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IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6704  OF 2013 (@ SPECIAL LEAVE PETITION (CIVIL) NO.23898 OF 2011)

COMMISSIONER OF INCOME TAX & ORS. ... APPELLANTS

VERSUS

CHHABIL DASS AGARWAL ... RESPONDENT

O R D E R

1. Application for impleadment is allowed.

2. Delay condoned.

3. Leave granted.

4. This appeal by special leave is directed against the judgment  

and order passed by the High Court of Sikkim at Gangtok in Writ  

Petition(C)  No.44  of  2009,  dated  05.10.2010.  By  the  impugned  

judgment  and  order,  the  High  Court  has  quashed  the  order  of  

assessment passed by the Assistant CIT, Circle-I, Siliguri under  

Section 148 of the Income Tax Act, 1961 (for short 'the Act') dated  

11.12.2009,  whereby  the  assessing  authority  has  confirmed  the  

notices issued under Section 148 of the Act for the Assessment Years  

1995-1996 and 1996-1997, respectively.

5. The facts in brief are: The assessee is a Sikkim based non-

Sikkimese who had filed his first return of income for Assessment  

Year 1997-1998. Upon assessment, it was discovered that he had a net  

profit  of  Rs.5,78,832/-  during  the  Assessment  Year  1996-1997

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relevant to the Assessment Year 1995-1996. Since no return was filed  

by  the  assessee  for  the  Assessment  Year  1996-1997  despite  

capitalizing the aforesaid profit, proceedings under Section 147 of  

the Act were initiated against him for the said Assessment Year.  

Accordingly, on 26.05.1998 the notice was issued under Section 148  

of the Act. Further, the Revenue has found out that as on 31.03.1996  

the assessee had brought forward closing capital of Rs.1,73,90,397/-  

including the aforesaid net profit during the Assessment Year 1996-

1997. The same remained unexplained as the return of income for  

Assessment Year 1995-1996 was also not furnished by the assessee.  

Hence, another notice under Section 148 was issued to the assessee  

for the Assessment Year 1995-1996, dated 30.03.2000. It has come on  

record that the assessee did not comply with the aforesaid notices  

issued  under  Section  148  of  the  Act  and  thus,  a  letter  dated  

19.01.2001 came to be issued to the assessee as a reminder to file  

his return of income for the assessment years clearly mentioning  

that failure to do so would lead to an ex-parte assessment under  

Section  144  of  the  Act.  Thereafter,  upon  filing  of  written  

submissions by the assessee, notice under Section 142(1) of the Act  

dated  25.06.2001  was  issued  for  the  Assessment  Year  1995-1996  

alongwith  final  show  cause  fixing  compliance  for  hearing  dated  

09.07.2001. The assessee sought for an adjournment which was not  

granted and the assessments were completed ex-parte under Section  

144  of  the  Act  raising  a  tax  demand  of  Rs.2,45,87,625/-  and  

Rs.6,32,972/- for Assessment Years 1995-96 and 1996-97, respectively  

by orders dated 09.07.2001 and 28.03.2001, respectively. Further,

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penalty proceedings under Section 271(1)(c) of the Act were also  

initiated for both Assessment Years.

6. The assessee approached the Writ Court in Writ Petition(c) Nos.  

31 and 38 of 2001 challenging the aforesaid notices issued under  

Section  148,  dated  26.05.1998  and  30.03.2000  and  the  subsequent  

assessment orders, dated 09.07.2001 and 28.03.2001. The issue raised  

before the Writ Court was whether the income of the non-Sikkimese  

residing in Sikkim is taxable under the Act. The said question was  

referred to a Committee for its consideration and the Writ Petition  

was disposed of as withdrawn with the direction to maintain status  

quo in the matter till the declaration of final decision by the  

Committee, by order dated 21.07.2005. In the meanwhile, Section 10  

(26AAA) of the Act was inserted by Section 4 of the Finance Act,  

2008  whereby  certain  income  accruing  or  arising  to  a  Sikkimese  

individual  was  exempted  from  tax.  Thereafter,  Central  Board  of  

Direct Taxes (for short ‘the Board’) issued Instruction No. 8 dated  

29.07.2008 in respect of tax liability of the income accruing or  

arising to a non-Sikkimese individual residing in Sikkim. In the  

light of the aforesaid amendment and instruction, the Writ Court by  

order dated 15.07.2009 reiterated the earlier order dated 21.07.2005  

and granted liberty to parties to approach the Writ Court or any  

other competent authority/forum for redressal of their grievances  

arising out of the matter.

