Wp/880/2006 Of Icici Securities Ltd v. The Assistaant Commissioner Of Income Tax-3 (2), Mumbaia And Anr

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. WRIT PETITION NO. 880 OF 2006 ICICI Securities Limited(Formerly known as ICICI Securities& Finance Co.Limited)v/s.The Assistant Commissioner of Income tax3(2), Mumbai and others ..Petitioner .. Respondents Mr.J.D.Mistry i/by M/s.Kanga & Co. for the petitioner. Mr.Ashok Kotangale with Mr.S.R.Chauhan and Mr.A.D.Nagarjunfor the respondents. CORAM : R.M. LODHA & J.P.DEVADHAR, JJ. P.C. DATED : 31ST MARCH, 2006. We heard Mr.J.D.Mistry, the counsel for the petitioner andMr.Ashok Kotangale, the counsel for the respondents. 2.The petitioner is a public limited company and is engaged intrading securities being shares and debentures and other non-banking financial activities. For the assessment year 1998-99,the petitioner filed return of income on 27[th] November, 1998 inwhich it disclosed an income of Rs.29,73,13,560/-. While doing so,the petitioner carried forward loss of Rs.10,91,56,111/- by takingaid of section 45(2) of Income Tax Act, 1961. By the order dated16[th] February, 2001, passed under section 143(3) of the Act, aftermaking certain additions and disallowances, the Assessing Officer computed the total income of the petitioner at Rs.33,14,14,880/-and determined an amount of Rs.3,11,71,314/- as payable by thepetitioner towards the income tax. 3.The petitioner preferred appeal against the assessmentorder dated 16[th] February, 2001 before the Commissioner ofIncome Tax (Appeals). The appellate authority vide order dated16[th] May, 2001 partly modified the order of assessment bydirecting to exclude certain amount being the principal amountfrom the lease rental received from Rajasthan State ElectricityBoard. 4.The assessing officer issued notice dated 25[th] February,2005 to the petitioner under section 148 of the Income Tax Actwherein it is stated that he had reasons to believe that its incomechargeable to tax for the assessment year 1998-99 had escapedassessment within the meaning of section 147 of the Act. By thesaid notice, the petitioner was asked to furnish in prescribed formits income for the assessment year 1998-99. 5.The petitioner upon receipt of the notice dated 25[th]February, 2005 sought reasons from the assessing officer forreopening the assessment for the year 1998-99. The reasons werefurnished by the assessing officer on 9[th] August, 2005. 7.The assessing officer sought certain details from thepetitioner vide his communications dated 21[st] August, 2005 and14[th] October, 2005. In response thereto, the assessee is said tohave submitted the requisite information on 27[th] October, 2005. 8.On 17[th] February, 2006, the assessing officer disposed of theobjections. The said order was received by the assessee on 22[nd]February, 2006. Thereafter, on 24[th] February, 2006, the assessingofficer passed the assessment order pursuant to the notice issuedto the petitioner under section 148 of the Income Tax Act. By theorder dated 24[th] February, 2006, the assessing officer pursuant tothe notice under section 148, ordered speculation loss ofRs.19,75,41,936/- to be carried for the set off and negatived thecontention of the assessee that the loss was business loss in shareand debentures transactions. 9.It may be noticed here that initially the petitioner filed writpetition before this court on 28[th] February, 2006 challenging thenotice dated 25[th] February, 2005 issued under section 148 forreopening of the assessment for the assessment year 1998-99 andthe order dated 17[th] February, 2006 disposing of the petitioner'sobjections. The petitioner is said to have filed two more writpetitions on 28[th] February, 2006 and 2[nd] March, 2006 challengingthe notices under section 148 for reopening of the assessment for 9.It may be noticed here that initially the petitioner filed writpetition before this court on 28[th] February, 2006 challenging thenotice dated 25[th] February, 2005 issued under section 148 forreopening of the assessment for the assessment year 1998-99 andthe order dated 17[th] February, 2006 disposing of the petitioner'sobjections. The petitioner is said to have filed two more writpetitions on 28[th] February, 2006 and 2[nd] March, 2006 challengingthe notices under section 148 for reopening of the assessment for the assessment years 2000-01 and 2001-02. The petitioner hasaverred in the writ petition that immediately after filing the twowrit petitions on 28[th] February, 2006, the petitioner's solicitorsM/s.Kanga & Co. addressed a letter dated 28[th] February, 2006informing the respondent No.1 that the petitioner had filed twowrit petitions in respect of the assessment years 1998-99 and2000-01 and that he should not take further proceedings pursuantto the notices issued under section 148 of the Income Tax Act. 10.The petitioner has averred that it was shocked and surprisedto receive on 2[nd] March, 2006, an order purportedly dated 24[th]February, 2006 passed under section 143(3) read with section 147of the Act taking the view that difference between the cost and thefair market value of the shares could not have been claimed ascapital loss under section 45(2) but has to be treated asspeculation loss under section 73. Though in the writ petition, noaverment is made about withdrawal of the earlier writ petition, weare informed by the counsel for the petitioner that writ petitionwas withdrawn on 24[th] March, 2006 and the present writ petitionwas lodged on the same day. 11.By means of this writ petition, the petitioner seeks toimpugn the notice dated 25[th] February, 2005 issued under section148 of the Income Tax Act together with the assessment orderdated 24[th] February, 2006 passed under section 143(3) read withsection 147 of the Act for the assessment year 1998-99. 