Kerala HC Declines to Interfere in S. 271D Income Tax Penalty Order; Relegates Taxpayer to Statutory Remedy [Read Order]

The Kerala High Court upheld a Single Judge's decision refusing to directly adjudicate the validity of a penalty order issued under Section 271D of the Income Tax Act, holding that the assessee's factual disputes regarding the evaluation of evidence and statutory limitation must be raised before the designated appellate authority in the first instance.

The Division Bench of Justice Devan Ramachandran and Justice Basant Balaji dismissed the writ petition with the observation that the petitioner was relegated to his alternate statutory remedy by the Single Judge and the writ jurisdiction could not be exercised at this point.

Zakkariya Raj Sabjan, the appellant, had challenged the impugned order (Ext.P5) passed by the National Faceless Assessment Centre, Delhi, before the High Court. He maintained that the penalty order was ex facie incompetent and void as it did not fulfil the required ingredients of Section 271D. The assessee submitted that the assesse was entitled to approach the High Court immediately without exhausting the statutory appellate mechanism, in view of the inherent defect in the ruling.

This submission was opposed by the Department, represented by Senior Standing Counsel Sri. Jose Joseph, by pointing out that the assessing authority had specifically recorded in the impugned order that the appellant had not discharged the preliminary onus to prove the provisions of Section 269SS of the Act. Thus the authority was statutorily obliged to commence and conclude the penalty proceedings under Section 271D.

he Division Bench concurred with the approach of the Single Judge and pointed out that the major grievances of the appellant were essentially based on factual disputes. The petitioner contended that the authority did not appreciate a statement (Ext.P4) in a proper manner before passing the penalty order. An adscititious plea was raised that the entire proceedings were barred by limitation under Section 275 of the Act.

The Court observed that these aspects, in particular the evaluation of evidence and the limitation argument, require a detailed factual appreciation by the competent statutory authority under the statutory scheme. The High Court observed that it could not substitute the statutory appellate mechanism for making a roving inquiry into disputed facts at the writ stage.

The Bench in terms of relief exercised its discretion, taking into account the procedural delay caused by the pendency of the present writ appeal before the Court. The Court dismissed the appeal outright and refused to examine the substance of the rival claims. It gave the appellant three weeks from the date of receipt of a copy of the judgement within which to lodge his statutory appeal.

In fact the Court held that all the legal and factual contentions of the appellant including those based on Sections 275 and 271D of the Income Tax Act, are emphatically kept completely open to be urged and pressed before the statutory appellate forum.

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