Karnataka High Court
Sri. Kandaswamy Rajendran vs The Deputy Commissioner Of Income Tax on 12 August, 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF AUGUST, 2022
BEFORE
THE HON'BLE MR. JUSTICE E.S. INDIRESH
WRIT PETITION NO.9937 OF 2022 (T-IT)
C/W
WRIT PETITION NOS.9938 OF 2022,
9939 OF 2022, 9945 OF 2022 AND 9946 OF 2022
IN WP NO.9937 OF 2022
BETWEEN:
SUNIL KUMAR SHARMA
SON OF SRI D P SHARMA
AGED ABOUT 45 YEARS,
No.328, TIPPU SULTAN PALACE ROAD
KALASIPALYAM
BENGALURU - 560002.
...PETITIONER
common in Writ Petitions
No.9938, 9939, 9945 of 2022
(BY SRI KIRAN S. JAVALI, SENIOR COUNSEL
FOR SRI SHREEHARI KUTSA, ADVOCATE)
AND:
1. DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE 1(4),
CENTRAL REVENUE BUILDING
QUEENS ROAD
BENGALURU - 560001.
2
2. COMMISSIONER OF INCOME TAX (APPEALS)-11
ROOM NO 322,
3RD FLOOR,
CENTRAL REVENUE BUILDING
QUEENS ROAD
BENGALURU 560001
....RESPONDENTS
(BY SRI BALBIR SINGH, ASG FOR
SRI K.V. ARAVIND & SRI DILIP M., ADVOCATES)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
NOTICE U/S 153C OF THE ACT FOR THE A.Y. 2015-16 DATED
21ST AUGUST, 2019 BEARING DIN-ITBA/AST/S/153C/2019-
20/1017492054(1) ENCLOSED AS ANNEXURE-A ISSUED BY
RESPONDENT 1; AND ETC.,
IN WP NO.9938 OF 2022
1. DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE 1(4),
CENTRAL REVENUE BUILDING
QUEENS ROAD
BENGALURU - 560001
2. COMMISSIONER OF INCOME TAX (APPEALS)-11
ROOM NO.322,
3RD FLOOR,
CENTRAL REVENUE BUILDING
QUEENS ROAD
BENGALURU - 560001.
....RESPONDENTS
(BY SRI BALBIR SINGH, ASG FOR
SRI K.V. ARAVIND & SRI DILIP M., ADVOCATES)
3
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
NOTICE UNDER SECTION 153C OF THE ACT FOR THE
ASSESSMENT YEAR (FOR SHORT, THE 'ASSESSMENT YEAR')
2016-17 DATED 21st AUGUST, 2019 BEARING DIN-
ITBA/AST/S/153C/2019-20/1017492024(1) AND ENCLOSED AS
ANNEXURE-A ISSUED BY RESPONDENT NO.1; AND ETC.,
IN WP NO.9939 OF 2022
1. DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE 1(4),
CENTRAL REVENUE BUILDING
QUEENS ROAD
BENGALURU - 560001
2. COMMISSIONER OF INCOME TAX (APPEALS)-11
ROOM NO 322,
3RD FLOOR,
CENTRAL REVENUE BUILDING
QUEENS ROAD
BENGALURU - 560001
....RESPONDENTS
(BY SRI BALBIR SINGH, ASG FOR
SRI K.V. ARAVIND & SRI DILIP M., ADVOCATES)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
NOTICE UNDER SECTION 153C OF THE ACT FOR THE
ASSESSMENT YEAR 2017-18 DATED 21st AUGUST, 2019
BEARING DIN-ITBA/AST/S/153C/2019-20/1017492039(1)
ENCLOSED AS ANNEXURE-A ISSUED BY RESPONDENT 1; AND
ETC.,
4
WP NO.9945 OF 2022
1. THE COMMISSIONER OF INCOME TAX (APPEALS)-11
BENGALURU,
OFFICE OF THE COMMISSIONER
OF INCOME TAX (APPEALS)-11
ROOM No.322, 3RD FLOOR
CENTRAL REVENUE BUILDING
QUEENS ROAD
BENGALURU - 560001.
