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Dr. K. Nedunchezhian v. Deputy Commissioner Of Income-Tax

Madras High Court

Jan 27, 2005

Judgment

Subsequent
References

CaseIQ

Smart Summary (Beta)

Structured Summary of the Opinion (F.M Ibrahim Kalifulla, J.)

Factual and Procedural Background

The petitioner challenged an assessment order dated December 29, 2004 made under section 158BC(c) read with section 143(3) of the Income-tax Act, 1961. The facts as presented in the opinion indicate that a search was conducted at the petitioner’s premises in December 2004 pursuant to a warrant dated December 12, 2004. After the search, a notice dated December 9, 2004 was issued to the petitioner, to which the petitioner filed detailed replies on December 16, 2004 and December 23, 2004 requesting particulars of the material and production of witnesses on which the assessment would be based. The impugned assessment was passed on December 29, 2004. The petitioner filed the present writ petition seeking to challenge the assessment on grounds including alleged violation of principles of natural justice. The petitioner also contended that he could not obtain adequate relief by way of the statutory appeal under sections 247 to 251 of the Income-tax Act. The writ petition (and connected miscellaneous petition W.P.M.P No. 1941 of 2005) was heard and decided by the Court.

Legal Issues Presented

Whether the impugned assessment dated December 29, 2004 (under section 158BC(c) read with section 143(3) of the Income-tax Act) involved such violations of the principles of natural justice as to render the proceedings amenable to writ relief.
Whether the statutory appellate remedy under sections 247 to 251 of the Income-tax Act is an efficacious alternative remedy, particularly whether the Commissioner (Appeals) has jurisdiction and sufficient powers to consider and decide alleged violations of principles of natural justice occurring in the original assessment proceedings.
Whether, given the statutory scheme (notably sections 250 and 251 and amendments made by the Finance (No. 2) Act, 1998), the writ petition is maintainable or should be dismissed on the ground of availability of an adequate alternate remedy.

Arguments of the Parties

Petitioner's Arguments

The warrant dated December 12, 2004 authorising the search did not contain particulars as to the details of the search to be undertaken.
After the search, a notice dated December 9, 2004 was issued and the petitioner filed detailed replies on December 16 and December 23, 2004 requesting particulars of the materials and production of witnesses on which the respondent proposed to rely for assessment.
The assessment order dated December 29, 2004 was passed without addressing the petitioner’s grievances and without affording a proper hearing, resulting in serious violations of the principles of natural justice.
The petitioner contended that the statutory appeal mechanism under sections 247–251 of the Income-tax Act would not provide an adequate remedy because, after amendments effected by the Finance (No. 2) Act, 1998, the Commissioner (Appeals) lacked jurisdiction to consider preliminary issues of violation of natural justice and was confined to considering only the merits of the assessment.

The opinion does not record any detailed or specific arguments advanced for the respondent (Assessing Officer) on the issues before the Court.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court examined the statutory provisions governing the appellate authority, specifically sections 250 and 251 of the Income-tax Act, 1961, and considered the effect of deletions made by the Finance (No. 2) Act, 1998. The Court reproduced and analysed key sub-sections of section 250 (procedural provisions for hearings before the Commissioner (Appeals)) and section 251 (powers of the Commissioner (Appeals)).

The Court highlighted particular features of section 250 and section 251 relied upon in its analysis:

Section 250(2)–(6) empowers the Commissioner (Appeals) to fix hearing dates, permit representation by the appellant and Assessing Officer, adjourn hearings, make or direct further inquiry, and allow additional grounds of appeal under section 250(5) where omission was not wilful or unreasonable.
Section 251(1)(c) grants the Commissioner (Appeals) a residuary power to "pass such orders in the appeal as he thinks fit" in any other case. The Explanation to section 251 permits the Commissioner (Appeals) to consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.

