25-Year Pendency Cannot Allow Writ Court To Decide Disputed Facts In Tax Case: Rajasthan High Court

The Rajasthan High Court on 21 August held that the mere pendency of a tax dispute for 25 years does not permit the Court to decide disputed questions of fact in writ proceedings on the basis of pleadings and affidavits, as this would bypass the fact-finding process under the Income Tax Act.

A Division Bench of Justices Arun Monga and Ashutosh Kumar declined to interfere with reassessment notices issued to Mahesh Kumar Gupta for Assessment Years 1995-96 to 1999-2000, holding that the disputed factual issues should be examined by the competent Income Tax authorities. The judges observed:

“Mere delay in its disposal does not equip us to treat the material appended to the writ petition, together with the facts pleaded in it, which stand specifically disputed in the reply of the respondents, as the sole basis for rendering our opinion. To do so would carry the danger of bypassing the entire adjudicatory process envisaged under the Income Tax Act, which is a self contained code.”

Gupta, who was engaged in the brick kiln business, challenged the reassessment proceedings arising from a survey and physical verification of stock at his brick kiln on 16 February 2000. He disputed the quantity of bricks recorded during the survey.

He challenged the reassessment notices issued under Sections 147 and 148 of the Income Tax Act, contending that the reasons recorded for reopening the assessments had not been supplied despite repeated requests. He also argued that there was no tangible material or live nexus to justify reopening the concluded assessments.

Further, he alleged mala fides against an Income Tax officer, claiming that the officer had obtained two truckloads of bricks from him in March 2000 against unpaid bills and subsequently made demands in connection with the reassessment proceedings. He also alleged that the officer had sought a luxury car and that the reassessment proceedings were initiated for an extraneous purpose.

The Revenue disputed these allegations and submitted that the reassessment proceedings were supported by material gathered during the survey. It also argued that the writ petition was premature as the notices had merely initiated reassessment proceedings. The petitioner could raise his objections before the Assessing Officer and avail statutory appellate remedies against any adverse assessment order, the Revenue submitted.

The High Court noted that the writ petition had remained pending since 2001. However, it held that the passage of time could not permit it to determine disputed factual issues merely on the basis of material appended to the writ petition. It observed:

“We are conscious that the matter has remained pending before this Court for as many as 25 years," itobserved, adding that treating the writ material as the sole basis for deciding the dispute would carry the danger of “bypassing the entire adjudicatory process envisaged under the Income Tax Act”.

The Bench further held that the Income Tax Act is a self-contained code and that deciding the dispute in writ jurisdiction would deprive the Revenue authorities of an opportunity to examine and sift the material necessary for a proper fact-finding exercise.

It also noted that the allegations of bias against the officials concerned did not survive for consideration at this stage, given the considerable passage of time. The officials had either retired or been transferred and would no longer be in a position to deal with the matter.

Accordingly, the High Court declined to interfere with the reassessment notices and remitted the matter to the competent Income Tax authority. It granted Gupta liberty to respond to the notices with all supporting material.

For the Petitioner: Suresh Sahni with Neha Sahni, Advocates

For the Respondents: Sandeep Pathak with Shefali Sharma, UOI, and R.M. Sharma, Advocate