2. THE DEPUTY COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE 1(4)
C R BUILDING QUEENS ROAD,
BENGALURU - 560001.
3. THE JOINT /ADDITIONAL COMMISSIONER
OF INCOME TAX
CENTRAL RANGE -1
C R BUILDING
QUEENS ROAD,
BENGALURU - 560001.
4. THE PRINCIPAL
COMMISSIONER OF INCOME TAX (CENTRAL)
C R BUILDING
QUEENS ROAD
BENGALURU - 560001
5. THE DIRECTOR
GENERAL OF INCOME TAX (INV.1)
C R BUILDING, QUEENS ROAD
BENGALURU - 560001
....RESPONDENTS
5
(BY SRI BALBIR SINGH, ASG FOR
SRI K.V. ARAVIND & SRI DILIP M., ADVOCATES)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
ORDER OF ASSESSMENT UNDER SECTION R.W.S. 143(3) 153D
OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFEREED AS
THE ACT) FOR THE ASSESSMENT YEAR (FOR SHORT, THE A.Y)
2018-19 DATED 31ST DECEMBER, 2019 bearing din-
itba/ast/m/143(3)/2019-20/1023542098(1) AND ENCLOSED AS
ANNEXURE-B1 AND ETC.,
IN WP NO.9946 OF 2022
BETWEEN
SRI KANDASWAMY RAJENDRAN
S/O LATE KANDASWAMY
AGED ABOUT 76 YEARS
RESIDING AT NO.8B, 1ST FLOOR
DDA MIH FLAT, SARAI JULENA
SUKDHEV VIHAR
NEW DELHI-110025.
...PETITIONER
(BY SRI KIRAN S. JAVALI, SENIOR COUNSEL
FOR SRI SHREEHARI KUTSA, ADVOCATE)
AND
1. THE DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE 1(4), C R BUILDING
ANNEX QUEEN'S ROAD
BENGALURU - 560001.
2. COMMISSIONER OF INCOME TAX (APPEALS)-11
KORAMANGALA
BENGALURU - 560034
6
....RESPONDENTS
(BY SRI K.V. ARAVIND, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
NOTICES UNDER SECTION 153C OF THE INCOME TAX ACT, 1961
BEARING NO.ITBA/AST/S/153C/2019-20/1017509414(1) FOR
ASSESSMENT YEAR 2012-13, NO. ITBA/AST/S/153C/2019-
20/1017509421(1) FOR ASSESSMENT YEAR 2013-14 NO.
ITBA/AST/S/153C/2019-20/1017509426(1) FOR ASSESSMENT
YEAR 2014-15 NO.ITBA/AST/S/153C/2019-20/1017509432(1)
FOR ASSESSMENT YEAR 2015-16 NO.ITBA/AST/S/153C/2019-
20/1017509438(1) FOR ASSESSMENT YEAR 2016-17 NO.
ITBA/AST/S/153C/2019-20/1017509444(1) FOR ASSESSMENT
YEAR 2017-18 ALL DATED 22ND AUGUST, 2019 VIDE ANNEXURE-
A RO A5 AS IT IS BEYOND JURISDICTION, ARBITRARY AND
WITHOUT AUTHORITY OF LAW HENCE NULL AND VOID; AND
ETC.,
IN THESE WRIT PETITIONS ARGUMENTS BEING HEARD,
JUDGMENT RESERVED, COMING ON FOR "PRONOUNCEMENT OF
ORDERS", THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Since question of law involved in these writ petitions are pertaining to challenge made to impugned notices issued under Section 153C of the Income Tax Act, 1961 and further action thereof, these writ petitions were clubbed together, heard and disposed of by this common order.