12.During the course of arguments, we indicated to the counselfor the petitioner that now since the assessment order has alreadybeen passed on 24[th] February, 2006, it would not be soundexercise of jurisdiction to entertain this writ petition and thepetitioner must exhaust the alternative remedy provided under theIncome Tax Act. The counsel invited our attention to the case ofSupreme Court in the case of Calcutta Discount Co.Ltd. v. Income-Tax Officer, Companies District I, Calcutta and another, 41 ITR191 and prayed for keeping the matter back to enable him to citea dozen cases of the Supreme Court and this Court taking theview that even after the assessment order has been passedpursuant to the notice under section 148, the High Court shouldinterfere in the notice as well as the assessment order. We did notdeem it proper to keep the matter back since we had alreadyheard the matter for some time. Thrice the counsel insisted forgiving him time until afternoon but on all three occasions wedeclined to grant prayer as we thought that it was not justifiedand insistence was too much. He wanted us to record in our orderthat he sought time and we declined. Though it sounded strangeto us; `surely we would', we told the counsel. 13.The counsel for the petitioner cited the judgment of theSupreme Court in the case of GKN Driveshafts (India) Ltd. v.Income-Tax Officer and others, 259 ITR 19. He submitted that theobservation made by the Supreme Court in GKN Driveshafts that 13.The counsel for the petitioner cited the judgment of theSupreme Court in the case of GKN Driveshafts (India) Ltd. v.Income-Tax Officer and others, 259 ITR 19. He submitted that theobservation made by the Supreme Court in GKN Driveshafts that if the objections are filed by an assessee after receipt of thereasons for reopening of the assessment under section 148, suchobjections had to be disposed of by speaking order beforeproceeding with the assessment of those years. He submitted thatthat would necessarily mean that sufficient time should be givento such assessee to challenge the same in appropriate proceedingsbefore passing the assessment order. He would submit that firstly,no sufficient opportunity was given to the petitioner to challengethe order dated 17[th] February, 2006 whereby the objections filedby the petitioner were overruled inasmuch as the said objectionswere received by the petitioner on 22[nd] February, 2006 and theassessment order under section 147 read with section 143(2) waspassed within two days therefrom that is on 24[th] February, 2006and secondly, that the order dated 17[th] February, 2006 is not aspeaking order. 14.The submissions do not appeal us. In GKN Driveshafts(India) Ltd., the Supreme Court said that pursuant to the noticeunder section 148 and disclosure of reasons for reopening ofassessment, if the assessee files objections, such objections mustbe disposed of by a speaking order before proceeding with theassessment for those years. That is what the Supreme Court said. “We see no justifiable reason to interfere with theorder under challenge. However, we clarify that whena notice under section 148 of the Income-tax Act isissued, the proper course of action for the noticee is tofile a return and if he so desires, to seek reasons forissuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt ofreasons, the noticee is entitled to file objections toissuance of notice and the Assessing Officer is bound todispose of the same by passing a speaking order. Inthe instant case, as the reasons have been disclosed inthese proceedings, the Assessing Officer has to disposeof the objections, if filed, by passing a speaking order,before proceeding with the assessment in respect ofthe abovesaid five assessment years.” 15.Reverting back to the facts of this case, to appreciate theapplicability of the judgment of the Supreme Court, it would beseen that the notice under section 148 was issued to the petitioneron 25[th] February, 2005. The reasons were disclosed on 9[th] August,2005. Upon receipt of reasons, the petitioner filed objections on17[th] August, 2005. The assessing officer sought certaininformation from the petitioner before disposal of objections andultimately, by the order dated 17[th] February, 2006, the objectionswere disposed of and the said order was received by the petitioneron 22[nd] February, 2006. It was only after the disposal of theobjections that the assessing officer proceeded to pass anassessment order. Where is the illegality in the approach of theassessing officer. In GKN Driveshafts (India) Ltd. it is not heldthat after disposal of the objections by the assessee, the assessingofficer must give time to the assessee to challenge the same andthereafter, proceed with the reassessment. As a matter of fact,until the assessment order dated 24[th] February, 2006 came to bepassed by the assessing officer, the petitioner had not evenchallenged the notice under section 148 which was admittedly received by him on 25[th] February, 2005 and reasons weredisclosed on 9[th] August, 2005. The earlier writ petition was filedby the petitioner on 28[th] February, 2006. By that time theassessment order dated 24[th] February, 2006 was already passedbut what was challenged in the said writ petition was the noticeunder section 148 and the order disposing of the objections. Whatis important is not whether the petitioner had by that timereceived the copy of the order dated 24[th] February, 2006 or notbut the fact of the matter is that the assessment order came to bepassed by the assessing officer on 24.2.2006 after the disposal ofobjections on 17.2.2006 and that the earlier writ petition was filedby the petitioner on 28.2.2006 after the assessment order hadalready been passed on 24.2.2006. The said writ petition waswithdrawn with liberty to file fresh writ petition. 