as against the order impugned, further appeal lies to the Commissioner of Income tax (Appeals). The petitioner has approached this Court without availing the remedy of appeal, therefore, the Writ Petition would not be maintainable. Considered the rival submissions. Without going into the merits of the main case, we would proceed to decide the preliminary issue of entertainability of the writ petition as against the order of assessment passed under sec. 153A of the Act. 9. 10. The main issue for consideration now is whether the Writ Petition is maintainable as against the order of assessment in the light of the statutory remedy of appeal provided under Section 246 (A) of the Income Tax Act, 1961. The fact remains that the impugned order of assessment is pursuant to the directions of the Commissioner exercising the jurisdiction under Section 263 of the Act, setting aside the assessment order dated 28-09-2021, as being erroneous and prejudicial to the interests of the Revenue. The petitioner has accepted the order of Revision passed by the CIT U/s.263 of the Act and the same has become final. 11. 11 12. It is settled principle of law that the alternative remedy of appeal would not be a bar to exercise jurisdiction under Article 226 of the Constitution of India. However the same, as held by the apex court, is subject to certain limitations that warrants the exercise of jurisdiction, viz., where the order impugned is without jurisdiction, is in gross violation of principles of natural justice or is beyond the jurisdiction, or where the vires of the provisions of the Act are under challenge. In the instant case, pursuant to the order of Revision passed by the CIT u/s.263 of the Act, the assessing officer has issued notices under Section142 (1) of the Act dated 24.03.2023, 03.10.2023 and 09.11.2023 calling for details of the un-secured hand loans and confirmations from the said creditors. The petitioner has failed to furnish relevant information asked for, except to state, that the material that was relied upon by the assessing officer to come to a conclusion that the petitioner had accepted unsecured loans, is bogus material and the same is resultant of the fraud played by his ex-employees. When the assessing officer had asked for the details, such as name, address and designation, of such of those employees who alleged to have played fraud on the petitioner and the details of the action taken against such employees, the petitioner did not respond to the same. Thus, the petitioner has failed to discharge the burden cast upon him. In the absence of any other material placed by the petitioner, the assessing officer proceeded “with the assessment. The contention of the petitioner, that, the 12 material that formed the basis for making the addition is Xerox copies of the promissory notes found at the premises of M/s.Raki Avenues Private Limited, which does not belong to him, and based on the said material the assessing officer could have made no addition, would involve a disputed questions of fact and the same would not be within the realm of this court under Art.226 of the constitution of India to be gone into. The act of the assessing officer bringing to tax a receipt of a sum, which the assessee has failed to explain, cannot be said to be without jurisdiction under the provisions of the Income- tax Act. It is for the assessee to establish before the assessing officer that the receipt is not his receipt or that the same is not taxable. The petitioner has not demonstrated any of the exceptional situations 12. referred to above that would require this Court to interfere under Art.226 of the Constitution of India. Following the judicial dicta on the issue, without going into the issue of taxability of unexplained unsecured loans in the form of promissory notes, we 13. are of the view that the order of the assessing officer cannot be construed as without jurisdiction or in violation of the principles of the natural justice. We hold that the petitioner has not made out any case justifying the bypass of statutory effective remedy of appeal and approaching this Court under Art 226 of the Constitution of India. The writ petition is, therefore, not entertainable. 13 14. The Writ Petition i IS accordingly dismissed. We however grant liberty to the petitioner to approach the appellate authority under Section Income Tax Act. 246 A of the 15. It is pertinent to observe that the observations only for the purpose of deciding the present petition made herein above are and the same will not come in the way of the appellate authority In adjudicating the issue. No order as to costs. As a sequel, pending interlocutory applications, if any, shall stand closed. ^ raja babu ASSISTAN //TRUE COPY// JSISTRAR SECTION OFFICER To, 1. One CC to Sri Venkata Narayana 2. One CC to Sri P. Ponna Rao, f 3. One CC to Sri P. Vijaya Kumar, 4. Three C.D. Copies. Rao Vedula, Advocate [OPUC] Deputy Solicitor General of India (OPUC) SC for Income Tax (OPUC) Cnr HIGH COURT DATED; 18/09/2024 ORDER WP.No.10291 of 2024 0 5 FEB 2025 | Current Section ^ DISMISSING THEW.P. WITHOUT COSTS "