Case Law Details
Poonjar Service Co-Operative Bank Ltd. Vs ITO (Kerala High Court)
In the case of Poonjar Service Co-Operative Bank Ltd. vs. ITO, the Kerala High Court dealt with a challenge against an assessment order for the year 2018-19 under Article 226 of the Constitution of India. The petitioner, claiming to be a Primary Agricultural Credit Society, contested the assessment order on the grounds that it disregarded a binding judgment of the Supreme Court in Mavilayi Service Co-operative Bank Ltd. vs. Commissioner of Income Tax, Calicut.
The crux of the petitioner’s argument was that the assessing authority had failed to apply the principles laid down by the Supreme Court in Mavilayi’s case regarding eligibility for deduction under Section 80P of the Income Tax Act, 1961. The petitioner contended that despite providing comprehensive responses and supporting documents during the assessment process, the assessing officer wrongly concluded that the petitioner did not qualify as a primary credit society entitled to the deductions under Section 80P. This, according to the petitioner, amounted to a clear disregard of the Supreme Court’s directive and was tantamount to contempt of court.
On the other hand, the counsel representing the Income Tax department argued that the petitioner should pursue the statutory remedy of appeal available under the Income Tax Act rather than seeking relief under Article 226. The respondent emphasized that the High Court should exercise restraint in interfering with assessment orders unless there are exceptional circumstances such as lack of jurisdiction, violation of natural justice, or manifest injustice.
After considering the arguments from both sides, the Kerala High Court delved into the principles governing the exercise of its jurisdiction under Article 226. It acknowledged that while Article 226 grants wide powers to constitutional courts, these powers are typically exercised sparingly, particularly in tax matters where statutory remedies like appeals exist. The court cited precedents emphasizing that a mere error in assessment or deviation from legal principles, without more, does not justify the invocation of Article 226.
The court referred to the Supreme Court’s directive in Mavilayi’s case, noting that assessing officers are bound to follow such judgments. However, it underscored that the remedy of a statutory appeal provides an adequate mechanism for correcting erroneous assessments. It held that unless an assessment order is without jurisdiction, violates principles of natural justice, or leads to manifest injustice, the High Court should not intervene through writ jurisdiction.
Further, the court highlighted that the Income Tax Act itself provides a comprehensive framework for assessment and appeal, which should ordinarily be exhausted before approaching the High Court under Article 226. It cited legal precedents that support this approach, emphasizing that judicial discipline mandates adherence to higher court judgments but does not mandate immediate intervention through writ jurisdiction in every case of misapplication of law.
In conclusion, the Kerala High Court dismissed the writ petition filed by Poonjar Service Co-Operative Bank Ltd., emphasizing that the petitioner had an adequate alternative remedy through a statutory appeal. It reiterated that the extraordinary jurisdiction under Article 226 should be exercised sparingly and only in exceptional cases where the statutory remedies are inadequate or inappropriate. The court affirmed the principle that it should not convert itself into an appellate authority over tax matters, especially when issues involve factual assessments best left to the expertise of the lower authorities.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
Faced with an order of assessment for the year 2018-19, the petitioner claiming to be a Primary Agricultural Credit Society, challenges the same under Article 226 of the Constitution of India, alleging that the impugned assessment order completely flouts the judgment of the Hon’ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. and others v Commissioner of Income Tax, Calicut and another [2021(1) KLT 485]. It was contended that the procedure adopted and the conclusions arrived at in the assessment order are in direct conflict with the Supreme Court judgment mentioned above. It was submitted that the petitioner need not be relegated to the normal remedy of a statutory appeal, since, the impugned assessment order directly conflicts with the Supreme Court judgment
2. Adv.A.Kumar, the learned counsel for the petitioner, in support of the challenge against the assessment order, pointed out that the various conditions when a Primary Agricultural Credit Society can claim the benefit of deduction under Section 80P were clearly delineated by the Supreme Court. However, in gross disregard of the binding decision, the assessing authority has, without even understanding the scope of the Supreme Court judgment, passed the order of assessment, astonishingly contradictory to the judgement of the Supreme Court. According to the learned counsel, the assessment order borders on contempt of the Supreme Court.
3. The facts necessary for disposing of this writ petition can be summarised as follows; For the assessment year 2018-19, while filing its return, petitioner claimed deduction under section 80P of the Income Tax Act, 1969, (for short ‘the Act’). While selecting the return for scrutiny, a notice was issued under section 143(2) of the Act, proposing to disallow the deductions claimed under section 80P of the Act. Proper explanations were submitted by the petitioner, which was followed by subsequent notices, explanations, production of documents, suffice to state, petitioner contends that every query raised by the department was comprehensively met and was even supported by documents. According to the petitioner, the assessing officer, in direct conflict with the Supreme Court judgment held that the petitioner is not a primary credit society and thereafter disallowed the claim for deduction. It is also pointed out that though the Supreme Court had clearly held in paragraph 33 of the said judgment that “providing credit facilities to its members does not necessarily mean agricultural credit alone” and further that “once it is clear that the cooperative society in question is providing credit facilities to its members. The fact that it is providing credit facility to non-members does not disentitle the society in question from availing of the deduction.” the assessing officer disallowed deductions claimed on reasons contrary to the Supreme Court Judgment. The learned counsel for the petitioner invited my attention to the decision in Union of India and others v Kamalakshi Finance Corporation Ltd [(1992) 1 SCC 443] and emphasised that the order of a higher authority is binding on the lower authority and disregard of earlier orders of the Appellate Authorities ought not to be taken lightly.