16.The present writ petition has been filed on 24[th] March, 2006challenging the notice dated 25[th] February, 2005 and theassessment order dated 24[th] February, 2006 passed under section143(3) read with section 147 of the Act. That the Income Tax Act,1961 is self-contained code and provides adequate and sufficientremedy in challenging the order dated 24[th] February, 2006 cannotbe disputed. In our view, therefore, the petitioner has alternativeand efficacious remedy in challenging the said order, and, there isnothing extra ordinary in the facts and circumstances of the casewhich justifies bypassing the statutory remedy. 17.In the case of Calcutta Discount Co., the writ petition wasfiled challenging the notices under section 34 of the Indian IncomeTax Act, 1922 before the orders pursuant to the said notices werepassed by the assessing officer. The petitioner prayed for writ ofprohibition in challenging those notices; prohibiting the incometax officer from continuing the assessment proceedings on thebasis of the said notices. Interalia, the objection on behalf of therevenue was that the question as to whether the officer hadreason to believe that no assessment had resulted of non-disclosure of material facts, before the income tax officer himself,the assessee shall have an opportunity to raise the issue and ifunsuccessful, the question can be raised before the appellateofficer or the appellate tribunal or the High Court in advisoryjurisdiction under section 66(2) of the Indian Income Tax Act,1922. The Supreme Court held that existence of such alternativeremedy was not always a sufficient reason for refusing a partyquick relief by a writ or order prohibiting an authority actingwithout jurisdiction from continuing such action. The notices wereheld without jurisdiction and in the circumstances, though theassessment orders were in the while made during the pendency ofthe writ petition, the Supreme court while setting aside thenotices under section 34 of the Indian Income Tax Act, 1922 alsoset aside the assessment orders. Calcutta Discount Co.Ltd., in ourconsidered opinion, is not applicable to the facts of the presentcase. 18.As to whether the availability of an alternative remedy mayjustify refusal to invoke extra ordinary jurisdiction would dependon facts of each case. Ordinarily, where the statutory provisionsare self contained and provide the efficient and alternativeremedy, the High Court may refuse to exercise jurisdiction underArticle 226 of the Constitution of India. This is a rule of prudenceand self restraint and not a matter of bar. The counsel for thepetitioner submitted that if the petitioner is driven out to file theappeal, the appellate authority may not dispose of the appealquickly and that demand may be raised and recovered and,therefore, the alternative remedy of appeal is not efficient. We arenot at all impressed by the submission. The submission is inrealm of conjecture. 18.As to whether the availability of an alternative remedy mayjustify refusal to invoke extra ordinary jurisdiction would dependon facts of each case. Ordinarily, where the statutory provisionsare self contained and provide the efficient and alternativeremedy, the High Court may refuse to exercise jurisdiction underArticle 226 of the Constitution of India. This is a rule of prudenceand self restraint and not a matter of bar. The counsel for thepetitioner submitted that if the petitioner is driven out to file theappeal, the appellate authority may not dispose of the appealquickly and that demand may be raised and recovered and,therefore, the alternative remedy of appeal is not efficient. We arenot at all impressed by the submission. The submission is inrealm of conjecture. 19.We thought of dealing with another argument of the counselthat the objections have not been disposed of by the speakingorder but the learned counsel for the petitioner cited our orderpassed on 7[th] June, 2004 in writ petition No.1182 of 2004,Allanasons Limited v. The Assistant Commissioner of Income Tax 1(1) & ors. and submitted that the direction be issued to theappellate authority for expeditious disposal of the appeal and untilthen the assessing officer (first respondent) be restrained fromrecovering the tax due pursuant to the order dated 24[th] February,2006 by any coercive process.The counsel for the petitioneralso submits that within one week from today, the petitioner shallfile an appeal before the Commissioner of Income Tax (Appeals), 20.In Allanasons Limited the appeal had already been filed andwas pending. That is not the case here. However, since thepetitioner intends to challenge the order dated 24.2.2006 by filingan appeal, we are of the view that interest of justice shall be sub-served by passing the similar order. 21.The learned counsel for the petitioner now submits that thepetitioner may be allowed to withdraw the writ petition. 22.We, accordingly, dismiss the writ petition as withdrawn withliberty to file appeal against the order dated 24[th] February, 2006.We expect the Commissioner of Income Tax (Appeals) to hear anddecide the appeal expeditiously. We also direct that until thedisposal of appeal and for a period of four weeks from the date ofservice of the order, no coercive process shall be taken by therespondent No.1 in recovering the demand pursuant to theassessment order dated 24[th] February, 2006. (R.M.LODHA, J.) (J.P.DEVADHAR, J.)