72. In writ petitions No.9937, 9938, 9939 and 9945 of 2022, Petitioner has questioned the Notice dated 21st August, 2019; Order of Assessment dated 31st December, 2019; and also sought for quashing the Notice of Demand dated 31st December, 2019 issued by respondent No.1. In writ petition No.9945 of 2022, the petitioner has also challenged the order dated 03rd May, 2022 passed in Appeal No.CIT(A)-11/ BNG/10701/2019-20, dismissing the appeal. In Writ Petition No.9946 of 2022, the petitioner is challenging the Notice issued under Section 153C of the Income Tax Act, 1961, for Assessment Years 2012-13, 2013- 14, 2014-15, 2015-16, 2016-17 and 2017-18 all dated 22nd August, 2019 as per Annexure-A to A5; and also sought for quashing Assessment orders dated 30th December, 2019 for Assessment Years 2015-16, 2016-17, 2017-18 and 2018-19 as per Annexure-B to B3 and further prayed for quashing demand notices dated 30th December, 2019 as per Annexure-C to C3 for the aforementioned Assessment Years.
3. Brief facts for adjudication of these writ petitions are that, the respondent-Revenue had conducted search action 8 under Section 132 of the Income Tax Act, 1961 (for short hereinafter referred to as 'the Act') on 02nd August, 2017 at the premises of the petitioner and similar search also took place at premises of one Sri Rajendran at New Delhi. It is the case of the respondent-Revenue that, during the search at the premises of Sri Rajendran, certain diaries and entries relating to the affairs of the petitioner-Sunil Kumar were recovered and statements of both the petitioner and that of Sri Rajendran, came to be recorded. It is further stated in the writ petitions that the respondent No.1 claims that the case of the petitioner was centralised to the jurisdiction of respondent No.1 as per Order dated 07th March, 2018 under Section 127 of the Act. Petitioners further contended that the respondent No.1 has neither issued any notice nor informed regarding centralisation of their case to the jurisdiction of respondent No.1 and it is further contended in the writ petitions that respondent No.1 ought to have provided an opportunity to the petitioners as required under Section 127 of the Act. Petitioners, while urging the aforementioned aspects, questioned that the impugned notices, calling upon petitioners to submit his return of income for the Assessment Year 2015-2016 9 vide Annexure-A, is without jurisdiction. The main grievance of the petitioners is that impugned notices under Section 153C of the Act is to be issued on "other person" and the petitioners being "searched person", the impugned notice under Section 153C of the Act is not maintainable. Hence, petitioners have presented these writ petitions challenging the action of the respondent-Revenue as non-est and contrary to law.
4. The respondent-Revenue entered appearance and filed objection, and it is contended that proceedings have been initiated against the petitioners under Section 153C of the Act, based on the material found and seized by the Enforcement Directorate. It is further stated that the writ petition is not maintainable as the impugned orders in the writ petition are appealable before the Commissioner of Income Tax-Appeals, and same is an efficacious remedy for the petitioners. It is further stated that petitioners have to avail the statutory remedy before the Commissioner of Income-tax-Appeals and accordingly, sought for dismissal of writ petitions as premature. It is also averred in the statement of objections that the writ petitions 10 deserve to be dismissed on the ground of delay and laches. It is further contended that the officer authorised under Section 132 of the Act, is empowered to enter and search any building, place, vessel, vehicle or Aircraft where he has reasoned to suspect such books of account, other documents, money, etc. It is further pleaded that Section 132 of the Act, empowers seizure or books of account/document not only relatable to searched person, however, in relation to other person also. The Assessing Officer, after compliance of the pre-conditions of recording statement after satisfaction, issued notice under Section 153C of the Act, and therefore, sought for dismissal of Writ Petitions. It is further clarified that Section 132(1) of the Act, provides for "person specific and not premises specific" and therefore, the determinative factor is the person against whom the warrant of search is issued under Section 132 of the Act. It is further submitted that Section 34 of the Evidence Act, 1872 are applicable to the proceedings under Income Tax Act, as the Income tax Act, is itself a Code and accordingly, sought for dismissal of writ petitions.
