IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 01.07.2009 CORAM THE HONOURABLE MR. JUSTICE V. DHANAPALAN W.P.Nos.1947 and 1948 of 2008 and M.P.No.1 of 2008 M/S. VIRA PROPERTIES (MADRAS PVT LTD RAYALA TOWERS 158 (781-785) ANNA SALAI CHENNAI 600 002 BY ITS EXECUTIVE DIRECTOR M.R. PRATAP .. PETITIONER in both the writ petitions Vs ASST. COMMISSIONER OF INCOME TAX COMPANY CIRCLE III (4) CHENNAI 600 034 ..RESPONDENT in both the writ petitions Prayer Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of Certiorari to call for the records of the Respondent in his assessment order dated 31.12.2007 passed under section 143 (3) read with section 147 for the Assessment year 2003-04 and 2004-2005 in respect of the petitioners income tax Assessment and quash the same For Petitioner :Mr.V.Ramachandran,Senior Counsel For Respondent :Mrs.Pushya Sitaraman, Standing counsel for the respondent. O R D E R By consent of both parties, the main writ petition itself is taken up for final disposal. 2. This writ petition has been filed praying to call for the records of the Respondent in his assessment order dated 31.12.2007 passed under section 143 (3) read with section 147 for the Assessment https://hcservices.ecourts.gov.in/hcservices/ years 2003-04 and 2004-2005 in respect of the petitioners income tax Assessment and quash the same. 3. The Petitioner is a private limited company incorporated under the provisions of the Companies Act 1956 and an assessee under the Income Tax Act 1961. According to the petitioner, for the assessment years 2003-2004 and 2004-2005, it has filed its return of income. For the Assessment Years 2003-2004 and 2004-2005,the respondent processed the return of income under the provisions of Section 143(1) of the Act and granted the refund as claimed in the returns of income. However, on 04.08.2006, the respondent has issued a notice under Section 148 seeking to reassess the income under Section 147 of the Act. The petitioner, vide its letter dated 17.08.2006 had sought for the reason for reopening the assessments and the respondent vide his letter dated 22.8.2006 has stated that certain income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. 4. It is further stated that the petitioner vide its letter dated 19.09.2006 had sought for personal inspection of the records for the relevant periods which has caused the respondent to reopen the assessment for the purpose of submitting comprehensive reply/objection for reopening the assessment under section 147 of the Act, which as an assessee the petitioner is eligible for. 5. According to the petitioner, for the earlier years 1999-2000 and 2000-2001, the respondent had issued similar notices under section 148 of the Act, and consequential notices under section 143 (2) of hearing issued fixing the date for the hearing on 14.07.2003 for both the years. Subsequently, the petitioner had objected to the notices issued under section 148 of the Act and sought the reasons for re-opening the assessments on 25.06.2003 and thereafter the respondent had dropped the proceedings on 02.12.2004. 6. It is further submitted that the respondent had completed the assessment for all the years commencing from 1990-2000 till 2002-2003 under Section 143(1) of the Act holding the income derived by the petitioner as "Income from Business and profession in terms of Section 28 of the Act". Completion of these assessments are in accordance with the settled principles of law and provisions of the statute specially Section 27(iii)(b) as amended by Finance Act. Further in respect of income received for providing amenities and its maintenance, till date in all the other assessment years including for the assessment years 2002-2003, the income has been assessed under the head 'business income'. Neverthesless, on mere change of opinion the respondent had issued the notices under Section 148 of the Act on 04.08.2006 for the assessment years 2003-2004 and 2004- 2005 and completed the assessment, when the very notice was under challenge before this Court in Writ Petition No.29611 and 29612 of https://hcservices.ecourts.gov.in/hcservices/ 2007 and this Court gave an oral instruction to the standing counsel for the department to keep the assessment pending till the disposal of the interim application filed by the petitioner for stay. 7. It is further submitted that the petitioner by letter dated 06.10.2006 filed detailed objections to the notices issued by the respondent under section 148 of the Income Tax Act. However, the respondent by letter dated 13.03.2007 over ruled the objections. 