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Application for impleadment is allowed.
Delay condoned.
Leave granted.
This appeal by special leave is directed against the judgment and order passed by the High Court of Sikkim at Gangtok in Writ Petition(C) No.44 of 2009, dated 05.10.2010. By the impugned judgment and order, the High Court has quashed the order of assessment passed by the Assistant CIT, Circle-I, Siliguri under Section 148 of the Income Tax Act, 1961 (for short 'the Act') dated 11.12.2009, whereby the assessing authority has confirmed the notices issued under Section 148 of the Act for the Assessment Years 1995-1996 and 1996-1997, respectively.
The facts in brief are: The assessee is a Sikkim based non- Sikkimese who had filed his first return of income for Assessment Year 1997-1998. Upon assessment, it was discovered that he had a net profit of Rs.5,78,832/- during the Assessment Year 1996-1997
Page 2 JUDGMENT 2 relevant to the Assessment Year 1995-1996. Since no return was filed by the assessee for the Assessment Year 1996-1997 despite capitalizing the aforesaid profit, proceedings under Section 147 of the Act were initiated against him for the said Assessment Year. Accordingly, on 26.05.1998 the notice was issued under Section 148 of the Act. Further, the Revenue has found out that as on 31.03.1996 the assessee had brought forward closing capital of Rs.1,73,90,397/- including the aforesaid net profit during the Assessment Year 1996- 1997. The same remained unexplained as the return of income for Assessment Year 1995-1996 was also not furnished by the assessee. Hence, another notice under Section 148 was issued to the assessee for the Assessment Year 1995-1996, dated 30.03.2000. It has come on record that the assessee did not comply with the aforesaid notices issued under Section 148 of the Act and thus, a letter dated 19.01.2001 came to be issued to the assessee as a reminder to file his return of income for the assessment years clearly mentioning that failure to do so would lead to an ex-parte assessment under Section 144 of the Act. Thereafter, upon filing of written submissions by the assessee, notice under Section 142(1) of the Act dated 25.06.2001 was issued for the Assessment Year 1995-1996 alongwith final show cause fixing compliance for hearing dated 09.07.2001. The assessee sought for an adjournment which was not granted and the assessments were completed ex-parte under Section 144 of the Act raising a tax demand of Rs.2,45,87,625/- and Rs.6,32,972/- for Assessment Years 1995-96 and 1996-97, respectively by orders dated 09.07.2001 and 28.03.2001, respectively. Further,
Page 3 JUDGMENT 3 penalty proceedings under Section 271(1)(c) of the Act were also initiated for both Assessment Years.
The assessee approached the Writ Court in Writ Petition(c) Nos. 31 and 38 of 2001 challenging the aforesaid notices issued under Section 148, dated 26.05.1998 and 30.03.2000 and the subsequent assessment orders, dated 09.07.2001 and 28.03.2001. The issue raised before the Writ Court was whether the income of the non-Sikkimese residing in Sikkim is taxable under the Act. The said question was referred to a Committee for its consideration and the Writ Petition was disposed of as withdrawn with the direction to maintain status quo in the matter till the declaration of final decision by the Committee, by order dated 21.07.2005. In the meanwhile, Section 10 (26AAA) of the Act was inserted by Section 4 of the Finance Act, 2008 whereby certain income accruing or arising to a Sikkimese individual was exempted from tax. Thereafter, Central Board of Direct Taxes (for short ‘the Board’) issued Instruction No. 8 dated 29.07.2008 in respect of tax liability of the income accruing or arising to a non-Sikkimese individual residing in Sikkim. In the light of the aforesaid amendment and instruction, the Writ Court by order dated 15.07.2009 reiterated the earlier order dated 21.07.2005 and granted liberty to parties to approach the Writ Court or any other competent authority/forum for redressal of their grievances arising out of the matter.
It is in the aforesaid backdrop that the assessing authority has passed the assessment order against the assessee confirming the
Page 4 JUDGMENT 4 earlier notices issued for Assessment Years 1995-1996 and 1996-1997 respectively and held that the assessee is liable to pay the income tax as demanded by demand notice dated 11.12.2009. 8. Aggrieved by the aforesaid, the assessee instead of exhausting the statutory remedy available under the Act, i.e., statutory appeal before the Statutory Appellate Authority (Commissioner of Income Tax (Appeals)) has approached the High Court under Article 226 of the Constitution of India. Suffice it is to notice here that the Writ Court has delved into the merits of the case and thought it fit to quash the order of the assessing authority dated 11.12.2009, by judgment and order dated 05.10.2010. 9. Being aggrieved by the aforesaid judgment and order of the Writ Court, the Revenue is before us in this appeal questioning the correctness or otherwise of the impugned judgment and order.
We have heard Shri Gaurab Banerjee, learned Additional Solicitor General appearing for the appellants and Shri Ganesh, learned Senior Counsel for the respondent.
