Mala Exports Corporation,Rep By v. The Assistant Commissioner Of Income Tax,Circle-Xv, Chennai – 600 034

Mala Exports Corporation,rep by Partner V.Sadasivam,No.20, Kothari Road,Chennai – 600 034.... Petitioner Vs. The Assistant Commissioner of Income Tax,Circle-XV, Chennai – 600 034.... Respondent Petition filed under Article 226 of The Constitution ofIndia praying to issue a writ of certiorari to call for therecords of the respondent relating to the assessment order dated30.03.2006 in respect of the Assessment Year 1987-88 and quashthe same as being illegal, arbitrary and inoperative. For Petitioner : Mr.R.Thiagarajan, Senior Counsel for Mr.V.SanjeeviFor Respondent : Mrs.Hema Muralikrishnan, Senior Standing Counsel O R D E RThe petitioner has filed the above Writ Petition to issue awrit of certiorari to call for the records of the respondentrelating to the assessment order dated 30.03.2006 in respect ofthe Assessment Year 1987-88 and quash the same. 2.It is the case of the petitioner that there was a searchand seizure under Section 132 of the Income Tax Act in relationto the transaction during the year 1985-86 (Assessment Year1987-88) on 13.12.1988. The petitioner's assessment wascompleted for the Assessment Year 1987-88 under Section 143(3)of the Income Tax Act on 27.03.1989. Thereafter, under Section263 of the Income Tax Act, the assessment was reopened on13.09.1989. 2.1.Against the order of reopening of the assessment, thepetitioner filed an Appeal before the Income Tax AppellateTribunal on 01.12.1989. While the said Appeal was pending, thereassessment was completed and an order was passed on31.03.1992. Challenging the same, the petitioner filed an Appeal https://hcservices.ecourts.gov.in/hcservices/ before the Commissioner of Income Tax (Appeals) on 28.04.1992.On 21.09.1992, the Income Tax Appellate Tribunal passed theorder in the Appeal filed against the order of reopening of theassessment stating that when fresh assessment was made, theassessee was not given the copies of the statement recordedbehind the back of the assessee and further directed to giveopportunity of hearing. 2.2.Pursuant to the order of the Tribunal, the Commissionerof Income Tax (Appeals), by order dated 16.02.1993, remanded thematter to the Assessing Officer directing the Officer to recordthe statements from V.Subramaniam and V.K.Berlia, the Author ofthe Agreement dated 04.12.1985. Pursuant to the order of remandpassed by the Commissioner of Income Tax (Appeals), theAssessing Officer recorded the statement of V.Subramaniam on10.09.1993. However, the Assessing Officer has not recorded thestatement of V.K.Berlia. On 30.07.2003, the Commissioner ofIncome Tax (Appeals) passed the final order in the Appealpreferred by the petitioner, confirming the assessment orderdated 31.03.1992. 2.3.The petitioner contended that the Assessing Officer andthe Commissioner of Income Tax (Appeals) had not followed thedirections of the Income Tax Appellate Tribunal, dated21.09.1992, in not recording the statement of V.K.Berlia. Asagainst the order passed by the Assessing Officer dated31.03.1992, which was confirmed by the Commissioner of IncomeTax (Appeals), the petitioner filed a Second Appeal to theIncome Appellate Tribunal. 2.4.By order dated 16.06.2004, the Income Tax AppellateTribunal set aside the orders of the Commissioner of the IncomeTax (Appeals) and the Assessing Officer and allowed the Appealand remanded the matter to the Assessing Officer with certaindirections. 2.3.The petitioner contended that the Assessing Officer andthe Commissioner of Income Tax (Appeals) had not followed thedirections of the Income Tax Appellate Tribunal, dated21.09.1992, in not recording the statement of V.K.Berlia. Asagainst the order passed by the Assessing Officer dated31.03.1992, which was confirmed by the Commissioner of IncomeTax (Appeals), the petitioner filed a Second Appeal to theIncome Appellate Tribunal. 2.4.By order dated 16.06.2004, the Income Tax AppellateTribunal set aside the orders of the Commissioner of the IncomeTax (Appeals) and the Assessing Officer and allowed the Appealand remanded the matter to the Assessing Officer with certaindirections. 