8. The petitioner further submits that they challenged the notice issued under Section 148 of the Income Tax Act as well as the order dated 22.08.2006 in W.P.Nos.29611 and 29612 of 2007 before this Court and despite the oral instructions of the court to the respondent not to proceed with the assessment pending disposal of the interim applications, the respondent went ahead and completed the impugned assessments on the plea that the same was getting time barred without affording the petitioner a personal hearing. The respondent is seeking to reopen the assessment on a mere change of opinion. It is further submitted that the respondent has violated the principles of natural justice as well as the statutory provisions contained under Section 143(2) of Income Tax Act, which requires a specific hearing and enquiry before making the assessment. 9. The respondent has filed counter affidavit and stated that on 27.9.2007, W.P.Nos.29611 and 29612 of 2007 were filed challenging the notice under Section 148 and consequent order overruling objections. When the matter was taken up for hearing, this Court had directed the counsel for the respondent not to take any action for two weeks and the last day of the said two weeks fell on 11.10.2007 and hence beyond that there was no oral direction from this Court to extend the stay. It is further stated that the Standing Counsel has stated that in the absence of any stay order, the Department may proceed with the assessment within the time limit allowed under the Act. It is further stated that in the absence of any specific stay order and non availability of extended time limit, the assessment was completed with the material available on record. It is also submitted that the petitioner had withdrawn the W.P.No.29611 and 29612 of 2007 on 20.2.2008. According to the respondent when this writ petition was taken up for hearing, the petitioner ought not have mentioned before this Court on 24.1.2008, that oral direction were issued to the Standing Counsel to inform the Officer to await the disposal of the writ petition before proceeding with the hearing by respondent. It is further submitted that the respondent had passed orders on the last day available under the limitation on 31.12.2007 since no order either oral or written were issued to the respondent. 10. The respondent further stated in the counter that for the assessment years 1999-2000, 2000-2001, the question of assessing the income from building never arose. Earlier notice under section 148 https://hcservices.ecourts.gov.in/hcservices/ for the assessment year 1999-2000 and 2000-2001 were issued calling for return of income and when the petitioner filed evidence for having filed the return, the proceedings were dropped. Thus the facts and circumstances for the issue of notice under Section 148 for the assessment year 1999-2000 and 2000-2001 are entirely different compared to the assessment year 2003-2004 and 2004-2005. 11. Heard Mr.Ramachandran, learned Senior counsel for the petitioner and Mrs.Pushya Sitaraman, learned Standing counsel for the respondent. 12. It is vehemently argued by the learned counsel for the petitioner that on 27.09.2007, in W.P.Nos.29611 and 296112 of 2007 where notices under Section 148 of the I.T.Act were challenged, this Court directed the respondent to file a counter and further directed that the respondent shall not proceed with the assessment and this direction was in force till 11.10.2007. However, the respondent issued a notice dated 4.10.2007 posting the case for enquiry on 09.10.2007 and proceeded to make an assessment on that basis. He further contended that the petitioner informed the respondent in writing that since there was a restraint imposed by this Court against making an assessment, the enquiry cannot be proceeded with on 09.10.2007 and hence the case was adjourned. 13. The further contention of the learned Senior counsel for the petitioner is that subsequent to the above posting of the case on 09.10.2007, no notice of hearing was given. While so the assessment order was completed on 31.12.2007 on the ground that the assessment was getting time barred on that day. Thus the respondent has violated the principles of natural justice as well as the statutory provisions contained under section 143(2) of I.T.Act, which requires a specific hearing and enquiry before making the assessment. 