IT : Justice must not only be done but appear to be done. Allowing assesses less than 24 hours to respond to show cause notice calling upon assessee to show cause as to why claim for deduction under section 80-IA shouldn't be disallowed particularly when there is no fear of the assessment getting time barred in the near future is a flaw in the decision making process and therefore amenable to judicial review. In such circumstances, it is incumbent upon the notice issuing authority to grant reasonable opportunity to the petitioner to respond to the notice. Therefore, High Court will not refrain from quashing assessment and allowing assessee's writ petition merely because assessee has alternative remedy to appeal to CIT(Appeals)
Facts
• AO issued show cause notice(SCN) on 27-11-2013 calling upon assessee-petitioner calling on him to show cause why deduction u/s 80-IA shouldn't be disallowed.
• SCN allowed assessee time till 3.30 PM on 28-11-2013 (less than 24 hours) to make representations against proposed action of disallowance.
• AO passed assessment order on 29-11-2013 making disallowance.
• Assessee filed writ petition under article 226 to the Bombay HC making out a grievance of not being allowed reasonable opportunity to make representations and not being given personal hearing and asked for quashing of assessment.
• Revenue opposed petition on the grounds that alternate remedy of appeal to CIT(A) available to assessee.
Held
• Non-exercise of HC's writ jurisdiction in case of availability of an alternative remedy is a self imposed restriction based upon convenience and discretion rather then a rule of law.
• In appropriate cases where there is a serious flaw in the decision making process or prejudice is caused to a party on account of breach of natural justice, HC is enjoined upon to exercise its writ jurisdiction.
• In fact non exercise of writ jurisdiction in appropriate cases would amount to abdication of HC's obligation to ensure that justice is done.
• Therefore the availability of an alternative remedy would not by itself bar the exercise of HC's writ jurisdiction, if the facts of the case so deserve.
• Denial of benefit under Section 80-IA of the Act was upon various grounds such as date of commencement of business and fulfilling eligibility criteria, etc under Section 80-IA of the Act.
• However, the petitioner was given less then 24 hours to respond to the show cause notice i.e. before 3.30 p.m. on 28 November 2013.
• The contention of the Revenue that there was no breach of natural justice inasmuch as opportunity had been granted to the petitioner earlier to furnish evidence by granting them personal hearing and the petitioner had failed to furnish any evidence.
• This may not be so in the present facts for the reason that if the petitioner had already been given sufficient opportunity and the petitioner had failed to lead the appropriate evidence then there was no occasion for the Assessing officer to have issued the Show cause notice dated 28 November 2013 calling upon the petitioner to show cause why its claim for deduction under Section 80-IA should not be disallowed. In fact the issue of show cause notice on 27 November 2013 is itself an admission of the fact that up to the date of the issue of the notice the Assessing Officer was not certain about disallowing or allowing the claim of the petitioner for deduction under Section 80-IA of the Act.
• Once the Assessing Officer has called upon the petitioner to show cause why its claim for deduction under Section 80-IA of the Act should not be disallowed, then a reasonable opportunity of filing its reply should be made available to the noticee of the show cause notice i.e. petitioner.
• In this case, less then 24 hours period is granted to the petitioner to respond to the notice, particularly when there is no fear of the assessment getting time barred in the near future.
• In such circumstances, it is incumbent upon the notice issuing authority to grant reasonable opportunity to the petitioner to respond to the notice.
• In fact, granting of an opportunity to respond to the show cause notice in less then 24 hours is a flaw in the decision making process and therefore amenable to judicial review.
• It has been stated times without number that Justice must not only be done but also appear to have been done. The non consideration of the petitioner's response to the notice by making it impossible to the petitioner to file its reply for the consideration of the Assessing Officer does cause prejudice to the petitioner leading to palpable injustice. Thus warranting the exercise of writ jurisdiction.
• Impugned assessment order dated 29-11-2013 quashed and set aside and assessment remanded to AO to pass fresh assessment order.
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[2013] 40 taxmann.com 545 (Bombay)
HIGH COURT OF BOMBAY
Vodafone India Ltd.
v.
Union of India
Mohit S. Shah, CJ.
M.S. SANKLECHA, J.
M.S. SANKLECHA, J.
Writ Petition (L) No. 3359 of 2013
DECEMBER 24, 2013
Percy Pardiwala and N.S. Thakkar for the Petitioner. Mrs. S.V. Bharucha for the Respondent.
