In a recent decision, the Gujarat High Court observed that it is the discretion of the Court to relegate a party to the alternative remedy at a belated stage. In the opinion of the Court, it is not an inviolable rule. The Court further given a detail discussion on the decision of the Supreme Court in Vijaybhai N.Chandrani, and held that the ratio laid down by the High Court was not been overruled by the Court. And therefore, the scope of s. 153C of the Income Tax Act, 1961 as observed by the High Court is still valid.
The petitioners challenged the assessment order passed under section 153C of the Income Tax Act on ground that the same was issued without jurisdiction since no documents were found as result of the search carried out against the assessee. The petitioners further relied upon the decision in Vijaybhai N. Chandrani vs. Assistant Commissioner of Income Tax, in which the Court the terms “belongs or belong to” a person other than a person referred to in Section 153A of the Income Tax Act, held that condition precedent for issuing notice under Section 153C of the Income Tax Act is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. In this case, the Court observed that section 153C cannot be invoked if the said requirements are not satisfied.
Opposing to the above contentions, the Revenue submitted that the Writ petition is liable to be dismissed since alternative remedy is available to the assessee under the statute. Further, it was contended that,the decision in Vijaybhai N. Chandrani, is no longer operates as a binding precedent since on appeal, the Supreme Court the Supreme Court expressed an opinion that the High Court should not have examined these aspects in a writ petition where the assessee had ample opportunity to controvert various factual aspects before the Assessing Officer and thereafter, to carry the matter in further appeal.
While analyzing the Apex Court ruling, the Court noticed two things. Firstly, the Supreme Court restricted the power of the High Court to examine the power of the Assessing Officer under section 153C. Secondly, the Court neutralized the ratio of the decision. It was noted by the Apex Court that the impugned order is set aside “without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C of the Income Tax Act.”
“The Supreme Court did not disapprove the judgment by holding that the interpretation adopted by the High Court was erroneous. It merely provided that the Assessing Officer shall proceed without being influenced by the observations made by the High Court under the said judgment. In other words, the Supreme Court freed the Assessing Officer from the obligation to be bound by the finding and the ratio of the judgment of the High Court. The simple question is, if the Assessing Officer was not bound by such judgment would the High Court in a later case continue to be so bound? The answer has to be in the negative. This is precisely the reason why, while discussing the judgement of the High Court with the reference to the facts in case of VijaybhaiN. Chandrani vs. Assistant Commissioner of Income Tax(supra), the Supreme Court also dealt with large number of other appeals arising from the same court, in which, the judgment in case of Vijaybhai N. Chandrani vs. AssistantCommissioner of Income Tax(supra) was followed. In effect therefore, the Supreme Court obliterated the effect of the ratio of the judgment of this Court in case of Vijaybhai N.Chandrani vs. Assistant Commissioner of Income Tax(supra). While doing so, the Supreme Court consciously recorded that the judgment is set aside “without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C”. In that view of the matter, the issue is once again at large before the High Court and the question would not be governed by the ratio on decision of High Court in case of Vijaybhai N. Chandrani vs. Assistant Commissioner of Income Tax(supra).”
While concluding, the Court observed that “Quite apart from this, when under similar if not identical circumstances, the Supreme Court found that the High Court ought not to have interfered in a writ petition at an early stage of issuance of notice under Section 153C of the Income Tax Act, we do not see any reason why we should not adopt the same course in the present proceedings. We agree with the suggestion of the counsel for the petitioner that writ jurisdiction under Article 226 of the Constitution is not shut out completely by the observations of the Supreme Court in case of Vijaybhai N.Chandrani (supra) or, any other judgement for that matter and exercise thereof is always a question of discretion. This would, however, not be the same thing as to suggest that in the present petition, we should not follow the line adopted by the Supreme Court in similar if not identical circumstances without there being any reason for distinction. Likewise, the question of relegating a party to the alternative remedy at a belated stage is also the question of discretion and not an inviolable rule. As a prudent exercise of discretion, the Court may not entertain a ground of alternative remedy once the petition has been admitted. This would, however, not mean that if in a given case, facts so present exhausting such remedy becomes imperative, the Court cannot chose such a course simply because the petition had already been admitted.” Accordingly, the petition was dismissed by the Court directing the petitioners avail the statutory remedy.
Read the full text of the Judgment below.
