Case Law Details
Supreme Build-Cap Pvt. Ltd Vs ACIT (Delhi High Court)
The Delhi High Court allowed the writ petition challenging the reassessment proceedings and the consequential assessment order for Assessment Year (AY) 2016-17, holding that the notice issued under Section 148 of the Income Tax Act, 1961 was barred by limitation and, therefore, without jurisdiction.
The petitioner challenged the assessment order dated 29.03.2026 on several grounds, primarily contending that the reassessment proceedings initiated through the notice dated 30.08.2024 under Section 148 were time-barred. According to the petitioner, the limitation period applicable for issuing such a notice at the relevant time was six years, making the notice invalid.
At the outset, the Revenue objected to the maintainability of the writ petition. It argued that since the petitioner had challenged an assessment order and an effective statutory appellate remedy was available, the High Court should decline to entertain the writ petition and direct the petitioner to pursue the prescribed appellate remedy.
In response, the petitioner submitted that during the reassessment proceedings, it had specifically raised the issue of limitation in its reply to the show cause notice dated 21.03.2026. However, the Assessing Officer neither considered nor decided this jurisdictional objection before passing the assessment order.
The petitioner further argued that the reassessment proceedings were barred by limitation in light of the Delhi High Court’s decision in Manju Somani v. Income Tax Officer, Ward-70(1) & Ors. dated 23.07.2024. It was contended that since the notice itself was issued beyond the prescribed limitation period, the proceedings lacked jurisdiction from the very beginning. Consequently, if the notice were declared void, the assessment order would automatically fail.
The Revenue, while responding to these submissions, was unable to provide any satisfactory explanation regarding the limitation issue. It nevertheless argued that if the petitioner was aggrieved by the initiation of reassessment proceedings, it ought to have approached the High Court before the assessment order was passed.
After hearing both parties, the High Court held that the reassessment proceedings initiated through the notice dated 30.08.2024 were fundamentally void because the notice had been issued beyond the prescribed limitation period.
The Court acknowledged that the petitioner approached the High Court after the assessment order had been passed. However, it noted that the petitioner had already raised a jurisdictional objection before the Assessing Officer during the assessment proceedings. Since this objection remained neither considered nor decided, the Court held that the petitioner should not be compelled to suffer an assessment order that was ex facie without jurisdiction merely because the proceedings had culminated in an assessment order.
The Court observed that requiring the petitioner to undergo appellate proceedings in such circumstances would amount to an unnecessary and inequitable exercise, particularly when the jurisdictional defect was evident from the record. It therefore found it appropriate to exercise its writ jurisdiction under Article 226 of the Constitution.
While arriving at this conclusion, the Court relied upon the Supreme Court’s decision in M/s Magadh Sugar Mills and Energy Limited vs. State of Bihar and Others. The judgment reiterated that although High Courts ordinarily refrain from exercising writ jurisdiction where an effective alternative remedy exists, the existence of such a remedy does not bar the exercise of writ jurisdiction in exceptional situations. These include cases involving enforcement of fundamental rights, violation of principles of natural justice, proceedings wholly without jurisdiction, or challenges to the validity of legislation. The Court also referred to the principles summarized by the Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh & Ors., emphasizing that the rule requiring exhaustion of statutory remedies is one of policy, convenience, and discretion rather than an absolute bar.
The High Court further relied upon the Supreme Court’s decision in Executive Engineer v. Seetaram Rice Mill. In that case, the Supreme Court upheld the High Court’s exercise of writ jurisdiction where the challenge related to the authority’s jurisdiction itself. The Supreme Court observed that courts should not decline to exercise jurisdiction merely because an alternative remedy exists where the proceedings appear, on their face, to be without jurisdiction. It also emphasized that the law does not compel parties to undertake futile or fruitless proceedings when the exercise of jurisdiction by the statutory authority is ex facie invalid.
Applying these principles, the Delhi High Court concluded that the reassessment notice issued under Section 148 was beyond the prescribed period of limitation and was therefore invalid. Since the reassessment proceedings were initiated on the basis of an invalid notice, the consequential assessment order also could not survive.
Accordingly, the Court quashed both the notice dated 30.08.2024 issued under Section 148 of the Income Tax Act, 1961 and the consequential assessment order dated 29.03.2026.
The writ petition was allowed, and all pending applications were dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. By way of the present writ petition, the petitioner has challenged the assessment order dated 29.03.2026 on various grounds including the basic ground that the initiation of reassessment proceedings by way of the notice dated 30.08.2024 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) for Assessment Year (AY) 2016-17 was time barred, as the limitation for issuing a notice under Section 148 of the Act of 1961 at the relevant time was only six years.
2. Mr. Ruchir Bhaita, learned Senior Standing Counsel for the respondent-Department at the outset raised an objection regarding maintainability and submitted that the petitioner has come to this Court against an assessment order and since there is a statutory remedy available, this Court should not entertain the writ petition and relegate it to avail the statutory remedy.