115. I have heard Sri Kiran S. Javali, learned Senior Counsel appearing for Shreehari Kutsa and Sri A Mahesh Chowdhary, appearing for the petitioners; Shri Balbir Singh, learned Additional Solicitor General of India on behalf of Sri K V Aravind, learned standing Counsel appearing for the Respondent-
Revenue.
6. Sri Kiran S. Javali, learned Senior Counsel invited the attention of the court to the impugned Order of Assessment and notice passed under Section 153C of the Act for the Assessment Year 2015-2016 and argued that the conclusion arrived at by the respondent-Revenue initiating action against the petitioners based on the diaries and loose sheets is contrary to law. He further contended that the petitioner, being a "searched person", issuance of the notice under Section 153C of the Act is not maintainable. In this regard, learned Senior Counsel places reliance on the judgment of this court in Writ Petition No.36004 of 2018 connected with Writ Petition No.36005 of 2018 disposed of on 24th January, 2019. Emphasizing on these aspects, Sri Kiran S Javali, argued that the respondent No.1 fails to 12 appreciate the law on the issue that, to invoke Section 153C of the Act, it is necessary to make out a case that material found in the case of "searched person" belongs to "other person" and as the search has been conducted on the residence of the petitioner at Bengaluru and material has been seized as per panchanama making him as the "searched person" and not "other person", and as such, learned Senior Counsel appearing for the petitioner submits that the impugned notice issued under Section 153C of the Act is bad in law.
7. Sri Kiran S. Javali, learned Senior Counsel, further argued that the respondent No.1 failed to examine whether the papers or loose note sheets found during the course of search in the premises of Sri Rajendran are documents having evidentiary value to prove the fact of transaction. In this regard, he refers to Section 34 of Indian Evidence Act, 1872 and submitted that the search action did not lead to discovery of unaccounted money, bullion, jewellery or valuable article and no books of account reveals undisclosed transactions of the assessee and the entire impugned proceedings revolves around scribbling of loose 13 sheets seized from premises of another person (Sri Rajendran) and therefore, learned Senior Counsel argued that the action taken by respondent No.1 is contrary to the law declared by the Apex Court in the case of CENTRAL BUREAU OF INVESTIGATION v. V.C. SHUKLA AND OTHERS, reported in (1998)3 SCC 410 and in the case of COMMON CAUSE AND OTHERS v. UNION OF INDIA, reported in (2017)11 SCC 731 and accordingly, sought for quashing of impugned notices.
8. Nextly, Sri Kiran S. Javali, learned Senior Counsel argued that satisfaction note is required under Section 153C of the Act for each Assessment Year and in the impugned proceedings consolidated satisfaction note has been recorded for different Assessment Years which vitiates entire assessment proceedings. In this regard, learned Senior Counsel appearing for the petitioners places reliance on the judgment of the Hon'ble Apex Court in the case of L K VERMA v. HMT AND ANOTHER, reported in (2006)2 SCC 269 and in the case of JEANS KNIT PVT LTD v. COMMISSIONER OF INCOME TAX, reported in (2017)390 ITR 10 (SC) and argued that this Court is having jurisdiction to 14 interfere with the impugned notices issued by the respondent-
Revenue as the same is without jurisdiction and as such, learned Senior Counsel sought for interference of this court in these writ petitions.
9. Insofar as Writ Petition No.9945 of 2022 is concerned, Sri Kiran S. Javali, learned Senior Counsel submitted that the petitioner herein has preferred appeal under Section 250 of the Act and the respondent No.1, by order dated 03rd May, 2022, dismissed the appeal without considering the factual aspects of the case in the right perspective. The learned Senior Counsel further contended that since the initiation of proceedings under Section 143 of the Act itself is without jurisdiction, the respondent No.1 herein ought to have allowed the appeal filed by the petitioner seeking setting aside the Order dated 22nd December, 2021 under Section 143(1) of the Act. In respect of alternative remedy and delay in filing the writ petitions, he contended that, since the impugned notices under Section 153C of the Act itself is contrary to judgment of the Apex Court 15 therefore, this Court, while exercising writ jurisdiction, is empowered to quash those impugned notices.