4. The learned Standing Counsel for Income Tax, Adv. Jose Joseph, on the other hand cautioned this Court from exercising the jurisdiction under Article 226 on the ground that a statutory appeal is wholly available for the petitioner to invoke and nothing interdicts the petitioner from resorting to such a remedy. He further substantiated his contentions by pointing out that this Court will not in exercise of the power under Article 226 consider the factual aspects and hence it is in the interest of all that petitioner be relegated to the statutory remedy of an appeal.
5. I have considered the rival contentions. An assessment order is challenged in this writ petition. There is no case for the petitioner that the assessment order has been passed without jurisdiction. It is also not contended that the assessment order was issued in violation of the principles of natural justice. It is admitted that the impugned order can be subject to a statutory appeal as per the provisions of the Act.
6. The jurisdiction of this Court under Article 226 though not limited, is certainly subject to certain well established principles of self-restraint. Generally, constitutional courts do not permit invocation of the writ jurisdiction when adequate and specific legal remedies are available under the respective statutes. Invoking the jurisdiction under Article 226 for issuance of a writ of certiorari is a supplementary remedy to be resorted to when the litigant has a legal right but no appropriate machinery to redress his grievance. Of course, if the exigencies of a case demand that the ordinary method of appeal will render injustice or be inadequate, the remedy of Article 226 can be invoked. Refraining from exercising the jurisdiction under Article 226 is more as a measure of policy, convenience, and discretion rather than a rule of law. In cases where orders of assessing authorities under taxing statutes are merely wrong or are contrary to established laws, generally, this Court keeps its hands off and relegates the parties to the statutory remedies. The situation would be different when an order is passed wholly without jurisdiction or in violation of the principles of natural justice or for other exceptional reasons. In such circumstances, the court may exercise its jurisdiction under Article 226. However, merely for the reason that the conclusions arrived at by an assessing officer are wrong or that it is incorrect being in conflict with a Supreme Court judgment would not generally invite this Court to exercise the extraordinary jurisdiction to interfere under Article 226 of the Constitution of India.
7. The Supreme Court had in Veerappa Pillai v. Raman & Raman Ltd (AIR 1952 SCC 192) held that where a particular statute provides self-contained machinery for determination of questions arising under the Act, the remedies provided under the Act should be followed except in cases of orders, which are wholly without jurisdiction or in excess of jurisdiction, or in violation of the principles of natural justice or actions in refusal to exercise jurisdiction vested in them or there is an error on the face of the record and such an act, omission, error or exercise resulted in manifest injustice. Similarly, when fundamental rights have been infringed, the alternate remedy is not a bar for entertaining writ petition. (See State of Bombay v. United Motors Ltd. (AIR 1953 SC 252).
8. Similarly, in tax matters, especially after an order of assessment is issued, the High Court ought not to entertain original petitions under Article 226 and convert itself into appellate authorities except in exceptional circumstances. In cases where the challenge requires an appreciation of facts and the analysis of the nature of objections raised or explanations provided, it is ideal to relegate the parties to the statutory remedies. The Income Tax Act, no doubt provides a complete machinery for assessment of tax and for relief in respect of improper or erroneous orders made by the taxing authorities as held in Sibram Poddar v. Income Tax Officer, Central circle II and Another ( AIR 1964 SC 1095).
9. There is no quarrel with regard to the proposition laid down in Union of India and others v Kamalakshi Finance Corporation Ltd. [(1992) 1 SCC 443]. Judicial discipline demands that all authorities follow orders of the superior authority. When the order of the Supreme Court clearly specifies and declares a law, all authorities are bound by the same and cannot depart from the conclusions arrived at therein. If however an authority is alleged to have departed from a binding decision of the Supreme Court, and appreciation of facts and materials are required, however limited it may be, the remedy of a statutory appeal is the appropriate remedy. Assessees cannot insist that, in every such case, this Court must exercise its jurisdiction to set aside even an assessment order.
10. As a matter of fact, the Supreme Court had directed in the judgment in Mayilavi’s case referred above, that the assessing officers must consider each case on the basis of the decision rendered by it. The said direction gives ample authority to the assessing officer to consider the case of the petitioner also on merits. Thus, in passing the impugned assessment order, the Assessing Officer had the requisite jurisdiction. Petitioner does not have any allegation that the order was issued in violation of the principles of natural justice. The grievance of the petitioner in the instant case stems from the nature of appreciation and analysis carried out by the assessing officer while passing the impugned assessment order.
11. Taking note of the nature of the assessment order impugned in this writ petition, it can be seen that the petitioner has an alternative remedy available, which is equally efficacious. No circumstances are pointed out to exercise the extraordinary jurisdiction under Article 226.
12. Accordingly, there is no merit in this writ petition and the same is dismissed, reserving the liberty of the petitioner to pursue the statutory remedies available.
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