ORDER
Per Court - At the instance and request of Counsel for both the sides, petition is taken up for final disposal at the stage of admission.
2. By this Petition under Article 226 of the Constitution of India, the order of Assessment dated 29 November 2013 passed by the Assessing Officer under Section 143(3) read with Sections 263 and 254 of the Income Tax 1961 (the Act) passed for Assessment Year 2005-06 is being challenged. The primary challenge to the impugned order dated 29 November 2013 is that the same has been passed in breach of principles of natural justice i.e. absence of fair opportunity of making a representation and in total defiance of the orders dated 18 September 2012 and 3 April 2013 passed by of the Income Tax Appellate Tribunal (the Tribunal).
3. Briefly, the facts leading to this petition are :-
| (a) | On 5 October 2005 the petitioner filed its return of income for the Assessment Year 2005-06 declaring its total income at Nil. The petitioner had arrived at Nil income by having claimed deduction of Rs.307.93 Crores under Section 80IB of the Act from its total income. However, the Assessing Officer by an order dated 3 September 2007 passed under Section 143(3) of the Act while accepting the claim for deduction under Section 80IB of the Act, determined the book profits of the petitioner at Rs.348.58Crores as against Rs.317.78 Crores declared by the petitioner for the purposes of Minimum Alternate Tax; | |
| (b) | On 11 November 2009, the Commissioner of Income Tax issued a notice to the petitioner in exercise of its power of revision under Section 263 of the Act contending that the Assessment Order dated 3 September 2007 of the Assessing Officer was erroneous and prejudicial to the interest of revenue to the extent it allowed deduction to the petitioner under Section 80IA of the Act. After hearing the petitioner, the Commissioner of Income Tax in exercise of its power under Section 263 of the Act passed an order dated 30 March 2010 denying the petitioner's claim for deduction under Section 80IA of the Act. This was essentially on the basis of the draft assessment for the Assessment Year 2006-07 which was subsequently confirmed by the Disputes Redressal Panel by its order dated 4 February 2011; | |
| (c) | Being aggrieved by the order dated 30 March 2010, the petitioner filed an appeal to the Tribunal. On 18 September 2012, the appeal filed by the petitioner was dismissed thus upholding the exercise of power of Revision under Section 263 of the Act. However, the Tribunal in its order dated 18 September 2012 directed the Assessing Officer to decide the issue of the petitioner's entitlement to its claim for deduction under Section 80IA of the Act without being in any manner influenced by the observations made in the order dated 30 March 2010 of the Commissioner of Income Tax or by the observations/findings made in the assessment order made under Section 143(3) of the Act for Assessment year 2006-2007; | |
| (d) | In the mean time, pending disposal of the petitioner's appeal to the Tribunal against the order of the Commissioner of Income Tax dated 30 March 2010, the Assessing Officer passed an order dated 30 December 2010 of assessment for Assessment year 2005-2006 in- consequence of the order dated 30 March 2010 passed by the Commissioner of Income Tax under Section 263 of the Act. In the order dated 30 December 2010, the Assessing Officer disallowed the entire claim of the petitioner for deduction under Section 80IA of the Act; | |
| (e) | Being aggrieved by the order of assessment dated 30 December 2010, the petitioner filed an appeal to the Commissioner of Income Tax(Appeals). By an order dated 13 October 2011 the Commissioner of Income Tax(Appeals)dismissed the petitioner's appeal. Consequent to the above dismissal, the petitioner filed an appeal to the Tribunal. The Tribunal by its order dated 3 April 2013 took note of the fact that by its earlier order dated 18 September 2012 in an appeal filed from the order dated 30 March 2010 passed under Section 263 of the Act, while dismissing the petitioner's appeal, had specifically directed the Assessing Officer to consider the petitioner's claim for deduction under Section 80IA of the Act being uninfluenced by the observations either in the order dated 30 March 2010 of the Commissioner of Income Tax or by the order of assessment of the Assessing Officer for the Assessment year 2006-2007. In view of the above, the Tribunal set aside the order dated 30 December 2010 of the Assessing Officer holding that it is entirely based on the finding of the Commissioner of Income Tax under Section 263 of the Act and on the finding recorded in respect of the order of assessment relating to the Assessment Year 2006-07. Thus, the Assessment Order was held to be contradictory to the directions of the Tribunal's order dated 18 September 2012. Accordingly, the order of the Assessing Officer was set aside and the matter restored to the Assessing Officer for de-novo adjudication for the Assessment Year 2005-06 after following the principal of natural justice; | |