10. Per Contra, Sri Balbir Singh, Additional Solicitor General of India appearing on behalf of Sri K.V. Aravind, learned Counsel appearing for the respondent-Revenue sought to justify the impugned Notices and Orders of Assessment passed by the respondent-Revenue. He invited the attention of the Court to Section 2(12A) of the Act which provides for definition of Books or Books of Account. Learned Additional Solicitor General also invited the attention of the Court to Section 132 of the Act and argued that the respondent-Revenue is empowered to make search and seizure, to unearth defaultees under the Act and such power be exercised by the respondent-Revenue, in consequence of information, having reason to believe/suspect about the transactions made by such defaultees. He particularly invited the attention of the Court to the Sections 132(4) and (4A) of the Act and argued that in view of the language employed in the aforementioned provisions, the respondent-
Revenue are empowered to look into the books of account or any 16 other articles, which is found in possession or control of any person in the course of the search and same is to be presumed in the custody of such defaultees. Nextly, learned Additional Solicitor General drew the attention of the Court to Section 278D of the Act which provides for presumption as to assets, books of account etc. in certain cases and further argued that, as the Respondent-Revenue found incriminating material at the time of search and seizure made at the residence at Delhi, whereby the involvement of the petitioner was forthcoming in the note sheet/diaries and therefore, learned Additional Solicitor General contended that the judgments referred to by the learned Senior Counsel appearing for the petitioner, viz. V.C. SHUKLA (supra) and in the case of COMMON CAUSE AND OTHERS (supra) are not applicable to the facts of the present case. Emphasising on these aspects, he referred to the judgment of the Apex Court in the case of V.C. SHUKLA (supra) and argued that the factual aspects in the said case is quite different from the present case and accordingly, it was argued that Section 34 of the Indian Evidence Act, 1872 is not applicable to the facts of the present case.
1711. Nextly, Sri Balbir Singh, learned Additional Solicitor General, argued that Section 132 of the Act is a Code in itself which provides for search and seizure by the respondent-
Revenue as the authorities, based on the incriminating material, have reason to believe in the custody of defaultee. In this regard, learned Additional Solicitor General refers to the judgment of the Hon'ble Apex Court in the case of P.R. METRANI v. COMMISSIONER OF INCOME TAX, BANGALORE reported in (2007)1 SCC 789 and particularly referred to paragraph 17 of the judgment. Further, the learned Additional Solicitor General argued that the constitutional validity of Section 132 of the Act has been upheld by the Hon'ble Apex Court in the case of POORAN MAL v. DIRECTOR OF INSPECTION reported in (1974)93 ITR 505 (SC). The learned ASG also placed reliance on the judgment of Hon'ble Supreme Court in the case of CHUHAMAL v. COMMISSIONER OF INCOME TAX reported in (1988)38 TAXMAN 190 (SC) and argued that presence of the unaccounted money found in the residence of the defaultee at the time of search and seizure, would pave way for initiating action against the petitioners herein and therefore, he sought for 18 dismissal of petitions. Lastly, the learned Additional Solicitor General contended that writ petitions are not maintainable in law as this Court has no jurisdiction to interfere with the decision of the respondent-Revenue, except the decision making process, if it is contrary to law and as such, the learned Additional Solicitor General argued for dismissal of petitions.
12. Having heard the submission made by learned Counsel appearing for the parties, I have carefully examined the writ papers. In the light of the submissions advanced by both sides, the following points arise for determination in these petitions:
1) Whether the petitioners have made out the case for interference under Article 226 of the Constitution of India?