2.5.On 20.02.2006, the respondent issued a letter callingfor a hearing on 23.02.2006. On receipt of the notice, thepetitioner sent a letter dated 21.02.2006 to the respondent tofix another date for hearing as their Auditor was away fromIndia. Since no reply fixing any hearing date was fixed, on14.03.2006, the petitioner himself voluntarily appeared inperson before the respondent and requested to furnish all thedocuments relied upon and provide opportunity for crossexamination. On 16.03.2006, the petitioner was furnished withcopies of some of the seized documents from Wavin. Thepetitioner filed a petition under Section 144-A of the IncomeTax Act to the Additional Commissioner of Income Tax on20.03.2006. On 27.03.2006, the petitioner filed his objections,along with a number of relevant documents and notes. The https://hcservices.ecourts.gov.in/hcservices/ petitioner also filed the details sought for by the respondenton 28.03.2006. Thereafter, by order dated 30.03.2006, therespondent completed the assessment and passed the impugnedorder without following the directions of the Income TaxAppellate Tribunal and in violation of principles of naturaljustice. The petitioner has filed the above Writ Petition. 3.The respondent, in their counter, has stated thatopportunity was given to the assessee as directed in the orderof the Income Tax Appellate Tribunal and the assessee'ssubmissions were duly taken into account while passing the freshassessment order dated 30.03.2006. Further, the respondentcontended that the impugned order has been passed by therespondent after following the directions given by the IncomeTax Appellate Tribunal. 4.Heard Mr.R.Thiagarajan, learned senior counsel appearingon behalf of Mr.V.Sanjeevi for the petitioner and Mrs.HemaMuralikrishnan, learned senior standing counsel for therespondent. 5.Mr.R.Thiagarajan, learned senior counsel appearing forthe petitioner submitted that the respondent had passed theimpugned order dated 30.03.2006 without following the specificdirections given by the Income Tax Appellate Tribunal andtherefore, on this ground alone, the impugned order is liable tobe set aside and the matter should be remanded to the respondentfor fresh consideration. Further, the learned senior counselsubmitted that the respondent had passed the impugned order bymerely following the earlier orders dated 31.03.1992 and30.07.2003, which were set aside by the Income Tax AppellateTribunal. The learned senior counsel submitted that the impugnedorder should be set aside and the matter should be remanded tothe respondent for fresh consideration and to redo theassessment by following the directions given by the Income TaxAppellate Tribunal. 5.1.In support of his contentions, the learned seniorcounsel relied upon the following judgments: 5.1.In support of his contentions, the learned seniorcounsel relied upon the following judgments: (i)(2005) 6 Supreme Court Cases 499 [State of H.P. andothers Vs. Gujarat Ambuja Cement Ltd., and another] wherein theHon'ble Supreme Court held as follows:“...22.If, as was noted in Ram and Shyam Co. v. Stateof Haryana and Ors. [(1985) 3 SCC 267 : AIR (1985) SC1147] the appeal is from "Caeser to Caeser's wife" theexistence of alternative remedy would be a mirage andan exercise in futility. In the instant case the writpetitioners had indicated the reasons as to why theythought that the alternative remedy would not be efficacious. Though the High Court did not go intothat plea relating to bias in detail, yet it felt thatalternative remedy would not be a bar to entertain thewrit petition. Since the High Court has elaboratelydealt with the question as to why the statutory remedyavailable was not efficacious, it would not be properfor this Court to consider the question again. Whenthe High Court had entertained a writ petitionnotwithstanding existence of an alternative remedythis Court while dealing with the matter in an appealshould not permit the question to be raised unless theHigh Court's reasoning for entertaining the writpetition is found to be palpably unsound andirrational. Similar view was expressed by this Courtin First ITO v. M/s. Short Brothers (P) Ltd., [(1966)3 SCR 84 : AIR 1967 SC 81] and State of U.P. v. IndianHume Pipe Co. Ltd., [(1977) 2 SCC 724 : 1977 SCC (Tax)335]. That being the position, we do not consider theHigh Court's judgment to be vulnerable on the groundthat alternative remedy was not availed. There are twowell recognized exceptions to the doctrine ofexhaustion of statutory remedies. First is when theproceedings are taken before the forum under aprovision of law which is ultra vires, it is open to aparty aggrieved thereby to move the High Court forquashing the proceedings on the ground that they areincompetent without a party being obliged to waituntil those proceedings run their full course.Secondly, the doctrine has no application when theimpugned order has been made in violation of theprinciples of natural justice. We may add that wherethe proceedings itself are an abuse of process of lawthe High Court in an appropriate case can entertain awrit petition.” (ii)1992 Supp (1) Supreme Court Cases 443 [Union of Indiaand others Vs. Kamlakshi Finance Corporation Ltd.] wherein theApex Court held as follows:“... 