SAI KIRAN CLEARING CO.PVT.LTD. vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -2 (3)(1) AND 3 ORS.

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WP/4310/2022HC Bombay21 April 2025Bench: HON'BLE SHRI JUSTICE M.S. SONAKHON'BLE SHRI JUSTICE JITENDRA SHANTILAL JAIN5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the writ petition could be entertained despite the Petitioner having invoked the alternate statutory remedy of appeal. This was because the undisputed facts revealed a clear violation of the principles of natural justice and fair play, which constitutes a circumstance where the rule of exhaustion of alternate remedies can be departed from. The Court found that the Petitioner was issued a show cause notice with a deadline of March 30, 2022, at 23:59 hours, and filed a response at 17:59 hours on the same day. However, the reassessment order was passed at 17:22 hours, before the deadline and without considering the Petitioner's response. This non-consideration vitiated the order and violated natural justice. The Court relied on the reasoning in *Mateen Pyarali Dholakia vs. Union of India*. Consequently, the impugned reassessment order was set aside, and the matter was remitted back to the assessing officer for fresh consideration, including granting the Petitioner a personal hearing. This exercise was to be completed within three months. The Petitioner's statement regarding the withdrawal of the pending appeal and not raising limitation objections was accepted. All contentions on the merits of the reassessment were left open.

What were the facts?

The Petitioner, Sai Kiran Clearing Co. Pvt. Ltd., challenged a reassessment Order dated March 30, 2022, passed by the Deputy Commissioner of Income Tax, Circle – 2(3)(1). The Petitioner filed a writ petition before the Bombay High Court, arguing a violation of natural justice. The Petitioner received a show cause notice on March 29, 2022, with a response deadline of March 30, 2022, at 23:59 hours. The Petitioner filed a response at 17:59 hours on March 30, 2022. However, the reassessment order was passed at 17:22 hours on the same day, before the Petitioner's response was considered. The Petitioner stated that an appeal against the reassessment order had already been instituted but offered to withdraw it depending on the outcome of the writ petition.

What were the issues?

1. Whether the High Court should entertain the writ petition despite the existence of an alternate statutory remedy of appeal, given the alleged gross and apparent violation of principles of natural justice? (Question of law and fact, turning on principles of natural justice and the rule of exhaustion of remedies). Assessee's Contentions: The Petitioner argued that the reassessment order was passed in violation of natural justice because it was made before the expiry of the time granted for filing a response, and the Petitioner's response, filed within the stipulated time, was ignored. This violation is an exception to the rule of exhausting alternate remedies. The Petitioner relied on the Bombay High Court's judgment in *Mateen Pyarali Dholakia vs. Union of India*. Revenue's Contentions: The Respondents submitted that the reassessment had to be completed by March 31, 2022, and that the Petitioner had acquiesced in the Section 148 proceedings. They also requested that if the matter were to be remanded, directions be issued for disposal within a timeline to avoid limitation issues.

Which sections of the Income-tax Act were involved?

Section 148

AI-generated summary — verify with the full judgment below

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WP 4310-2022 (J).doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 4310 OF 2022 Sai Kiran Clearing Co. Pvt. Ltd. .Petitioner having its address at 202, 2nd Floor, Ratan Galaxie, Plot No. 1, J. N. Road, Mulund (West), Mumbai – 400 080. Vs. 1. The Deputy Commissioner of Income Tax, .Respondents Circle – 2(3)(1), 552, 5th Floor, Aayakar Bhavan, M. K. Road, Mumbai – 400 20. 2. The Additional/Joint/Deputy/Assistant Commissioner of Income-tax/Income Tax Officer, National Faceless Assessment Centre, Delhi. 3. The Additional Commissioner of Income-tax, Range 2(3), Aayakar Bhavan, M. K. Road, Mumbai – 400 020. 4. Union of India through the Secretary, Department of Revenue, Ministry of Finance, Government of India, North Block, New Delhi – 110 001. Mr. Fenil Bhatt i/b. Mint and Confreres, Advocate, for the Petitioner Mr. N. C. Mohanty, Advocate, for the Respondents Anand 1 of 5

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WP 4310-2022 (J).doc CORAM : M. S. SONAK & JITENDRA JAIN, JJ.