| (f) | Consequent to the above, the Assessing Officer issued a notice dated 7 August 2013 calling upon the petitioner to submit necessary evidence in support of its claim for deduction under Section 80IA of the Act. In response, the petitioner filed various replies, wherein they submitted their claim for deduction under Section 80IA of the Act, both on factual as well as legal grounds; | |
| (g) | Apparently not satisfied with the replies of the petitioner on 27 November 2013, the Assessing Officer issued a show cause notice to the petitioner in respect of the Assessment for the Assessment Year 2005-06 and called upon the petitioner to explain with sufficient documentary evidence its claim for deduction under Section 80IA of the Act. The petitioner was called upon to furnish its reply to the above show cause notice on or before 3.30 p.m. on 28 November 2013. | |
| (h) | We are informed that the petitioner filed the necessary details in the form of compilation of documents on 29 November 2013.However, to its shock, the petitioner received an order dated 29 November 2013, after it had filed its reply, denying it the benefit of its claim for deduction under Section 80IA of the Act. |
4. Mr. Percy Pardiwala, Senior Counsel in support of the petition submits :-
| (a) | The Assessing Officer issued a show cause notice on 27 September 2013, seeking to deny the benefit of deduction claimed by the petitioner under Section 80IA of the Act and sought a response to the same by 3.30 p.m. on 28 November 2013. This was a very short time to file its reply along with evidence. Nevertheless the petitioner had filed its reply/evidence/submissions in the form of compilation on 29 November 2013. However, the Assessing Officer without having considered the reply has passed a 76 page order on 29 November 2013. Thus, the petitioner did not get sufficient time to respond to the notice and this was a breach of principles of natural justice; and | |
| (b) | In any event, on merits also the impugned order dated 29 November 2013 of the Assessing Officer is in breach of the directions of the Tribunal as contained in the Tribunal orders dated 18 September 2012 and 3 April 2013 wherein the Assessing Officer has been directed to pass an order without being influenced by the observations made in the order dated 30 March 2010 of the Commissioner of Income Tax under Section 263 of the Act as also the Assessment Order passed for the Assessment Year 2006-07. |
However, the impugned Assessment Order denies the petitioner its claims for deduction under Section 80IA of the Act by relying upon the finding in the both the aforesaid orders.
5. As against the above, Mrs. Bharucha, Counsel appearing for the revenue in support of the impugned order submits:-
| (a) | In case the petitioner is aggrieved by the impugned order dated 29 November 2013 of the Assessing Officer, it has an alternative remedy of appeal provided under the Act to the Commissioner of income Tax(Appeals). In view of the above, this petition should not be entertained and the petitioner be directed to avail of the statutory remedy of appeal; | |
| (b) | There has been no breach of natural justice inasmuch as the notice dated 27 November 2013, calling upon the petitioner to show cause why their claim for deduction under Section 80IA of the Act should not be disallowed itself refers to the fact that the petitioner had been afforded sufficient opportunities to present its case over a longer period including the grant of personal hearing, yet nothing was brought on record to by the petitioner to support its claim for deduction under Section 80IA of the Act. In that view of the matter, there has been no breach of natural justice as sufficient opportunity to present its claim had been granted to the petitioner; and | |
| (c) | The alleged grievance of the petitioner that the impugned Assessment Order dated 29 November 2013 has been passed in defiance of the orders dated 18 September 2012 and 3 April 2013 of the Tribunal could be considered by the Appellate Authority, constituted under Act viz. Commissioner of Income tax(Appeals) to which the petitioner can file the appeal. Therefore there is no reason to entertain this petition. |
6. We have considered the rival submissions. Normally, we would not entertain a petition under Article 226 of the Constitution of India where an alternative remedy in the form of appeal is provided in the statute. In the present case, the order of the Assessment dated 29 November 2013 is an order from which an appeal would lie under Section 246-A of the Act to the Commissioner of Income Tax (Appeals). However this non exercise of our writ jurisdiction in case of availability of an alternative remedy is a self imposed restriction based upon convenience and discretion rather then a rule of law. In appropriate cases where there is a serious flaw in the decision making process or prejudice is caused to a party on account of breach of natural justice, we are enjoined to exercise our writ jurisdiction. In fact non exercise of our writ jurisdiction in appropriate cases would amount to abdication of our obligation to ensure that justice is done. Therefore the availability of an alternative remedy would not by itself bar the exercise of our writ jurisdiction, if the facts of the case so deserve.
