M/S.jayantilal Investments v. The Income Tax Officer & Another

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.116 OF 2010 M/s.Jayantilal Investments ..Petitioner Versus The Income Tax Officer & Another ..Respondents. Mr.S.U. Kamdar, Senior Advocate i/by Mr. Yatin R. Shah for the petitioner. Ms.Suchitra Kamble for the respondent. CORAM : Dr.D.Y. Chandrachud & J.P. Devadhar, JJ. DATE : 3[rd] February, 2010 P.C. : 1.The challenge in this proceeding under Article 226 of the Constitution of India is to an order of assessment passed by the assessing officer under Section 143(3) of the Income Tax Act, 1961. The order is appealable. Hence, ordinarily this Court would not be inclined to entertain a petition under Article 226, when an alternate remedy is available. However, it has been submitted on behalf of the petitioner that in the present case, the jurisdiction under Article 226 should be exercised for two reasons; firstly it has been submitted that the assessing officer has no jurisdiction to change the accounting method followed by the assessee for several years and the order is in breach of the requirements of Section 145(3). Secondly, it has been submitted that the assessee had paid the tax in the course of the subsequent assessment year and consequently the remedy of an appeal would not be efficacious in so far as the assessment year in question is concerned. Reliance was sought to be placed on the following judgments; (1) K.H. Mody, (1940) VIII ITR 179 (Bom), (2) CIT V/s. Advance Construction Company P. Limited, (2005) 275 ITR 30, (3) K. Raheja Development Corporation V/s. State of Karnataka, AIR 2005 S.C. 2350, and (4) CIT V/s. WoodwArd Governor India P. Limited, (2009) 312 ITR 254 (S.C.). 2.It is not necessary for this Court to express a view on the merits of the case of the assessee. The assessing officer, it may be noted, has observed in Para 5.4 of his order that the project completion method being followed by the assessee is used to postpone the tax liability indefinitely and eventually to evade payment of tax by adjustment of `manufactured’ losses in the remote future. The assessing officer has adverted to Section 145 (1) under which the assessee has to follow either the cash or the mercantile system of accounting. During the course of assessment, the assessing officer has held that there was no scope to postpone the accrual of profit on the purported basis of the project completion method. In para 5.2, the assessing officer has invoked the provisions of Section 145(3) by rejecting the method of accounting followed by the assessee. At the cost of repetition, it would be necessary to emphasize that the correctness of the view of the assessing officer would not fall for determination in the writ jurisdiction under Article 226. Whether or not the assessing officer was justified in coming to the conclusion which he did in invoking the provisions of Section 145(3) is a matter which can be and should be canvassed in a regular appeal, which is available against the order of the assessing officer. The decisions which are relied upon by the assessee, in fact arose after the gamut of remedies under the Income Tax Act was exhausted. For instance, the judgment of the Division Bench in K.H. Modywas in a reference under Section 66 (2) of the Act of 1922. The judgment of the Gujarat High Court in AdvanceConstructionagain arose on a reference under Section 256(2). The judgment of the Supreme Court in K. Raheja Development involved a situation where an adjudication had taken place, both before the appellate authority and the Tribunal. In these circumstances, we are of the considered view that the petitioner must be relegated to the remedy of an appeal. The appellate authority would, it is needless for this Court to add, of course be bound to consider the law laid down by the Supreme Court including in the judgment of Woodward Governor India Limited(supra) while considering as to whether any case for invoking the provisions of Section 145(3) has been made out. 3.In so far as the second submission is concerned, the fact that the assessee claims to have paid the tax in the course of the next assessment year cannot be a reason for this Court to conclude or hold that the remedy of an appeal is not an efficacious remedy. According to the Department, the tax was liable to be paid in the course of the previous assessment year, which is disputed by the assessee. This again would turn down the evaluation of the merits of the rival contentions, which is left to the appellate authority. We are informed at Bar that the assessee has already filed an appeal before the Commissioner of Income Tax (Appeals). 4.For all these reasons, we are of the view that the petition under Article 226 should not be entertained only on the ground that an appeal is available against the order of assessment under Section 143(3). All the observations made in this order are confined to the rejection of the petition on that ground. The petition is accordingly dismissed. There shall be no order as to costs. (J.P. Devadhar, J.)(Dr.D.Y. Chandrachud, J.)