3. Learned counsel for the petitioner-assessee immediately responded to the preliminary objection raised by Mr. Ruchir Bhatia by submitting that during the assessment proceedings, in response to the show cause notice dated 21.03.2026, the petitioner did file a reply and raised a plea of the notice being time barred but the same was not even considered by the Assessing Officer (AO).
4. He further submitted that petitioner’s basic challenge to the impugned assessment order is, that the proceedings are time barred in light of judgment of this Court dated 23.07.2024 titled as Manju Somani v. Income Tax Officer, Ward-70(1) & Ors. in W.P.(C) 7364/2024, 2024:DHC:5411-DB and since the issue as canvassed goes to the root of the matter, this Court can well exercise its jurisdiction under Article 226 of the Constitution of India in light of the series of judgments passed by Hon’ble the Supreme Court and by this Court.
5. He argued that a simple look at the impugned notice dated 30.08.2024 shows that it is per-se beyond prescribed period of limitation and if that impugned notice is declared void and illegal for being beyond limitation, the assessment order shall definitely fall flat on the ground.
6. In response to the petitioner’s submission, Mr. Ruchir Bhatia, learned Senior Standing Counsel could not give any satisfactory explanation. He however, submitted that if the petitioner was so aggrieved by the initiation of proceedings, it ought to have approached this Court before an assessment order was passed.
7. Having heard learned counsel for the parties, we are of the view that the initiation of reassessment proceedings vide notice dated 30.08.2024 is fundamentally void being beyond the prescribed period of limitation. Though the petitioner has approached this Court after suffering an assessment order, however given the fact that the petitioner had raised jurisdictional objection before the AO in its reply and the same remained unheeded and undecided, we are of the view that simply because the proceedings have culminated into an assessment order, the petitioner cannot be made to suffer the agony of an order which is without jurisdiction on the face of it, until the appellate authority does a formal act of annulling it.
8. Requiring the petitioner to take up the formality rather rigmarole of the appellate proceedings when the facts are crystal clear, would be iniquitous in the present factual matrix. We are, therefore, persuaded to allow the present writ petition in light of judgment of Hon’ble the Supreme Court rendered in the case of M/s Magadh Sugar Mills and Energy Limited vs. The State of Bihar And Others, reported in 2021 SCC OnLine SC 801, wherein Hon’ble the Supreme Court reiterated the principles governing the exercise of writ jurisdiction where an alternate remedy exists. The relevant paragraph of the said judgment is reproduced hereinfra:
“19 While a High Court would normally not exercise its writ jurisdiction under Article 226 of the Constitution if an effective and efficacious alternate remedy is available, the existence of an alternate remedy does not by itself bar the High Court from exercising its jurisdiction in certain contingencies. This principle has been crystallized by this Court in Whirpool Corporation v. Registrar of Trademarks, Mumbai and Harbanslal Sahni v. Indian Oil Corporation Ltd. Recently, in Radha Krishan Industries v. State of Himachal Pradesh & Ors a two judge Bench of this Court of which one of us was a part of (Justice DY Chandrachud) has summarized the principles governing the exercise of writ jurisdiction by the High Court in the presence of an alternate remedy. This Court has observed:
“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;
(v) When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion; and
In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be …………….interfered with.
(emphasis supplied)
9. This view was further affirmed by Hon’ble the Supreme Court in the case of Executive Engineer v. Seetaram Rice Mill, reported in (2012) 2 SCC 108 wherein, a show cause notice and provisional assessment were issued alleging unauthorized use of electricity under Section 126 of the Electricity Act, 2003, followed by a demand. The assessee questioned the applicability of the provision itself and consequently the jurisdiction of the authority to proceed. The High Court entertained the writ petition, and Hon’ble the Supreme Court, it being a case involving a challenge to the authority’s jurisdiction, upheld such exercise of jurisdiction while observing thus:
It is argued and to some extent correctly that the High Court should not decline to exercise its jurisdiction merely for the reason that there is a statutory alternative remedy available even when the case falls in the above stated class of cases. It is a settled principle that the courts/tribunal will not exercise jurisdiction in futility. The law will not itself attempt to do an act which would be vain, lex nil frustra facit, nor to enforce one which would be frivolous—lex neminem cogit ad vana seu inutilia—the law will not force anyone to do a thing vain and fruitless. In other words, if exercise of jurisdiction by the tribunal ex facie appears to be an exercise of jurisdiction in futility for any of the stated reasons, then it will be permissible for the High Court to interfere in exercise of its jurisdiction. This issue is no longer res integra and has been settled by a catena of judgments of this Court, which we find entirely unnecessary to refer to in detail. Suffice it to make a reference to the judgment of this Court in Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] where this Court was concerned with the powers of the Registrar of Trade Marks and the Tribunal under the Trade and Merchandise Marks Act, 1958 and exercise of jurisdiction by the High Court in the face of availability of a remedy under the Act.
10. In view of the discussion foregoing, the impugned notice dated 30.08.2024 issued under Section 148 of the Act of 1961 so also the consequential assessment order dated 29.03.2026 is hereby quashed.
11. The writ petition stands allowed accordingly.
12. The pending applications stand dismissed.
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