6. Sri Reddy is perhaps right in saying that theofficers were not actuated by any mala fides in passingthe impugned orders. They perhaps genuinely felt thatthe claim of the assessee was not tenable and that, ifit was accepted, the Revenue would suffer. But what SriReddy overlooks is that we are not concerned here withthe correctness or otherwise of their conclusion or ofany factual malafides but with the fact that theofficers, in reaching in their conclusion,by-passed twoappellate orders in regard to the same issue which wereplaced before them,one of the Collector (Appeals) and (ii)1992 Supp (1) Supreme Court Cases 443 [Union of Indiaand others Vs. Kamlakshi Finance Corporation Ltd.] wherein theApex Court held as follows:“... 6. Sri Reddy is perhaps right in saying that theofficers were not actuated by any mala fides in passingthe impugned orders. They perhaps genuinely felt thatthe claim of the assessee was not tenable and that, ifit was accepted, the Revenue would suffer. But what SriReddy overlooks is that we are not concerned here withthe correctness or otherwise of their conclusion or ofany factual malafides but with the fact that theofficers, in reaching in their conclusion,by-passed twoappellate orders in regard to the same issue which wereplaced before them,one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in ourview,rightly criticised this conduct of the AssistantCollectors and the harassment to the assessee caused bythe failure of these officers to give effect to theorders of authorities higher to them in the appellateheirarchy. It cannot be too vehemently emphasised thatit is of utmost importance that, in disposing of thequasi-judicial issues before them, revenue officers arebound by the decisions of the appellate authorities;The order of the Appellate Collector is binding on theAssistant Collectors working within his jurisdictionand the order of the Tribunal is binding upon theAssistant Collectors and the Appellate Collectors whofunction under the jurisdiction of the Tribunal. Theprinciples of judicial discipline require that theorders of the higher appellate authorities should befollowed unreservedly by the subordinate authorities.The mere fact that the order of the appellate authorityis not "acceptable" to the department - in itself anobjectionable phrase - and is the subject matter of anappeal can furnish no ground for not following itunless its operation has been suspended by a competentcourt. If this healthy rule is not followed, the resultwill only be undue harassment to assessees and chaos inadministration of tax laws.7.The impression or anxiety of the AssistantCollector that, if he accepted the assessee'scontention, the department would lose revenue and wouldalso have no remedy to have the matter rectified isalso incorrect. Section 35-E confers adequate powers onthe department in this regard. Under Sub-section (1),where the Central Board of Direct Taxes come across anyorder passed by the Collector of Central Excise withthe legality or propriety of which it is not satisfied,it can direct the Collector to apply to the AppellateTribunal for the determination of such points arisingout of the decision or order as may be specified by theBoard in its order. Under Sub-section(2) the Collectorof Central Excise, when he comes across any orderpassed by an authority subordinate to him, if notsatisfied with this legality or propriety, may directsuch authority to apply to the Collector (Appeals) forthe determination of such points arising out of thedecision or order as may be specified by the Collectorof Central Excise in his order and there is a furtherright of appeal to the department. The position now,therefore, is that,if any order passed by an AssistantCollector or Collector is adverse to the interests ofthe Revenue, the immediately higher administrativeauthority has the power to have the matter satisfactorily resolved by taking up the issue to theAppellate Collector