2) Whether the impugned notice under Section 153C and Order of Assessment Notice under Section 156 of the Act requires to be set aside?
3) What Order?19
13. Perusal of the writ papers would indicate that the respondent-Revenue made a search at the premises of one Sri Rajendran at New Delhi and recovered certain diaries/loose sheets, which is purportedly consisting of certain entries relating to the affairs/transactions of the petitioner. Based on the statement of the said Sri Rajendran (Petitioner in Writ petition No.9946 of 2022) recorded during the investigation, respondent-
Revenue initiated action against the petitioner-Sunil Kumar. In this regard, the respondent-Revenue, by exercising power under Section 127 of the Act, transferred the case to the respondent No.1. Section 127 of the Act provides for power to transfer cases. Relevant provision is Section 127(1) of the Act and same is extracted below:
"Section 127(1): The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing 20 Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him."
(underlining supplied)
14. The language employed under Section 127 of the Act connotes providing reasonable opportunity to the assessee and passing Assessment Order based on reasons. Perusal of the writ papers and the arguments of learned Counsel appearing for the respondent-Revenue do not satisfy the ingredients of "fair play"
as embodied under Section 127(1) of the Act {see PUNJAB NATIONAL BANK LTD. v. ALL INDIA PUNJAB NATIONAL BANK EMPLOYEES FEDERATION (1960(1) SCR 806)}. I have also carefully noticed the observation made in impugned Order of Assessment and the impugned notices. Concluding part at paragraph 7.7 of Assessment Order dated 31st December, 2019 (Annexure-D1) passed under section 153C and Section 143(3) read with 153D of the Act, reads as under:
"To summarise, the diaries and loose sheets that has been seized from the premise of Mr. Rajendran contain entries with lower denomination rupee notes. The entries also contain details of names of persons with their mobile phone numbers. That the transactions have been 21 carried out on the directions of Mr. Sunil Kumar Sharma is backed by the fact that Mr. Sunil Kumar Sharma has sent text messages to Mr. Rajendran which has been perused and analysed. Therefore, it is once again reiterated that the entries in the diaries seized from the premise of Mr. Rajendran contain details of hawala transactions from the directions of Mr. Sunil Kumar Sharma.
Therefore, quantification of unexplained to be taxed under Section 69A of the Act as per discussions above is Rs.40 lakh for AY-2015-16."
(emphasis supplied)
15. It is also relevant to deduce the celebrated decision of the Hon'ble Apex Court in the case of TATA CELLULAR v. UNION OF INDIA reported in (1994)6 SCC 651. Though the matter pertaining to the action of the Administrative Authority, however, the ratio laid down by the Hon'ble Apex Court in the said judgment is aptly applicable to the facts of the case on hand. At paragraphs 74 to 81 of the judgment, it is observed thus:
"74. Judicial review is concerned with reviewing not the merits of the decision in support of which the 22 application for judicial review is made, but the decision- making process itself.
75. In Chief Constable of the North Wales Police v. Evans23 Lord Brightman said :
"Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made. Judicial review is concerned, not with the decision, but with the decision-making process. Unless that restriction on the power of the court is observed, the court will in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power."
In the same case Lord Hailsham commented on the purpose of the remedy by way of judicial review under RSC, Ord. 53 in the following terms :
"This remedy, vastly increased in extent, and rendered, over a long period in recent years, of infinitely more convenient access than that provided by the old prerogative writs and actions for a declaration, is intended to protect the individual against the abuse of power by a wide range of authorities, judicial, quasi-judicial, and, as would originally have been thought when I first practiced at the Bar, administrative. It is not intended to take away from those authorities the powers and 22 1986 AC 240, 251: (1986) 1 All ER 199 23 (1982) 3 All ER 141, 154 discretions properly vested in them by law and to substitute the courts as the bodies making the decisions. It is intended to see that the relevant authorities use their powers in a proper manner (p. 1160)."
