Mmg Constructions Llp vs Union Of India
2021 Latest Caselaw 5988 Kant

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     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

      DATED THIS THE 13TH DAY OF DECEMBER, 2021

                       PRESENT

          THE HON'BLE MRS. JUSTICE S.SUJATHA

                          AND

     THE HON'BLE MR. JUSTICE S.VISHWAJITH SHETTY

          WRIT PETITION No.21638/2021 (T-IT)

BETWEEN:

MMG CONSTRUCTIONS LLP
617, FIRST FLOOR,
NEW KANTHARAJA, URS ROAD,
CHAMARAJA MOHALLA,
KUVEMPUNAGAR,
MYSURU 560 023.
THROUGH ITS MANAGING PARTNER
MR. JAYARAMU
S/O RAMEGOWDA,
AGED ABOUT 41 YEARS,
OCCUPATION: SERVICE,
R/AT -09, MMG PRADISE,
SY. NO.117/1A1, OLD 117/1,
SRIRAMPURA MYSORE-570 008.               ... PETITIONER

(BY SRI.I.P.BANSAL, ADV. FOR SRI. B.S.BALACHANDRAN,
ADV.)

AND:

1.      UNION OF INDIA
        THROUGH THE SECRETARY,
        MINISTRY OF FINANCE,
        NORTH BLOCK,
        NEW DELHI 110 001.

2.      CENTRAL BOARD OF DIRECT TAXES,
        SECRETARIAT BUILDING,
        DEPARTMENT OF REVENUE,
        NORTH BLOCK,
        NEW DELHI-110 001.
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     REP. BY ITS - CHAIRPERSON.

3.   THE ASSISTANT COMMISSIONER OF INCOME TAX,
     CIRCLE 1(1) AND TPS,
     ROOM NO.113, 1ST FLOOR,
     REAC, MYSORE REAC,
     MYSURU 570 008,
     KARNATAKA.

4.   ADDITIONAL/JOINT/DEPUTY/ASSISTANT
     COMMISSIONER OF INCOME TAX/ INCOME-TAX
     OFFICER,
     NATIONAL FACELESS ASSESSMENT CENTRE,
     ROOM NO.401, 2ND FLOOR,
     E -RAMP, JAWAHARLAL NEHRU STADIUM,
     DELHI 110 003.

5.   COMMISSIOENR OF INCOME TAX
     (NAFAC)-1, NEW DELHI,
     NATIONAL FACELESS ASSESSMENT CENTRE,
     ROOM NO.401, 2ND FLOOR, E-RAMP,
     JAWAHARALAL NEHRU STADIUM,
     DELHI 110 003.                ... RESPONDENTS

(BY SRI H.SHANTHI BHUSHAN, ASG FOR R1;
    SRI K.V.ARAVIND, ADV. FOR R2 TO 5)

      THIS WRIT PETITION IS FILED UNDER ARTICLE 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
DECLARE THAT PROVISIONS OF SUB-SECTION (8) OF
SECTION 144B OF THE IT ACT ARE UNCONSTITUTIONAL.
QUASH THE LETTER DATED 29.09.2021 ISSUED BY THE R3 IN
DIN    AND    LETTER    NO.   ITBA/AST/   /F/17/2021-
22/1036001532(1)(ANNEXURE-E) TO ASSUME JURISDICTION
ON THE CASE OF THE PETITIONER FOR THE AY 2018-19
RELYING ON THE LETTER DATED 28.09.2021 ISSUED BY THE
R5 AS IT CIRCUMVENTS THE PROVISIONS OF SECTION
144B(1) AND SECTION 127 OF THE IT ACT.