Applying a conspectus reading of these provisions, the Court concluded that the Commissioner (Appeals) retains sufficient powers to enquire into and decide matters necessary to do justice in an appeal, including consideration of alleged violations of principles of natural justice, even after deletions made by the Finance (No. 2) Act, 1998. The Court reasoned that the specific procedural and substantive powers in sections 250 and 251 (including the power to permit additional grounds, to direct further inquiry, and the residuary and explanatory provisions) enable the Commissioner (Appeals) to address preliminary issues such as the petitioner’s complaint of breach of natural justice.

On this basis, the Court held that the statutory appeal remedy under sections 247 to 251 is an efficacious alternative remedy. Because that alternative remedy was available and adequate, the Court found no scope to entertain the writ petition and therefore concluded that the writ petition must fail.

The Court also dealt with the collateral procedural request by the petitioner: since the petitioner had prosecuted the writ petition during the period when the last date for filing an appeal expired (January 28, 2005), the Court exercised equitable discretion to permit the petitioner an extension to file the appeal and allowed filing on or before February 4, 2005.

Holding and Implications

Holding: The writ petition is dismissed. The Court held that the petitioner has an adequate and efficacious alternative remedy by way of statutory appeal under sections 247 to 251 of the Income-tax Act, and the Commissioner (Appeals) has sufficient power to consider matters including alleged violations of natural justice arising out of the assessment proceedings.

Direct consequences for the parties:

Writ petition dismissed: The principal writ petition was dismissed by the Court and W.P.M.P No. 1941 of 2005 (the connected miscellaneous petition) was also dismissed.
Statutory appeal to be pursued: The petitioner was directed to pursue the remedy before the Commissioner (Appeals) under sections 247–251 of the Income-tax Act.
Extension for filing appeal granted: The petitioner was permitted to file the appeal on or before February 4, 2005 (an extension from the earlier last date of January 28, 2005 owing to prosecution of the writ petition).

The Court did not purport to lay down any new binding precedent beyond its interpretation that the Commissioner (Appeals) possesses adequate powers under sections 250 and 251 to consider matters arising from the original proceedings; the decision’s practical effect is to direct the petitioner to the statutory appellate forum rather than to grant substantive relief in the writ petition.

Show all summary ...

F.M Ibrahim Kalifulla, J.:— The petitioner seeks to challenge the order of assessment passed by the respondent herein dated December 29, 2004, under section 158BC(c) read with section 143(3) of the Income-tax Act, 1961.

2. Mr. C. Ramachandran, learned senior counsel appearing for the peti-tioner, would contend that there was a search made in the petitioner's premises in December, 2004, pursuant to warrant dated December 12, 2004, that in the said warrant there was no reference, to any details as regards the search to be made, that subsequent to the said search, a notice was issued to the petitioner on December 9, 2004 to which the petitioner filed his detailed replies on December 16, 2004, and December 23, 2004, wherein the petitioner wanted the details of the materials and the pro-duction of witnesses based on which evidence, the respondent sought to make an assessment as against the petitioner.

3. Learned senior counsel would therefore contend that without taking note of the petitioner's griev-ances, the impugned order of assessment came to be passed on December 29, 2004, whereby serious violations of principles of natural justice have been committed by the respondent while passing the order impugned in the writ petition. It is in these circumstances, learned senior counsel would contend that the petitioner cannot validly work out his remedy by way of statutory appeal provided under sections 247 to 251 of the Income-tax Act.

4. According to learned senior counsel, a perusal of the powers of the Commissioner (Appeals) would show that such powers are very limited where he cannot possibly deal with the question as to the violation of the principles of natural justice and that he can confine his scope of con-sideration while disposing of the appeal within the limited scope provided under section 251(1)(a), (b) and (c) of the Act and the said provision does not provide any scope for dealing with the question of violation of the prin-ciples of natural justice while passing the impugned order of assessment. In this context, learned senior counsel also relied upon the Finance (No. 2) Act, 1998 which came into effect on and from October 1, 1998, in and by which certain expressions in the then existing section 251 of the Act came to be removed and such expressions having been deleted from the said provisions, it will have to be held that the Commissioner (Appeals) lacks jurisdiction to deal with such preliminary issue relating to the violation of principles of natural justice and the said appellate authority can only deal with the question as to the merits of the assessment and nothing else.