Shri Gaurab Banerjee would submit that the Writ Court was not justified in entertaining the Writ Petition since the assessee has invoked its juri iction under Article 226 of the Constitution of India despite the availability of an equally efficacious alternate remedy under the Act and therefore, the Writ Court ought not to have interfered with the notices issued under Section 148 of the Act, the re-assessment order passed by the assessing authority and the
Page 5 JUDGMENT 5 consequential demand notices issued thereon.
Au contraire, Shri Ganesh would support the impugned judgment and order of the High Court.
We have considered the rival contentions made by the learned counsel for the parties to the lis.
In the instant case, the only question which arises for our consideration and decision is whether the High Court was justified in interfering with the order passed by the assessing authority under Section 148 of the Act in exercise of its juri iction under Article 226 when an equally efficacious alternate remedy was available to the assessee under the Act.
Before discussing the fact proposition, we would notice the principle of law as laid down by this Court. It is settled law that non-entertainment of petitions under writ juri iction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. Undoubtedly, it is within the discretion of the High Court to grant relief under Article 226 despite the existence of an alternative remedy. However, the High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary
Page 6 JUDGMENT 6 juri iction under Article 226. (See: State of U.P. vs. Mohammad Nooh, AIR 1958 SC 86; Titaghur Paper Mills Co. Ltd. vs. State of Orissa, (1983) 2 SCC 433; Harbanslal Sahnia vs. Indian Oil Corpn. Ltd., (2003) 2 SCC 107; State of H.P. vs. Gujarat Ambuja Cement Ltd., (2005) 6 SCC 499).
The Constitution Benches of this Court in K.S. Rashid and Sons vs. Income Tax Investigation Commission, AIR 1954 SC 207; Sangram Singh vs. Election Tribunal, Kotah, AIR 1955 SC 425; Union of India vs. T.R. Varma, AIR 1957 SC 882; State of U.P. vs. Mohd. Nooh, AIR 1958 SC 86 and K.S. Venkataraman and Co. (P) Ltd. vs. State of Madras, AIR 1966 SC 1089 have held that though Article 226 confers a very wide powers in the matter of issuing writs on the High Court, the remedy of writ absolutely discretionary in character. If the High Court is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere, it can refuse to exercise its juri iction. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted. (See: N.T. Veluswami Thevar vs. G. Raja Nainar, AIR 1959 SC 422; Municipal Council, Khurai vs. Kamal Kumar, (1965) 2 SCR 653; Siliguri Municipality vs. Amalendu Das, (1984) 2 SCC 436; S.T. Muthusami vs. K. Natarajan, (1988) 1 SCC 572; Rajasthan SRTC vs. Krishna Kant, (1995) 5 SCC 75; Kerala SEB vs. Kurien E. Kalathil, (2000) 6 SCC 293; A. Venkatasubbiah Naidu vs. S. Chellappan, (2000) 7 SCC 695; L.L. Sudhakar Reddy vs. State of A.P., (2001) 6 SCC 634; Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha vs. State of Maharashtra, (2001) 8 SCC 509; Pratap observed as follows:
“12. In Thansingh Nathmal v. Supdt. of Taxes, AIR 1964 SC 1419 this Court adverted to the rule of self-imposed restraint that the writ petition will not be entertained if an effective remedy is available to the aggrieved person and observed: (AIR p. 1423, para 7). “7. … The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming juri iction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another juri iction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up.”
In Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 this Court observed: (SCC pp. 440-41, para 11) “11. … It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford, 141 ER 486 in the following passage: (ER p. 495) ‘… There are three classes of cases in which a liability may be established founded upon a statute. … But there is a third class viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. … The remedy provided by the
Page 8 JUDGMENT 8 statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to.’ The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspapers Ltd., 1919 AC 368 and has been reaffirmed by the Privy Council in Attorney General of Trinidad and Tobago v. Gordon Grant and Co. Ltd., 1935 AC 532 (PC) and Secy. of State v. Mask and Co., AIR 1940 PC 105 It has also been held to be equally applicable to enforcement of rights, and has been followed by this Court throughout. The High Court was therefore justified in dismissing the writ petitions in limine.”
In Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536 B.P. Jeevan Reddy, J. (speaking for the majority of the larger Bench) observed: (SCC p. 607, para 77) “77. … So far as the juri iction of the High Court under Article 226—or for that matter, the juri iction of this Court under Article 32—is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their juri iction consistent with the provisions of the enactment.”” (See: G. Veerappa Pillai v. Raman & Raman Ltd., AIR 1952 SC 192; CCE v. Dunlop India Ltd., (1985) 1 SCC 260; Ramendra Kishore Biswas v. State of Tripura, (1999) 1 SCC 472; Shivgonda Anna Patil v. State of Maharashtra, (1999) 3 SCC 5; C.A. Abraham v. ITO, (1961) 2 SCR 765; Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433; H.B. Gandhi v. Gopi Nath and Sons, 1992 Supp (2) SCC 312; Whirlpool Corpn. v.