7. It is in the aforesaid backdrop that the assessing authority  

has passed the assessment order against the assessee confirming the

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earlier notices issued for Assessment Years 1995-1996 and 1996-1997  

respectively and held that the assessee is liable to pay the income  

tax as demanded by demand notice  dated 11.12.2009.  

8. Aggrieved by the aforesaid, the assessee instead of exhausting  

the statutory remedy available under the Act, i.e., statutory appeal  

before the Statutory Appellate Authority (Commissioner of Income Tax  

(Appeals)) has approached the High Court under Article 226 of the  

Constitution of India. Suffice it is to notice here that the Writ  

Court has delved into the merits of the case and thought it fit to  

quash  the  order  of  the  assessing  authority  dated  11.12.2009,  by  

judgment and order dated 05.10.2010.

9. Being aggrieved by the aforesaid judgment and order of the Writ  

Court,  the  Revenue  is  before  us  in  this  appeal  questioning  the  

correctness or otherwise of the impugned judgment and order.

10. We  have  heard  Shri  Gaurab  Banerjee,  learned  Additional  

Solicitor  General  appearing  for  the  appellants  and  Shri  Ganesh,  

learned Senior Counsel for the respondent.

11. Shri Gaurab Banerjee would submit that the Writ Court was not  

justified in entertaining the Writ Petition since the assessee has  

invoked its jurisdiction under Article 226 of the Constitution of  

India despite the availability of an equally efficacious alternate  

remedy under the Act and therefore, the Writ Court ought not to have  

interfered with the notices issued under Section 148 of the Act, the  

re-assessment  order  passed  by  the  assessing  authority  and  the

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consequential demand notices issued thereon.  

12. Au contraire, Shri Ganesh would support the impugned judgment  

and order of the High Court.

13. We have considered the rival contentions made by the learned  

counsel for the parties to the lis.  

14. In the instant case, the only question which arises for our  

consideration and decision is whether the High Court was justified  

in  interfering  with  the  order  passed  by  the  assessing  authority  

under Section 148 of the Act in exercise of its jurisdiction under  

Article  226  when  an  equally  efficacious  alternate  remedy  was  

available to the assessee under the Act.

15. Before discussing the fact proposition, we would notice the  

principle of law as laid down by this Court. It is settled law that  

non-entertainment of petitions under writ jurisdiction by the High  

Court when an efficacious alternative remedy is available is a rule  

of  self-imposed  limitation.  It is  essentially  a  rule  of  policy,  

convenience and discretion rather than a rule of law.  Undoubtedly,  

it is within the discretion of the High Court to grant relief under  

Article 226 despite the existence of an alternative remedy. However,  

the  High  Court  must  not  interfere  if  there  is  an  adequate  

efficacious alternative remedy available to the petitioner and he  

has approached the High Court without availing the same unless he  

has made out an exceptional case warranting such interference or  

there  exist  sufficient  grounds  to  invoke  the  extraordinary

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jurisdiction under Article 226. (See: State of U.P. vs. Mohammad  

Nooh,  AIR 1958 SC 86; Titaghur Paper Mills Co. Ltd. vs. State of  

Orissa,  (1983) 2 SCC 433; Harbanslal Sahnia vs.  Indian Oil Corpn.  

Ltd.,  (2003) 2 SCC 107; State of H.P. vs. Gujarat Ambuja Cement  

Ltd., (2005) 6 SCC 499).

16. The Constitution Benches of this Court in K.S. Rashid and Sons  

vs. Income Tax Investigation Commission,  AIR 1954 SC 207; Sangram  

Singh vs. Election Tribunal, Kotah, AIR 1955 SC 425; Union of India  

vs. T.R. Varma, AIR 1957 SC 882; State of U.P. vs. Mohd. Nooh, AIR  

1958 SC 86  and K.S. Venkataraman and Co. (P) Ltd. vs. State of  

Madras, AIR 1966 SC 1089 have held that though Article 226 confers a  

very wide powers in the matter of issuing writs on the High Court,  

the remedy of writ absolutely discretionary in character. If the  

High  Court  is  satisfied  that  the  aggrieved  party  can  have  an  

adequate or suitable relief elsewhere, it can refuse to exercise its  

jurisdiction.  The  Court,  in  extraordinary  circumstances,  may  

exercise the power if it comes to the conclusion that there has been  

a breach of principles of natural justice or procedure required for  

decision has not been adopted.  