DATE: 21.04.2025 ORAL JUDGMENT (PER: M. S. SONAK, J.) 1. Heard learned Counsel for the parties. 2. Rule. The rule is made returnable forthwith. By consent, the Petition is taken up for final hearing. 3. The Petitioner challenges the impugned reassessment Order dated 30.03.2022. Learned Counsel fairly states that an Appeal is already instituted against the impugned re-assessment Order dated 30.03.2022 after disclosing that this Petition has been filed and offering to withdraw such Appeal depending on the outcome of this Petition. 4. Mr. Bhat learned Counsel for the Petitioner submits that this is a case of gross and apparent violation of principles of natural justice, and that is why this Court may consider entertaining this Petition even though the Petitioner has already invoked the alternate statutory remedy of appeal. He points out that the Petitioner was issued a Show Cause Notice dated 29.03.2022, inviting a response by 23.59 hours of 30.03.2022. He submits that even though this time was insufficient, the Petitioner filed a response on 30.03.2022 at 17.59 hours. However, the second Anand 2 of 5

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WP 4310-2022 (J).doc Respondent passed the impugned Order at 17.22 hours of 30.03.2022 without waiting for the reply. He submits that this is a case where the Petitioner’s response, even though filed within the prescribed time, was entirely ignored and the impugned re- assessment Order was made. Mr. Bhatt submits that this is a clear case of violation of natural justice and therefore constitutes one of the exceptions to the rule of exhaustion of alternate remedies. 5. Mr. Mohanty learned Counsel for the Respondents submits that the reassessment had to be completed by 31.03.2022. He pointed out that the Petitioner acquiesced in the Section 148 proceedings. In any event, he submitted that if the matter has to go back to the assessing officer, appropriate directions be issued for disposal within the timeline to be indicated by this Court, so that no limitation issues are raised. 6. We have considered the rival contentions and are satisfied that this Petition can be entertained despite the Petitioner invoking the alternate statutory remedy of appeal. This is because the undisputed facts indicate a clear violation of the principles of natural justice and fair play. This is one of the circumstances in which the rule of exhaustion of alternate remedies can be departed from. 7. The Petitioner was issued a Show Cause Notice and granted time to file a response by 23.59 hours of 30.03.2022. Such a Anand 3 of 5

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WP 4310-2022 (J).doc response was filed by the Petitioner at 17.59 hours on 30.03.2022. Even before the time limit indicated in the Show Cause Notice would expire, the second Respondent made the impugned re- assessment Order dated 30.03.2022 at 17.22 hours. Thus, the Petitioner’s response filed within the timeline indicated was not even considered. Such non-consideration vitiates the impugned Order and violates the principles of natural justice. 8. Mr. Bhatt has relied on the Judgment of this Court in the case of Mateen Pyarali Dholakia vs. Union of India and others in W. P. No. 1286 of 2021 dated 11.10.2021 in support of his arguments. In the said case as well, the Co-ordinate Division Bench interfered with the impugned assessment Order because the same was passed even before the time granted for filing a reply could expire and without considering the reply filed by the assessee. The reasoning behind the decision will also apply to the facts of the present case. 9. On the above short ground, we set aside the impugned re- assessment Order dated 30.03.2022 and remit the matter back to the assessing officer for considering the Petitioner’s response for granting the Petitioner a personal hearing and making a fresh re- assessment Order on its own merits and in accordance with law. This entire exercise must be completed within three months of the uploading of this order. Anand 4 of 5

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WP 4310-2022 (J).doc 10. Mr. Bhatt’s statement that the Appeal against the impugned re-assessment Order dated 30.03.2022, which we now quash, will be withdrawn within 15 days of the uploading of this Order is accepted, and the Petitioner must comply with the same. 11. Mr. Bhat states that no objection based on limitation would be raised provided the fresh reassessment Order is made within three months of uploading this order. Besides, Mr. Bhatt states that the Petitioner will render full co-operation and not seek any unnecessary adjournments at the stage of personal hearing. All these statements are accepted. 12. All contentions on the merits of the reassessment are left open. If the assessment Order aggrieves the Petitioner, then the Petitioner is granted liberty to raise all contentions, including contentions raised in this Petition regarding the validity of re- opening of assessment in the Appeal that the Petitioner may choose to institute against such re-assessment Order. 13. The rule is made absolute in the above terms without any costs order. The Petition stands disposed of. 14. All concerned are to act on an authenticated copy of this Order. (JITENDRA JAIN, J.) (M. S. SONAK, J.) Anand 5 of 5

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