MAKUM TEA CO. (INDIA) LTD. v. DEPUTY COMMISSIONER OF INCOME TAX & ANR.
Civil Rule No. 3015 of 1993, decided on September 2, 1998.
HIGH COURT OF GAUHATI
Dr. A. K. Saraf & K. K. Gupta, for the Petitioner : G. K. Joshi & B. J. Talukdar, for the Respondents
D. BISWAS, J. :
The petitioner, Makum Tea Company (India) Ltd., is a limited company and is an assessee under the IT Act, 1961. In this writ petition, the petitioner-company has challenged the order dt. 19th March, 1993 (Annexure-II), issued under section 143(1) (a) of the IT Act, 1961, demanding income-tax and gl additional tax for the asst. yr. 1992-93 and the order dt. 10th June, 1993, in purported exercise of powers under section 154 of the Act refusing to rectify the mistakes so far y, as interest on deposit and interest on loan, etc., are concerned and adding the same in the total income of the petitioner.
2. The petitioner-company submitted its return of income for the asst. yr. 1992-93 relevant to the previous year 1991-92 on 30th Dec., 1992, showing a total income of Rs. 75,61,610. The total tax including surcharge payable by the petitioner-company amounted to Rs. 39,13,134. In addition a sum of Rs. 1,96,656 was also payable on account of interest under section 234B and section 234C of the Act. Accordingly, the petitioner-company has paid a total sum of Rs. 41,09,790. The petitioner-company also furnished a detailed computation of taxable income for the year ended on 31st March, 1992, along with the return of income indicating the depreciation allowable, additions made to the fixed assets during the year 1992, amounts disallowable under section 43B, profit on gl sale of investment, shares and lease, etc. In the purported exercise of powers under section 143(1) (a), the first respondent gl added certain income mentioned in Para. 5 of the writ petition and determined the total income at Rs. 1,34,47,568 and levied the total tax payable at Rs. 60,51,403. The first respondent also determined surcharge payable at Rs. 9,07,710 and an additional tax under section 143 (1A) of the Act amounting gl to Rs. 9,09,196. After adjustment of the amount already paid by the petitioner-company, a net amount of Rs. 47,82,173 was determined as payable. The petitioner-company filed a petition for rectification of the mistake apparent on the face of record under the provisions of section 154 of the IT gl Act, 1961. In the said petition (Annexure-III), it was pointed out that the addition made by respondent No. 1 as pointed out in para. 5 of the written statement resulted in double taxation. It was indicated in the said petition that at p. 11 of the balance sheet, the amount of Rs. 4,18,20,484 shown as profit before taxation includes other income of Rs. 1,68,33,032 and the break-up of which is available in schedule 14 (p 18) of the balance sheet shows that the other income amounting to Rs. 1,68,33,032 also includes the income which has been added back. It was further pointed out that the mistake is apparent on the face of the record and this is required to be rectified, and till such rectification is made, the tax demand of Rs. 47,82,173 may be stayed.
The petition filed by the petitioner-company was disposed of by an order dt. 10th June, 1993 (annexure IV). By the said order, respondent No. 1 rectified certain other mistakes except the interest on deposit and interest on loan. Accordingly, after making necessary computation, a sum of Rs. 35,22,340 was determined as payable on account of income-tax inclusive of additional tax and interest due for the asst. yr. 1992-93. The addition of various incomes with the total income in purported exercise of powers under section 143(1) (a) of the Act has been challenged by the gl petitioner-company on the ground that it was beyond the jurisdiction of respondent No. 1.
3. I have heard Dr. A. K. Saraf, learned counsel appearing for the petitioner-company, and Mr. G. K. Joshi, learned counsel for the Revenue.
4. Dr. Saraf submits that the respondents acted beyond their jurisdiction in adding the amount of interest on deposit and interest on loan as those were not income from other sources. Dr. Saraf also questioned the powers of the respondents under section 143(1) (a) of the Act to make gl adjustment of the income derived from interest on deposit which is already included in the income from other sources which has been included in the other income of Rs. 1,68,33,032. The purported exercise of powers under section 143(1) (a) of the Act has been assailed as beyond the gl jurisdiction of respondent No. 1 inasmuch as no deduction, allowance or relief for loss carried forward was claimed by the petitioner-company in the return and this rules out the scope of prima facie adjustment of the income.
5. It would appear from the provisions of cl. (iii) of the proviso to section 143(1) (a) of the Act that the powers vested gl therein will come into operation only when any loss carried forward, deduction, allowance or relief has been claimed in the return, which, on the basis of the information available in such return, accounts or documents annexed to the return, are prima facie inadmissible. From the intimation (Annexure-II) sent by respondent No. 1, it cannot be said that such deduction, allowance or relief or loss carried forward was claimed by the petitioner-company in the return. In view of this, it would appear that the question of making prima facie adjustment in the income of the petitioner-company does not arise.
6. Mr. Joshi, learned standing counsel for the respondents, submitted that there being provision of appeal against an order passed under section 154 of the Act, this petition under gl Art. 226 of the Constitution does not lie. He further submitted that the amounts added back are prima facie not acceptable and this is a disputed matter which cannot be adjudicated properly in exercise of writ jurisdiction. In support of his argument, he referred to two decisions reported in Titaghur Paper Mills Co. Ltd. vs. State of Orissa (1983) 34 CTR (SC) 393 : (1983) 142 ITR 663 (SC) and Santosh Kumar vs. Central Warehousing Corporation AIR 1986 SC 1164.