or the Appellate Tribunal as thecase may be. In the light of these amended provisions,there can be no justification for any AssistantCollector or Collector refusing to follow the order ofthe Appellate Collector or the Appellate Tribunal, asthe case may be, even where he may have somereservations on its correctness. He has to follow theorder of the higher appellate authority. This mayinstantly cause some prejudice to the Revenue but theremedy is also in the hands of the same officer. He hasonly to bring the matter to the notice of the Board orthe Collector so as to enable appropriate proceedingsbeing taken under Section 35-E (1) or (2) to keep theinterests of the department alive. If the officer'sview is the correct one, it will no doubt be finallyupheld and the Revenue will get the duty, though aftersome delay which such procedure would entail.” (iii)(2008) 3 MLJ 852 [N.Sivakumar Vs. K.Vembu, President,Valrakurich Village, Sendurai Taluk and others] wherein thisCourt held as follows: “...8.In the first place, if there is a violation ofprinciples of natural justice, it is not necessary inall cases to avail of the appeal remedy and theaggrieved person can straightaway approach this Courtunder Article 226. Further, in this case, there is onemore reason why the appeal remedy will be of no use tothe petitioner. It is seen that on 29.1.2008, the BlockDevelopment Officer, who is the first appellateauthority has directed the first respondent to takeaction against the petitioner in accordance with theHigh Court's decision as follows:“cau;ePjpkd;w jPu;g;g[iuapd; mog;gilapy;epakd mYtyu; vd;w Kiwapy; jf;f eltof;if vLj;jplCuhl;rp kd;w jiytUf;F bjuptpf;fg;gLfpwJ” 6.Countering the submissions made by the learned seniorcounsel appearing for the petitioner, Mrs.Hema Muralikrishnan,learned senior standing counsel appearing for the respondentsubmitted that the remedy open to the petitioner is to file anAppeal as against the impugned order and that they cannot file aWrit Petition before this Court. Further, the learned standingcounsel submitted that the statement of V.K.Berlia could not beobtained by the respondent for the reason that his whereaboutswere not known to the respondent. Further, the statement of thesaid V.K.Berlia was produced by the petitioner and not by therespondent. 7.On a careful consideration of the materials available onrecord and the submissions made by the learned counsel on eitherside, the only contention raised by Mr.R.Thiagarajan, learnedsenior counsel for the petitioner is that the respondent hadpassed the impugned order dated 30.03.2006 without following thedirections given by the Income Tax Appellate Tribunal anderroneously following the orders dated 31.03.1992 and30.07.2003, which were set aside by the Income Tax AppellateTribunal. 8.On a perusal of the order passed by the Income TaxAppellate Tribunal dated 16.06.2004, it could be seen that theTribunal had set aside the order dated 31.03.1992 passed by theAssessing Officer and also the order dated 30.07.2003 passed bythe Commissioner of Income Tax (Appeals) XII and remanded thematter to the Assessing Officer with a direction to decide theissue afresh after giving sufficient opportunity to put forwardthe case of the assessee. Further, the assessee was given anopportunity to cross examine those persons from whom theAssessing Officer recorded the statement. The relevant portionof the order passed by the Income Tax Appellate Tribunal readsas follows: “... 8.On a perusal of the order passed by the Income TaxAppellate Tribunal dated 16.06.2004, it could be seen that theTribunal had set aside the order dated 31.03.1992 passed by theAssessing Officer and also the order dated 30.07.2003 passed bythe Commissioner of Income Tax (Appeals) XII and remanded thematter to the Assessing Officer with a direction to decide theissue afresh after giving sufficient opportunity to put forwardthe case of the assessee. Further, the assessee was given anopportunity to cross examine those persons from whom theAssessing Officer recorded the statement. The relevant portionof the order passed by the Income Tax Appellate Tribunal readsas follows: “... 