14. Per contra, learned Standing counsel for the respondent submitted that on 27.9.2007 when W.P.No.29611 and 29612 of 2007 was taken up for hearing, the court had directed the counsel for the respondent not to take any action for two weeks and the last day of the said two weeks fell on 11.10.2007. She further submitted that there was no oral direction from this Court to extend the say. Hence, in the absence of any stay order, the department may proceed with the assessment within the time limit allowed under the Act. She has further contended that the petitioner had withdrawn the W.P.Nos.29611 and 29612 of 2007 on 20.02.2008 and when the present writ petition was taken up for hearing, the petitioner ought not have mentioned before this Court on 24.1.2008 that oral direction were issued to the Standing Counsel to inform the Offcier to await the disposal of the writ petition before proceeding with the hearing by respondent. She further contends that the respondent had passed order on the last day available under the limitation i.e.., on https://hcservices.ecourts.gov.in/hcservices/ 31.12.2007 since no order either oral or written were issued to the respondent. 15. I have heard the learned counsel on either side. 16. Though several issues have been raised in the writ petition, the pertinent issue involved in this case is that no opportunity of hearing is given to the petitioner before passing the assessment orders and hence it violates the principles of natural justice. 17. It is seen that W.P.No.29611 and 29612 of 2007 was listed on 27.9.2007 and this Court gave an oral direction not to proceed further for a period of two weeks. The learned Standing Counsel for the respondent does not dispute such an oral direction and accepts the fact that the oral direction was in force till 11.10.2007. According to the learned Standing Counsel for the respondent, hearing took place on 09.10.2007, however, the petitioner was not present on that day for hearing. 18. A perusal of the records reveal that the petitioner had the intention to attend the hearing, however, there was no oral or written notice for them to appear for enquiry after 11.10.2007 the last date of the oral order and in the absence of the petitioner, the respondent passed orders without giving an opportunity of hearing. To substantiate his contention, learned Senior counsel appearing for the petitioner relied on a decision of the Supreme Court reported in 2005(6) SCC 499 and the relevant portion of the judgment reads thus:- "17. We shall first deal with the plea regarding alternative remedy as raised by the appellant State. Except for a period when Article 226 was amended by the Constitution (Forty-second Amendment) Act, 1976, the power relating to alternative remedy has been considered to be a rule of self-imposed limitation. It is essentially a rule of police, convenience and discretion and never a rule of law.Despite the existence of an alternative remedy it is within the jurisdiction of discretion of the High Court to grant relief under Article 226 of the Constitution. At the same time, it cannot be lost sight of that though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate efficacious alternative remedy. If somebody approaches the High Court without availing the alternative remedy provided the High Court should ensure that he has made out a strong case or that there exist good grounds to https://hcservices.ecourts.gov.in/hcservices/ invoke the extraordinary jurisdiction. 18. The Constitution Benches of this Court in K.S.Rashid and Son V. Income Tax Investigation Commission Sangram Singh Vs. Election Tribunal, Kotach, Union of India V. T.R.Varma, State of U.P. V. Mohd.Nooh and K.S.Venkataraman and Co. (P) Ltd., V. State of Madras held that Article 226 of the Constitution confers on all the High Court a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. 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. " 19. Having noticed that there was a oral direction not to proceed with the enquiry and after that period there was no notice of hearing, the respondent has proceeded in conducting the enquiry without affording an opportunity to the petitioner. Therefore, the impugned order suffers from legal infirmity and it cannot be sustained and in the light of the above decision of the Supreme court, the impugned order dated 31.12.2007 passed by the respondent is set aside and the matter is remanded to the respondent for fresh assessment and the respondent is directed to pass orders on the fresh assessment after affording an opportunity of hearing to the petitioner. It is open to the petitioner to agitate all the issues raised in this writ petition before the assessing authority . 20. The writ petition is allowed with the above observation. No costs. Consequently, connected M.P.No.1 of 2008 is closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar nvsri https://hcservices.ecourts.gov.in/hcservices/ To : THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE III (4) CHENNAI 600 034. 2 cc To Mr.George Seriyan, Advocate, SR.27443. 1 cc To Mr.Pushya Sitaraman, Standing Counsel for I.T.Cases, SR.27975. W.P.Nos.1947 and 1948 of 2009 KA(CO) RVL 14.07.2009 https://hcservices.ecourts.gov.in/hcservices/