7. In Titaghur Paper Mills (supra), the Supreme Court held as follows :
“Under the scheme of the Act, there is a hierarchy of authorities before which the petitioners can get adequate redress against the wrongful acts complained of. The petitioners have the right to prefer an appeal before the prescribed authority under sub-section (1) of section 23 of the Act. gl If the petitioners are dissatisfied with the decision in the appeal, they can prefer a further appeal to the Tribunal under sub-section (3) of section 23 of the Act, and then ask for a gl case to be stated upon a question of law for the opinion of the High Court under section 24 of the Act. The Act provides for gl a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Art. 226 of the Constitution. 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 Water Works Co. vs. Hawkesford (1859) 6 CB (NS) 336 at page 356 in the following passage :
‘There are three classes of cases in which a liability may be established founded upon 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 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 vs. London “Express” Newspaper Ltd. (1919) AC 368 (HL) and has been reaffirmed by the Privy Council in Attorney-General of Trinidad & Tobago vs. Gordon Grant & Co. (1935) AC 532 (PC) and Secretary of State vs. Mask & 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.”
8. In addition to the aforesaid judgment, we may refer to the decision in Santosh Kumar (supra). In para 4 of the judgment, the Supreme Court while dealing with the provisions of the Land Acquisition Act, 1894, made the following observation (p. 1166) :
“In our view there cannot be any possible doubt that the scheme of the Act is that, apart from fraud, corruption or collusion, the amount of compensation awarded by the Collector under section 11 of the Act may not be questioned in gl any proceeding either by the Government or by the company or local authority at whose instance the acquisition is made. Sec. 50(2) and section 25 lead to that inevitable conclusion. Surely what may not be done under the provisions of the Act may not be permitted to be done by invoking the jurisdiction of the High Court under Art. 226. Art. 226 is not meant to avoid or circumvent the processes of the law and the provisions of the statute. When section 50(2) expressly bars the nc company or local authority at whose instance the acquisition is made from demanding a reference under section 18 of the Act, nc notwithstanding that such company or local authority may be allowed to adduce evidence before the Collector, and when section 25 expressly prohibits the Court from reducing the nc amount of compensation while dealing with the reference under section 18, it is clearly not permissible for the company nc or local authority to invoke the jurisdiction of the High Court under Art. 226 to challenge the amount of compensation awarded by the Collector and to have it reduced.”
In Titaghur Paper Mill’s case (supra), the Supreme Court laid down the ratio while dealing with the powers of the taxing officer under the Orissa Sales-tax Act, 1947, and the Central Sales-tax Act, 1956.
In Santosh Kumar’s case (supra), the Supreme Court laid down the ratio on consideration of the provisions of the Land Acquisition Act, 1894.
9. To counter the above views laid down by the Supreme Court in the circumstances of those two cases which are virtually different from the facts of the case at hand, Dr. Saraf has relied upon the decisions of the Bombay High Court in Khatau Junkar Ltd. vs. K. section Pathania (1992) 102 CTR (Bom) 194 : (1992) 196 ITR 55 (Bom) and in Indian Rayon and Industries Ltd. vs. J. R. Kanekar, Asstt. CIT (1992) 108 CTR (Bom) 384 : (1993) 200 ITR 747 (Bom) : TC 10R.336 along with other decisions.
10. In Khatau Junkar Ltd. vs. K. section Pathania (supra), a Division Bench of the Bombay High Court dealt with a matter similar to the one at hand and enunciated the following proposition of law :
“(i) that, in the present case, when, by a unilateral act, without giving any hearing to the assessee, the ITO had disallowed the claims by going beyond the return and the documents annexed to it, the remedy by way of writ could not be challenged on the ground of an alternative remedy, such as a rectification under section 154 which could not correct nc substantive errors or a revision under section 264 being now nc made available to the aggrieved person. These could not be considered as efficacious remedies in the present circumstances. Hence, the remedy under Art. 226 of the Constitution was not barred.”
11. In Indian Rayon’s case (supra), the ratio laid down by the Bombay High Court is that when the AO travels beyond the
scope of powers of section 143 (1) (a), particularly cls. (i), nc (ii) and (iii) appended to the first proviso thereto, the exercise carried out by the AO in the garb of adjustment under section 143 (1) (a) was wholly beyond his jurisdiction and nc as such the adjustment is impermissible under the first proviso to section 143 (1)(a). This conclusion led the Bombay nc High Court to hold that the alternative remedy available under section 154 and section 264 of the Act could not be considered as efficacious remedies in the present circumstances. In this context it was further held that the remedy under Art. 226 of the Constitution is not barred.
12. In the instant case also the AO has made adjustment as stated in Para. 5 of the writ petition without giving any opportunity of hearing to the petitioner-company and the amounts added back to the total income and disallowances made cannot be said to be within the purview of the provisions of cl. (iii) of section 143 (1)(a). In my opinion, the on addition of the amount on account of interest on loan and interest on deposit is not justified. Instead, the AO could have proceeded to make final assessment under the provisions of section 143 (2) for the purpose of notice and section 143 (3), for the purpose of assessment to set at rest the dispute at the initial stage after giving proper opportunity to the assessee-company to explain their stand. In my view, the impugned order, i.e., the intimation (Annexure-II) and the order (Annexure-IV), passed under section 154 of the IT Act refusing to correct the error have to be set aside.
Accordingly, the intimation (Annexure-II) under section 143 (1) (a), and the order (Annexure-IV) under section 154 of the Act are hereby set aside. However, it is made clear that the respondents may take recourse to any other provision of the Act to deal with the situation.
In the result, the petition is disposed of with the observation made above. The parties are to bear their own costs.