5.The learned D.R. submitted that now he isprepared to furnish copies of the seized material andtherefore, suggested that the appeal may be decided bythe Tribunal on merit or a remand report may be calledfrom the Assessing Officer if required. In our view,the suggestion of the learned D.R. to decide the appealon merit after furnishing the copies of the seizedmaterial to the assessee or call for a remand reportwould not meet the ends of justice in this case.Normally, this Tribunal would call for remand reportwhen a particular issue was not considered by the lowerauthority or a particular material was not consideredby the lower authority. In this case, the entirematerial seized from M/s.Wavin India Ltd. was notfurnished to the assessee. Therefore, we do not knowwhat would be the objection of the assessee afterseeing the copies of the material that was seized fromM/s.Wavin India Ltd. After seeing the material seizedfrom M/s.Wavin India Ltd., the assessee may put forwardtheir objection to the Assessing Officer. The AssessingOfficer may or may not accept the objection. But, whenthe Assessing Officer does not accept the objection ofthe assessee, In our view, a detailed enquiry has to bemade on the basis of the objection that may be raised.Such a kind of enquiry would be effectively made at theAssessing Officer level since examination and cross examination of witness may also be required. ThisTribunal being the final fact finding authority, it isbetter to given an opportunity to the lower authoritiesto examine the whole facts afresh on the basis of theobjection that may be put forwarded by the assesseeafter looking into the seized material that would befurnished to them so that both parties will get anopportunity to agitate the matter on appeal before thisTribunal. 5.In view of the above, we are unable to acceptthe suggestion put forward by the learned D.R. In ourview, the ends of justice will be met if the matter isremanded back to the Assessing Officer to examine thewhole facts afresh after furnishing the copies of theseized material and giving an opportunity to theassessee to put forward their objection. 6.In view of the above discussion, we set asidethe order of the lower authorities and remand back theissue to the file of the Assessing Officer. We directthe Assessing Officer to furnish all copies of thematerial that were seized from M/s.Wavin India Ltd. andrelied upon by the Assessing Officer in the assessmentorder, to the assessee and decide the issue afreshafter giving sufficient opportunity to put forward thecase of the assessee. The assessee shall be given anopportunity to cross examine those persons from whomthe Assessing Officer recorded the statement.Thereafter, the Assessing Officer shall decide theissue in accordance with law.” 6.In view of the above discussion, we set asidethe order of the lower authorities and remand back theissue to the file of the Assessing Officer. We directthe Assessing Officer to furnish all copies of thematerial that were seized from M/s.Wavin India Ltd. andrelied upon by the Assessing Officer in the assessmentorder, to the assessee and decide the issue afreshafter giving sufficient opportunity to put forward thecase of the assessee. The assessee shall be given anopportunity to cross examine those persons from whomthe Assessing Officer recorded the statement.Thereafter, the Assessing Officer shall decide theissue in accordance with law.” 9.After remand, the Assessing Officer issued a notice tothe petitioner on 20.02.2006 calling upon them to appear forhearing on 23.02.2006. Thereafter, the petitioner filed theirobjections along with the documents on 27.03.2006. According tothe petitioner, the respondent has not furnished the copies ofthe documents seized at the time of seizure on 13.12.1988. Therespondent, without following the directions of the Income TaxAppellate Tribunal, had passed the impugned order on 30.03.2006. 10.On a perusal of the impugned order dated 30.03.2006, itis clear that the respondent had followed the order dated31.03.1992 passed by the then Assistant Commissioner of IncomeTax, City Circle-I (INV), Chennai and also the order passed bythe Commissioner of Income Tax (Appeals) XII dated 30.07.2003.When both these orders were set aside by the Income TaxAppellate Tribunal on 16.06.2004, the respondent should not havefollowed the orders which were set aside by the Tribunal. Thatapart, the respondent has not followed the directions given bythe Income Tax Appellate Tribunal and also has not furnished thecopies of the documents to the petitioner. When the order passed by the Assessing Officer on 31.03.1992 and the order passed bythe Commissioner of Income Tax (Appeals) XII dated 30.07.2003were set aside in the impugned order dated 30.03.2006, therespondent had, in several places, approved the orders dated31.03.1992 and 30.07.2003. The finding given by the AssessingOfficer is erroneous in view of the order passed by the IncomeTax Appellate Tribunal. 