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Supreme Court rules on writ petitions
The Supreme Court (SC) has held that writ petitions should not be entertained when an alternative remedy is available. Taxand India investigates the case of Chhabil Dass Agarwal (taxpayer) which led to this decision.
The SC reaffirmed that writ petitions should not be entertained by the High Court (HC) under Article 226 of the Constitution of India when alternate remedies are available under the Income Tax Act (Act). It held that where a hierarchy of appeals is provided under the relevant statues, taxpayers must exhaust the statutory remedies before resorting to writ jurisdiction.
In this case, the Revenue Authorities (RA) issued a notice under section 148 of the Act for re-opening the inital assessment regarding the taxability of income arising for the non-Sikkimese taxpayer residing in Sikkim.
The taxpayer, instead of approaching the Commissioner of Income Tax Appeals, which was a statutory remedy provided under the Act, filed a writ petition challenging the re-assessment order on the ground that the proceeding was in violation of principles of natural justice as sufficient opportunity of being heard was not given. The HC entertained the writ petition, considered the merits involved in the assessment and quashed the re-assessment order. The Revenue filed a Special Leave Petition before the SC, challenging the order of the HC.
The SC had to determine whether the HC was justified in interfering with the order passed by the RA under section 147 in exercise of its jurisdiction when an equally effective alternate remedy was available to the taxpayer under the Act. The SC ruled that the HC must not interfere in a proceeding if an effective alternative remedy is available to the taxpayer. However the HC may entertain a writ if the taxpayer makes out an exceptional case warranting such interference, ie, there should be sufficient grounds to invoke the extraordinary jurisdiction, for example if there were a breach of principles of natural justice or the procedure required for the decision was not adopted.
It is a settled position in law that generally writ petitions are not maintainable when the parties have not exhausted their statutory remedies available under the Act. This ruling has reaffirmed this fundamental position on the subject of approaching the HC on a writ.
It is important to note that in this case, the taxpayer had filed a writ after the reassessment order was passed by the RA. A reassessment order passed by RA is an appealable order. An appeal can be filed against this order of reassessment. The SC has ruled that a writ should not have been entertained by the HC primarily because of this important fact pattern.