5. Having heard the submissions of learned senior counsel and on a perusal of section 250 as well as section 251 of the Act, I am of the view that such contention put forth on behalf of the petitioner cannot be coun-tenanced. For better appreciation of the stand of the petitioner, the relevant provisions can be extracted which read as under:

“250.(1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the Assessing Officer against whose order the appeal is preferred.

(2) The following shall have the right to be heard at the hearing of the appeal:

(a) the appellant, either in person or by an authorised represent-ative;

(b) the Assessing Officer either in person or by a representative.

(3) The Commissioner (Appeals) shall have the power to adjourn the hearing of the appeal from time to time.

(4) The Commissioner (Appeals) may, before disposing of any appeal make such further enquiry as he thinks fit, or may direct the Assessing Officer to make further enquiry and report the result of the same to the Commissioner (Appeals).

(5) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable.

(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.

(6A) In every appeal, the Commissioner (Appeals) where it is pos-sible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of section 246A.

(7) On the disposal of the appeal, the Commissioner (Appeals) shall communicate the order passed by him to the assessee and to the Chief Commissioner or Commissioner.

251. Powers of the Commissioner (Appeals).— (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers:

(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and after making such further inquiry as may be necessary, and the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;

(b) in an appeal against an order imposing a penalty, he may con-firm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation.— In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the pro-ceedings in which the order appealed against was passed, notwith-standing that such matter was not raised before the Commissioner (Appeals) by the appellant.”

6. Under section 250 while fixing the procedure for hearing of appeals, various prescriptions have been made as to how the appellant can repre-sent himself in the appeal proceedings and the power of the Commissioner (Appeals) to fix the necessary dates of hearing before disposing of the appeal. It also vests with the Commissioner (Appeals) power to make fur-ther enquiries as and when required for the better appreciation of the appeal.

7. In fact, under section 250(5), it is specifically provided that the Commissioner (Appeals) can even allow the appellant to go into any ground of appeal not specified in the grounds of appeal if the appellate authority is satisfied that the omission of that ground from the form of appeal was neither wilful nor unreasonable. Similarly under section 251(1)(c), it is provided that the appellate authority in any other case can pass orders in the appeal as he thinks fit. Further in the Explanation it is stated that the Commissioner (Appeals) can consider and decide any matter arising out of the proceedings in which the order appealed against was passed not-withstanding that such matter was not raised before the Commissioner (Appeals) by the appellant. Thus, a conspectus reading of the above said provisions even after the deletion of certain expressions by the Finance Act (No. 2) of 1998 would make it clear that the Commissioner (Appeals) has been vested with sufficient powers to decide the appeal on the merits on all aspects in order to render justice by virtue of exercise of the appel-late power vested with him. In such circumstances, merely, because cer-tain expressions came to be deleted from section 251(1)(c) of the Act, I am afraid, it cannot be held that there is no scope for the Commissioner (Appeals) to go into the question as to the violation of principles of natural justice complained of by the - assessee while prosecuting the appeal before him.

8. In view of the above said conclusion, I do not find any scope to entertain this writ petition in the light of the alternative efficacious remedy available to the petitioner under sections 247 to 251 of the Income-tax Act. The writ petition therefore fails and the same is dismissed. Consequently, W.P.M.P No. 1941 of 2005 is also dismissed.

9. Mr. C. Ramachandran, learned senior counsel, submits that since the petitioner was prosecuting this writ petition, the last date for filing the appeal expired on January 28, 2005 and the petitioner should be given some breathing time to present the appeal before the Commissioner (Appeals). Considering the grievance of the petitioner, the petitioner is permitted to file the appeal on or before February 4, 2005.