11.The judgments relied upon by the learned senior counselreported in 1992 Supp (1) Supreme Court Cases 443 [Union ofIndia and others Vs. Kamlakshi Finance Corporation Ltd.] and(2005) 6 Supreme Court Cases 499 [State of H.P. and others Vs.Gujarat Ambuja Cement Ltd., and another] squarely applies to thefacts and circumstances of the present case. 12.The respondent has to follow the order passed by thehigher Appellate Authority. When the Appellate Authority hasgiven some directions to the Assessing Officer, the AssessingOfficer must follow the directions without taking any divergentview. When the orders passed by the Assessing Officer and theCommissioner of Income Tax (Appeals) were set aside, therespondent should not have followed those orders. 13.With regard to the maintainability of the Writ Petition,since there is a violation of principles of natural justice andthat the respondent had passed the impugned order following theorders which were set aside by the Tribunal, this Court hasjurisdiction to entertain the Writ Petition challenging theorder passed by the respondent. 14.The ratio laid down by this Court in the judgmentreported in (2008) 3 MLJ 852 [N.Sivakumar Vs. K.Vembu,President, Valrakurich Village, Sendurai Taluk and others]applies to the present case. 15.With regard to the examination of V.K.Berlia, in theorder dated 30.07.2003, the Commissioner of Income Tax (Appeals)XII had observed as follows:“... 13.With regard to the maintainability of the Writ Petition,since there is a violation of principles of natural justice andthat the respondent had passed the impugned order following theorders which were set aside by the Tribunal, this Court hasjurisdiction to entertain the Writ Petition challenging theorder passed by the respondent. 14.The ratio laid down by this Court in the judgmentreported in (2008) 3 MLJ 852 [N.Sivakumar Vs. K.Vembu,President, Valrakurich Village, Sendurai Taluk and others]applies to the present case. 15.With regard to the examination of V.K.Berlia, in theorder dated 30.07.2003, the Commissioner of Income Tax (Appeals)XII had observed as follows:“... 12.The appellant had further relied on thestatements given by Sri V.K.Berlia in his affidavit dt.30.9.193. Again, this affidavit is dated 30.9.93 buthad been notarised by the Notary Public on 5.10.93. Andactually, this affidavit was not signed by SriV.K.Berlia in the presence of the Notary Public.” From the above, it is clear that the petitioner had relied uponthe statement given by the said V.K.Berlia. 16.The learned counsel appearing for the respondent https://hcservices.ecourts.gov.in/hcservices/ submitted that the Department is not in a position to obtain theaddress of V.K.Berlia, therefore, summons could not be sent tohim to appear for examination. 17.In these circumstances, since the affidavit was producedby the petitioner, the petitioner should furnish the address ofV.K.Berlia to the respondent, enabling the respondent to sendnotice to the said V.K.Berlia for examination. 18.In these circumstances, the impugned order dated30.03.2006 is liable to be set aside. Accordingly, the same isset aside. The matter is remitted back to the respondent forfresh consideration. The respondent is directed to furnish allcopies of the documents that were seized from M/s.Wavin IndiaLimited and relied upon by the Assessing Officer in theassessment order dated 31.03.1992 to the assessee within aperiod of two weeks from the date of receipt of a copy of thisorder. The petitioner is directed to furnish the address ofV.K.Berlia to the respondent within two weeks from the date ofreceipt of a copy of this order, enabling the respondent to sendnotice to the said V.K.Berlia for his examination. It is alsoopen to the petitioner to file their objections/reply, afterperusing the copies of the documents to be furnished by therespondent within two weeks from the date of receipt of thecopies of the documents. The parties are at liberty toexamine/cross examine the witnesses. The respondent is directedto redo the assessment after giving due opportunity of personalhearing to the petitioner. vaTo The Assistant Commissioner of Income Tax,Circle-XV, Chennai – 600 034. KAN(CO)TR(01/03/2018) https://hcservices.ecourts.gov.in/hcservices/