     THIS PETITION COMING ON FOR HEARING ON
INTERLOCUTARY APPLICATION THIS DAY, S.SUJATHA J.,
MADE THE FOLLOWING:
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                        ORDER

This writ petition is directed against the

assessment order dated 29.09.2021 passed by

respondent No.3 for the assessment year 2018-19

along with the impugned demand notices issued under

Section 156, Section 274 read with Section 270A and

Section 274 read with Section 271AAC(1) of the

Income Tax Act, 1961 ("the Act", for short) inter alia

challenging the letter dated 29.09.2021 issued by

respondent No.3 (Annexure-E) to assume jurisdiction

in the case of the petitioner for the assessment year

2018-19 relying on the letter dated 28.09.2021 issued

by the respondent No.5, further seeking for a

declaration that sub-section (8) of Section 144B of the

Act is unconstitutional.

2. Learned counsel Sri.I.P.Bansal representing the

petitioner-assessee submits that the challenge made to

the provisions of sub-Section (8) of Section 144B of the

Act is not pressed. The said submission is placed on

record. As such, now the relief is restricted only to the

challenge made to the assessment order passed by

respondent No.3 and the notices issued thereof.

3. The petitioner claims to be a limited liability

partnership [LLP] firm and is a Builder, Developer and

Contractor. It transpires that for the assessment year

under consideration i.e., 2018-19, it has filed its

return of income under Section 139(4) of the Act,

which was processed under Section 143(1) of the Act.

Vide notice dated 22.09.2019 issued by the Assistant

Commissioner of Income-Tax (e-Verification) under

Section 143(2) of the Act, the petitioner was informed

that its case has been selected for scrutiny on the

issues relating to "income from real estate business"

and "investment in immovable property" and the

petitioner was instructed to further conduct the

proceedings through e-portal. Thereafter by letter

dated 15.10.2020 issued by the respondent No.4, the

petitoner was informed that assessment proceedings

pending in the case of the petitioner henceforth shall

be completed under Faceless Assessment Scheme,

2019, pursuant to which the notice under Section

142(1) of the Act was issued. The jurisdictional

Assessing Officer issued the notice dated 28.09.2021

under section 142(1) of the Act, calling upon the

petitioner to furnish the documents and information

on or before 29.09.2021 at 4.00 p.m.

4. It is the grievance of the petitioner that no

reasonable opportunity was provided to furnish the

reply to the notice along with the information and

documents. The assessment order was concluded on

29.09.2021 in breach of principles of natural justice.

5. Learned counsel for the petitioner placing

reliance on the judgment of the High Court of Bombay

in the case of Vodafone India Limited -vs- Union of

India1 as well as the ruling of the Hon'ble Apex Court

in the case of Magadh Sugar and Energy Limited -

vs- The State of Bihar and Others2 and the Circular

No.F.No.225/97/2021/ITA-II dated 06.09.2021

(2013) 40 Taxmann.com 545 (Bombay)

2021(5) KLT 667

submitted that the case on hand would fall under

the exception to the rule of alternative remedy for

violation of principles of natural justice. The

notice issued on 28.09.2021 was generated at

5.46 p.m. and the short notice was provided to

file objections by 29.09.2021. The petitoner -

assessee has filed its reply on 29.9.2021. The

Assessing Officer without considering the same

has proceeded to pass the impugned assessment

order under Section 143(3) of the Act, which is

accompanied with notices issued under Sections

156, 274 read with 270A and 271AAC(1) of the Act.

The status of the petitoner has been mentioned as

"non-resident" in the impugned assessment order.

Again a Corrigendum was issued on 30.09.2021

stating that assessment has been framed under

Section 144 of the Act instead of Section 143(3) of the

Act. Hence, learned counsel submits that

notwithstanding a statutory appeal filed against

the impugned assessment order, the same being in

gross violation of the principles of natural justice, the

writ petition is maintainable. However, learned

counsel undertakes before the court that the appeal

filed by him before the Commissioner of Income Tax

(Appeals) would be withdrawn subject to the

assessment order impugned is annulled by this court

and restored to the file of the Assessing Officer.

