Sanchayita Lahkar

The High Court of Sikkim Single Bench of Justice Meenakshi Madan Rai held that a writ petition challenging reassessment proceedings under the Income Tax Act is maintainable notwithstanding the availability of an appellate remedy before the tax authorities. In a petition by a company assessee against a reassessment notice and order alleging escapement of income, the Court rejected preliminary objections raised by the revenue on the ground of alternative remedy. The Bench stated that where a reassessment notice under Sections 148 and 149 is alleged to be without jurisdiction, issued beyond the prescribed time limit, or otherwise invalid, the High Court may directly examine its legality under Article 226 of the Constitution, since such a challenge goes to the very jurisdiction of the reassessment itself.

The petitioner challenged the initiation of reassessment proceedings under the Income Tax Act, 1961, after receiving a notice under Section 148A(b) dated 19-03-2022. The notice referred to three issues: deemed income under Section 115JC relating to a donation claimed under Section 80GC, determination of book profit and alleged escapement of income concerning an excise duty refund amounting to ₹22,99,92,702/-, and the charge of income of the same amount by treating the excise duty refund as a capital receipt. The petitioner responded on 26-03-2022. Thereafter, the respondent issued an order under Section 148A(d) on 27-04-2022 summarising the findings on all issues.

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The respondent raised a preliminary objection before the High Court asserting that the petitioner had an efficacious alternative remedy under Sections 246A(1)(b) and 253 of the Act and therefore could not invoke the writ jurisdiction. Reliance was placed on judgments including Anshul Jain v. Principal Commissioner of Income Tax.

The petitioner contended that no statutory remedy existed against an order under Section 148A(d), that the notice was issued beyond the period of limitation under Section 149, and that the reassessment proceedings were without jurisdiction. It was also contended that the amount relied upon by the respondent did not fall within the definition of “asset” under the Explanation to Section 149(1)(b), as it was only a deposit in the Personal Ledger Account, not a bank deposit. The petitioner relied on several decisions of the Supreme Court to argue that a writ petition is maintainable where jurisdictional questions arise and no disputed facts are involved.

The Court recorded that it was “not inclined to agree with the submission of the Learned Counsel for the Writ Petitioner that the IT Act makes no provision for appeals against an Order under Section 148A(d) of the IT Act as a reading of Section 246A(1)(b) makes such room.” It then stated that “it is now a settled position of law that the power to issue prerogative writs under Article 226 of the Constitution of India is plenary and discretionary in nature.”

Referring to Uttar Pradesh Power Transmission Corporation Ltd., the Court cited the following passage: “67. It is well settled that availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case. The High Court may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (1) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice or (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under challenge.”

The Court further quoted Godrej Sara Lee Ltd. as follows: “4. … The power to issue prerogative writs under Article 226 is plenary in nature. Any limitation on the exercise of such power must be traceable in the Constitution itself. … Article 226 does not, in terms, impose any limitation or restraint on the exercise of power to issue writs. … yet, the mere fact that the petitioner before the High Court, in a given case, has not pursued the alternative remedy available to him/it cannot mechanically be construed as a ground for its dismissal. … availability of an alternative remedy does not operate as an absolute bar to the ‘maintainability’ of a writ petition …”

After analysing these authorities, the Court recorded: “In light of the settled position of law and the questions raised before this Court by the Writ Petitioner, in my considered view, nothing prevents this Court from exercising its discretion and plenary powers provided under Article 226 of the Constitution of India to consider the matter at hand.”

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The Court directed: “In light of the settled position of law and the questions raised before this Court by the Writ Petitioner, in my considered view, nothing prevents this Court from exercising its discretion and plenary powers provided under Article 226 of the Constitution of India to consider the matter at hand. On the anvil of the foregoing discussions, the preliminary objection stands rejected and the Petition disposed of.”

Advocates Representing The Parties

For the Petitioner: Mr. Mukesh M. Patil, Senior Advocate; Mr. Anup Kumar Bhattacharjee, Advocate; Ms. Babita Kumari, Advocate.

For the Respondent: Ms. Sangita Pradhan, Deputy Solicitor General of India.

Case Title: Zydus Healthcare Ltd. vs. Assistant Commissioner of Income Tax
Case Number: WP(C) No.39 of 2022
Bench: Justice Meenakshi Madan Rai