(See: N.T. Veluswami Thevar vs. G. Raja Nainar,  AIR 1959 SC 422;  Municipal  Council,  Khurai  vs.  Kamal  Kumar,  (1965)  2  SCR  653;  Siliguri  Municipality  vs.  Amalendu  Das,  (1984)  2  SCC  436;  S.T.  Muthusami vs. K. Natarajan,  (1988) 1 SCC 572; Rajasthan SRTC vs.  Krishna Kant,  (1995) 5 SCC 75; Kerala SEB vs. Kurien E. Kalathil,  (2000) 6 SCC 293; A. Venkatasubbiah Naidu vs. S. Chellappan, (2000)  7 SCC 695; L.L. Sudhakar Reddy vs. State of A.P., (2001) 6 SCC 634;  Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha  Utpadak Sanstha vs. State of Maharashtra, (2001) 8 SCC 509; Pratap  Singh vs. State of Haryana,  (2002) 7 SCC 484  and GKN Driveshafts  (India) Ltd. vs. ITO, (2003) 1 SCC 72).

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17. In  Nivedita  Sharma  vs.  Cellular  Operators  Assn.  of  India,  

(2011)  14 SCC  337,  this Court  has  held that  where hierarchy  of  

appeals is provided by the statute, party must exhaust the statutory  

remedies  before  resorting  to  writ  jurisdiction  for  relief  and  

observed as follows:  

“12. In Thansingh Nathmal v. Supdt. of Taxes, AIR 1964 SC  1419  this  Court  adverted  to  the  rule  of  self-imposed  restraint that the writ petition will not be entertained if  an effective remedy is available to the aggrieved person  and observed: (AIR p. 1423, para 7).

“7. … The High Court does not therefore act as a court  of appeal against the decision of a court or tribunal,  to correct errors of fact, and does not by assuming  jurisdiction  under  Article  226  trench  upon  an  alternative remedy provided by statute for obtaining  relief. Where it is open to the aggrieved petitioner  to move another tribunal, or even itself in another  jurisdiction  for  obtaining  redress  in  the  manner  provided by a statute, the High Court normally will  not permit by entertaining a petition under Article  226 of the Constitution the machinery created under  the statute to be bypassed, and will leave the party  applying to it to seek resort to the machinery so set  up.”

13. In  Titaghur Paper Mills Co. Ltd. v.  State of Orissa,  (1983) 2 SCC 433 this Court observed: (SCC pp. 440-41, para  11)

“11. … It is now well recognised that where a right or  liability  is  created  by  a  statute  which  gives  a  special remedy for enforcing it, the remedy provided  by that statute only must be availed of. This rule was  stated  with  great  clarity  by  Willes,  J.  in  Wolverhampton New Waterworks Co. v. Hawkesford, 141 ER  486 in the following passage: (ER p. 495)

‘…  There are three classes of cases in which a  liability  may  be  established  founded  upon  a  statute. … But there is a third class viz. where  a  liability  not  existing  at  common  law  is  created  by  a  statute  which  at  the  same  time  gives  a  special  and  particular  remedy  for  enforcing  it.  …  The  remedy  provided  by  the

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statute  must  be  followed,  and  it  is  not  competent  to  the  party  to  pursue  the  course  applicable  to  cases  of  the  second  class.  The  form given by the statute must be adopted and  adhered to.’

The rule laid down in this passage was approved by the  House of Lords in Neville v. London Express Newspapers  Ltd., 1919 AC 368  and has been reaffirmed by the Privy  Council in Attorney General of Trinidad and Tobago v.  Gordon Grant and Co. Ltd., 1935 AC 532 (PC) and Secy.  of State v. Mask and Co., AIR 1940 PC 105 It has also  been held to be equally applicable to enforcement of  rights, and has been followed by this Court throughout.  The High Court was therefore justified in dismissing  the writ petitions in limine.”

14. In Mafatlal Industries Ltd. v. Union of India, (1997) 5  SCC 536 B.P. Jeevan Reddy, J. (speaking for the majority of  the larger Bench) observed: (SCC p. 607, para 77)

“77. … So far as the jurisdiction of the High Court  under Article 226—or for that matter, the jurisdiction  of  this  Court  under  Article  32—is  concerned,  it  is  obvious that the provisions of the Act cannot bar and  curtail these remedies. It is, however, equally obvious  that  while  exercising  the  power  under  Article  226/Article 32, the Court would certainly take note of  the legislative intent manifested in the provisions of  the Act and would exercise their jurisdiction consistent  with the provisions of the enactment.””

