Thursday, April 25, 2024

Takshila Educational Society failed to avail alternative remedy, petition dismissed by High Court

In Takshila Educational Society v. The Assessment Unit, Income Tax Department, National Faceless Assessment, Centre, New Delhi, the division bench of Patna High Court observed, "The plea made of no oral hearing afforded has to be considered in the context of the option not having been exercised; which amounts to a waiver" in its judgement dated April 22, 2024. Takshila Educational Society, the petitioner is aggrieved with the assessment order dated March 22, 2024, passed without affording an opportunity of hearing. There is an appeal provided from the order, which has not been availed of. 

The petitioner sought an opportunity for a proper hearing. The senior counsel for the petitioner relied on a Full Bench decision of Patna High Court in Commissioner of Wealth-Tax Vs. Sri Jagdish Prasad Choudhary, (1995) 211 ITR 472X (Pat). Therein, the specific provision on which the dictum was laid was Section 18 (2) of the Wealth Tax Act, which reads as under: “18 (2) No order shall be made under sub-section (1) unless the person concerned has been given a reasonable opportunity of being heard." 

The Full Bench has held that the word “heard” occurring in Section 18(2) of the Act means to be heard “orally” and not a mere consideration of the case as made out in the written representation. Incidentally, it was also examined whether such an oral hearing can be given only on the request of the person concerned or whether under the scheme of the Act, there is an implied obligation of the concerned authority to offer an opportunity of oral hearing. It was found on the scheme of the Wealth Tax Act, specifically sub-Section (2) of Section 18 that even without a request there is an implied obligation on the authority.

The Court's judgement reads: "4. Juxtaposed with the above provision, we have to consider Section 144B(vii), which reads as under: “(vii) the assessee or any other person, as the case may be, shall file his response to the notice referred to in clause (vi), within the time specified therein or such time as may be extended on the basis of an application in this regard, to the National Faceless Assessment Centre;”

When one looked for Section 144 B (vii) in the  Income Tax Act, 1961, it was noticed that the entire Section 144 B has been "Omitted by the Direct Tax Laws (Amendment) Act, 1987" as per its Section 51 with effect from April 1, 1989. The omitted provision dealt with "Reference to Deputy Commissioner in certain cases".

Drawing on these omitted provisions, the Court observed: "5. Hence, under the scheme of the Income Tax Act, specifically after the faceless assessment was brought into force, a request has to be made for an oral hearing. There is a specific option provided, which has to be ticked in the affirmative, to make the request while uploading the objection. Unless the request is made, the faceless assessment would be concluded without an oral hearing, which again is as per the scheme of the Act. We do not think that the dictum of the Full Court applies here. We also notice that there is a provision for appeal where all the facts can be argued in person. The appellate authority also has sufficient power to get a report from the Assessing Officer, after affording an opportunity of hearing before the Assessing Officer." These observations require re-consideration in the light of the omitted provisions which appear to have erroneously been cited.   

The Court drew on the judgement of the Supreme Court in State of Himachal Pradesh v. Gujarat Ambuja Cement Limited (2005) 6 SCC 499 to ascertain the contours of the High Court's jurisdiction under Article 226 of the Constitution of India and the scope to interfere with appellable orders, as laid down by the Supreme Court. The Court has held that if an assessee approaches the High Court without availing the alternate remedy, it should be ensured that the assessee has made out a strong case or that there exists good grounds to invoke the extraordinary jurisdiction. It was clarified that the remedy of writ is an absolutely discretionary remedy. The High Court can always refuse the exercise of discretion if there is an adequate and effective remedy elsewhere. 

It observed: "The High Court can exercise the power only if it comes to the conclusion that there has been a breach of principles of natural justice or due procedure required for the decision has not been adopted. The High Court would also interfere if it comes to a conclusion that there is infringement of fundamental rights or where there is failure of principles of natural justice or where the orders and proceeding are wholly without jurisdiction or when the vires of an Act is challenged." The judgement was authored by Chief Justice K. Vinod Chandran.

The High Court reserved the liberty of the petitioner to approach the appellate authority. The period during which the writ petition, was pending, from April 10, 2024, till April 22, 2024 shall not be reckoned as delay.

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