7. In the present case, we find that a show cause notice was issued to the petitioner on 27 September 2013, calling upon the petitioner to show cause why its claim for deduction under Section 80IA of the Act should not be disallowed. This denial of benefit under Section 80IA of the Act was upon various grounds such as date of commencement of business and fulfilling eligibility criteria, etc under Section 80IA of the Act. However, the petitioner was given less then 24 hours to respond to the show cause notice i.e. before 3.30 p.m. on 28 November 2013. The contention of the revenue that there was no breach of natural justice inasmuch as opportunity had been granted to the petitioner earlier to furnish evidence by granting them personal hearing and the petitioner had failed to furnish any evidence. This may not be so in the present facts for the reason that if the petitioner had already been given sufficient opportunity and the petitioner had failed to lead the appropriate evidence then there was no occasion for the Assessing officer to have issued the Show cause notice dated 28 November 2013 calling upon the petitioner to show cause why its claim for deduction under Section 80IA should not be disallowed. In fact the issue of show cause notice on 27 November 2013 is itself an admission of the fact that up to the date of the issue of the notice the Assessing Officer was not certain about disallowing or allowing the claim of the petitioner for deduction under Section 80IA of the Act. We find that once the Assessing Officer has called upon the petitioner to show cause why its claim for deduction under Section 80IA of the Act should not be disallowed, then a reasonable opportunity of filing its reply should be made available to the noticee of the show cause notice i.e. petitioner. In this case, less then 24 hours period is granted to the petitioner to respond to the notice, particularly when there is no fear of the assessment getting time barred in the near future. In such circumstances, it is incumbent upon the notice issuing authority to grant reasonable opportunity to the petitioner to respond to the notice. In fact, granting of an opportunity to respond to the show cause notice in less then 24 hours is a flaw in the decision making process and therefore amenable to judicial review. It has been stated times without number that Justice must not only be done but also appear to have been done. The non consideration of the petitioner's response to the notice by making it impossible to the petitioner to file its reply for the consideration of the Assessing Officer does cause prejudice to the petitioner leading to palpable injustice. Thus warranting the exercise of our writ jurisdiction.
8. On the above limited ground alone, we set aside the impugned order dated 29 November 2013 passed in breach of natural justice which is a result of a serious flaw in the decision making process. However in the present facts, we restore the matter to the Assessing Officer for fresh disposal after considering the petitioner's reply dated 29 November 2013(which has already been submitted) and granting the petitioner a personal hearing. Therefore we have not examined the other contention of the petitioner that the impugned order is bad as it failed to follow the binding directions contained in the orders dated 18 September 2012 and 3 April 2013 of the Tribunal. However there can be no dispute that the Assessing Officer is bound to follow the directions contained in the orders of a higher forum i.e. the Tribunal in this case which it gave while remanding the matter to the Assessing officer to pass a fresh order on de novo adjudication.
9. In view of the above, we pass the following order:-
| (i) | The impugned Assessment order dated 29 November 2013 (Ex. F) for Assessment year 2005-06 is quashed and set aside; | |
| (ii) | The assessment for the Assessment year 2005-06 is remanded to the Assessing Officer with a direction to take on record the submissions along with documents in the form of a compilation submitted by the petitioner on 29 November 2013 to the Assessing Officer; and | |
| (iii) | The petitioner will thereafter be given an opportunity of hearing by the Assessing Officer before passing a fresh assessment order in accordance with law, including taking into consideration the observations made by the Tribunal in its orders dated 18 September 2012 (Income Tax Appeal No.706/Chd/2010) and 3 April 2013 (Income Tax Appeal No.1172/Chandi/2011). |
10. It is clarified that we have not examined the merits of the controversy between the parties including the issue whether the impugned order has been passed on the basis of the order dated 30 March 2010 of the Commissioner of Income Tax and on the basis of the order of assessment for the Assessment year 2006-07. Therefore all contentions are kept open to be urged before and decided by the Assessing Officer in line with the directions of the order dated 18 September 2012 and 3 April 2013 of the Tribunal.
11. In order to save the time, learned Counsel for the parties agree that the petitioner will appear for a personal hearing before the Assessing Officer on 15 January 2014 at 11.00 a.m.
12. Petition disposed of in the above terms. No order as to costs.
Regards
Prarthana Jalan
__._,_.___
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