(See: G. Veerappa Pillai v. Raman & Raman Ltd., AIR 1952 SC 192; CCE  v. Dunlop India Ltd., (1985) 1 SCC 260; Ramendra Kishore Biswas v.  State of Tripura, (1999) 1 SCC 472; Shivgonda Anna Patil v. State of  Maharashtra, (1999) 3 SCC 5; C.A. Abraham v. ITO, (1961) 2 SCR 765;  Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433;  H.B. Gandhi v. Gopi Nath and Sons, 1992 Supp (2) SCC 312; Whirlpool  Corpn. v. Registrar of Trade Marks, (1998) 8 SCC 1; Tin Plate Co. of  India Ltd. v. State of Bihar, (1998) 8 SCC 272; Sheela Devi v.  Jaspal Singh, (1999) 1 SCC 209  and Punjab National Bank v. O.C.  Krishnan, (2001) 6 SCC 569)

18. In Union of India vs. Guwahati Carbon Ltd., (2012) 11 SCC 651,  

this Court has reiterated the aforesaid principle and observed:

“8. Before  we  discuss  the  correctness  of  the  impugned  order, we intend to remind ourselves the observations made  by  this  Court  in  Munshi  Ram v.  Municipal  Committee,  Chheharta, (1979) 3 SCC 83. In the said decision, this Court

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was pleased to observe that: (SCC p. 88, para 23).

“23.  …  when  a  revenue  statute  provides  for  a  person  aggrieved by an assessment thereunder, a particular remedy  to be sought in a particular forum, in a particular way, it  must be sought in that forum and in that manner, and all the  other forums and modes of seeking [remedy] are excluded.””

19. Thus, while it can be said that this Court has recognized some  

exceptions  to  the  rule  of  alternative remedy,  i.e.,  where  the  

statutory authority has not acted in accordance with the provisions  

of the enactment in question, or in defiance of the fundamental  

principles  of  judicial  procedure,  or  has  resorted  to  invoke  the  

provisions which are repealed, or when an order has been passed in  

total  violation  of  the  principles  of  natural  justice,  the  

proposition  laid  down  in  Thansingh  Nathmal case,  Titagarh  Paper  

Mills case and other similar judgments that the High Court will not  

entertain a petition under Article 226 of the Constitution if an  

effective alternative remedy is available to the aggrieved person or  

the statute under which the action complained of has been taken  

itself contains a mechanism for redressal of grievance still holds  

the field. Therefore, when a statutory forum is created by law for  

redressal of grievances, a writ petition should not be entertained  

ignoring the statutory dispensation.

20. In the instant case, the Act provides complete machinery for  

the assessment/re-assessment of tax, imposition of penalty and for  

obtaining relief in respect of any improper orders passed by the  

Revenue  Authorities,  and  the  assessee  could  not  be  permitted  to  

abandon that machinery and to invoke the jurisdiction of the High

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Court under Article 226 of the Constitution when he had adequate  

remedy open to him by an appeal to the Commissioner of Income Tax  

(Appeals). The remedy under the statute, however, must be effective  

and not a mere formality with no substantial relief. In  Ram and  

Shyam Co. vs.  State of Haryana,  (1985) 3 SCC 267 this Court has  

noticed that if an appeal is from “Caesar to Caesar’s wife” the  

existence of alternative remedy would be a mirage and an exercise in  

futility.  In  the  instant  case,  neither  has  the  assessee-writ  

petitioner described the available alternate remedy under the Act as  

ineffectual and non-efficacious while invoking the writ jurisdiction  

of  the  High  Court  nor  has  the  High  Court  ascribed  cogent  and  

satisfactory reasons to have exercised its jurisdiction in the facts  

of instant case.

21. In light of the same, we are of the considered opinion that the  

Writ Court ought not to have entertained the Writ Petition filed by  

the  assessee,  wherein  he  has  only  questioned  the  correctness  or  

otherwise of the notices issued under Section 148 of the Act, the  

re-assessment  orders  passed  and  the  consequential  demand  notices  

issued thereon.  

22. In view of the above, we allow this appeal and set aside the  

judgment and order passed by the High Court in Writ Petition (Civil)  

No.44 of 2009.

23. We grant liberty to the respondent, if he so desires, to file  

an appropriate petition/ appeal against the orders of re-assessment  

passed under Section 148 of the Act within four weeks' time from

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today.  If  the  petition  is  filed  before  the  appellate  authority  

within the time granted by this Court, the appellate authority shall  

consider the petition only on merits without any reference to the  

period of limitation.

24. However, it is clarified that the appellate authority shall not  

be  influenced  by  any  observation  made  by  the  High  Court  while  

disposing  of  the  Writ  Petition  (Civil)  No.44  of  2009,  in  its  

judgment and order dated 05.10.2010.

25. All the contentions of the parties are left open.

Ordered accordingly.

...................J. ( H. L. DATTU )

...................J. ( M. Y. EQBAL )

NEW DELHI; AUGUST 08, 2013.