6. Learned counsel Sri.K.V.Aravind appearing for

the Revenue submits that the status of the assessee

whether resident or non-resident has resulted in

passing the impugned assessment order. However,

learned counsel is not in a position to dispute the

arguments advanced by the learned counsel for the

assessee, inasmuch as, breach of the principles of

natural justice in providing less than 24 hours time for

giving reply to the notice issued by the Assessing

Officer.

7. We have given our anxious consideration to

the arguments advanced by the learned counsel

appearing for the parties and perused the material on

record.

8. It is exfacie apparent that the notice under

Section 142(1) of the Act was issued by respondent

No.3 on 28.09.2021 calling upon the petitioner to file

his reply on or before 29.09.2021 at 04.00 p.m. The

respondent No.3 has issued the impugned letter dated

29.09.2021 addressed to the petitioner informing that

the respondent No.3 had assumed jurisdiction over the

case for concluding the assessment proceedings by

30.09.2021. Though the petitioner has submitted its

reply to the notice dated 28.09.2021 and indeed

sought some more time to file detailed

objections/additional information, the respondent

No.3 without providing reasonable opportunity to the

petitioner has proceeded to pass the impugned

assessment order dated 29.09.2021.

9. The arguments of the learned counsel

appearing for the petitoner that the objections filed by

the petitoner was not considered by the Assessing

Officer, appears to have some force. At this

juncture, it will be beneficial to refer to the judgment

of the Hon'ble Apex Court in the case of Magadh

Sugar & Energy Limited (supra), the principles of

law enunciated by the Hon'ble Apex Court is extracted

here under:

"19. . . . . .

28. The principles of law which emerge are that:

(i) The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well;

(ii) The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person;

(iii) Exceptions to the rule of alternate remedy arise where (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged;

(iv) An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily,

a writ petition should not be entertained when an efficacious alternate remedy is provided by law;"

10. Similarly in the case of Vodafone India

Limited (supra), the High Court of Bombay while

considering the show cause notice issued to the

assessee giving less than 24 hours to respond to the

show cause notice observed that the same is a flaw in

the decision making process and therefore amenable

to judicial review; it has further observed that it has

been stated times without number that Justice must

not only be done but also appear to have been done,

the non-consideration of the petitioner's response to

the notice by making it impossible to the petitoner to

file its reply for the consideration of the Assessing

Officer does cause prejudice to the petitioner leading

to palpable injustice; thus, warranting the exercise of

writ jurisdiction.

11. Ordinarily alternative remedy if not

exhausted by the assessee, a writ petition is not

maintainable, but in the exceptional circumstances as

held by the Hon'ble Apex Court in the case of Magadh

Sugar & Energy Limited (supra), violation of

principles of natural justice certainly warrants

interference. This legal principle is followed by the

Hon'ble High Court of Bombay in the case of Vodafone

India Ltd. (supra). We have no reason to differ from

the judgment of Vodafone India Ltd. (supra), since in

identical circumstances where a response was sought

by the Assessing Officer to the show cause notice,

giving less than 24 hours, it has been held to be

arbitrary resulting in palpable injustice. Thus, without

going into merits or demerits of the case, it would be

suffice in restoring the proceedins to the Assessing

Officer to provide reasonable opportunity of hearing to

the petitioner with liberty to file additional reply,

annulling the assessment order.

12. Accordingly, we set aside the assessment

order and the demand notices. The proceedings are

restored to the file of the Assessing Officer for re-

consideration.

The petitioner - assessee is at liberty to file

additional reply to the notices issued, along with

documents, if any, within a period of four weeks from

the date of receipt of the certified copy of the order.

The Assessing Officer shall consider the same in

accordance with law and conclude the assessment in

an expedite manner.

All rights and contentions of the parties are left

open.

The Writ Petition stands disposed of in terms of

the above.

All pending I.As. stand disposed of accordingly.

Sd/-

JUDGE

Sd/-

JUDGE

KNM/-