In R. v. Panel on Takeovers and Mergers, ex p Datafin plc24, Sir John Donaldson, M.R. commented:
23"An application for judicial review is not an appeal." In Lonrho plc v. Secretary of State for Trade and Industry25, Lord Keith said: "Judicial review is a protection and not a weapon."
It is thus different from an appeal. When hearing an appeal the Court is concerned with the merits of the decision under appeal. In Amin, Re26, Lord Fraser observed that :
"Judicial review is concerned not with the merits of a decision but with the manner in which the decision was made.... Judicial review is entirely different from an ordinary appeal. It is made effective by the court quashing the administrative decision without substituting its own decision, and is to be contrasted with an appeal where the appellate tribunal substitutes its own decision on the merits for that of the administrative officer."
76. In R. v. Panel on Take-overs and Mergers, ex p in Guinness plc27, Lord Donaldson, M.R. referred to the judicial review jurisdiction as being supervisory or 'longstop' jurisdiction. Unless that restriction on the power of the court is observed, the court will, under the guise of preventing the abuse of power, be itself guilty of usurping power.
77. The duty of the court is to confine itself to the question of legality. Its concern should be :
1. Whether a decision-making authority exceeded its powers?
2. Committed an error of law, 24
3. Committed a breach of the rules of natural justice,
4. Reached a decision which no reasonable tribunal would have reached or,
5. Abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:
(i) Illegality : This means the decision- maker must understand correctly the law that regulates his decision-making power and must give effect to it.
(ii) Irrationality, namely, Wednesday
unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out addition of further grounds in course of time.
As a matter of fact, in R.V. SECRETARY OF STATE for the Home Department, ex Brind28, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, 25 "consider whether something has gone wrong of a nature and degree which requires its intervention".
78. What is this charming principle of Wednesday unreasonableness? Is it a magical formula? In R. v. Askew29, Lord Mansfield considered the question whether mandamus should be granted against the College of Physicians. He expressed the relevant principles in two eloquent sentences. They gained greater value two centuries later :
"It is true, that the judgment and discretion of determining upon this skill, ability, learning and sufficiency to exercise and practise this profession is trusted to the College of Physicians and this Court will not take it from them, nor interrupt them in the due and proper exercise of it. But their conduct in the exercise of this trust thus committed to them ought to be fair, candid and unprejudiced; not arbitrary, capricious, or biased; much less, warped by resentment, or personal dislike."
79. To quote again, Michael Supperstone and James Goudie; in their work Judicial Review (1992 Edn.) it is observed at pp. 119 to 121 as under :
"The assertion of a claim to examine the reasonableness been done by a public authority inevitably led to differences of judicial opinion as to the circumstances in which the court should intervene. These differences of opinion were resolved in two landmark cases which confined the circumstances for intervention to narrow limits. In Kruse v. Johnson3O a specially constituted divisional court had to consider the validity of a bye- law made by a local authority. In the leading 26 judgment of Lord Russell of Killowen, C.J., the approach to be adopted by the court was set out. Such bye-laws ought to be 'benevolently' interpreted, and credit ought to be given to those who have to administer them that they would be reasonably administered. They could be held invalid if unreasonable : Where for instance bye- laws were found to be partial and unequal in their operation as between different classes, if they were manifestly unjust, if they disclosed bad faith, or if they involved such oppressive or gratuitous interference with the rights of citizens as could find no justification in the minds of reasonable men. Lord Russell 28 (1991) 1 AC 696 29 (1768) 4 Burr 2186 : 98 ER 139 30 (1898) 2 QB 91: (1895-9) All ER Rep 105 emphasised that a bye-law is not unreasonable just because particular judges might think it went further than was prudent or necessary or convenient.
In 1947 the Court of Appeal confirmed a similar approach for the review of executive discretion generally in Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. This case was concerned with a complaint by the owners of a cinema in Wednesbury that it was unreasonable of the local authority to licence performances on Sunday only subject to a condition that 'no children under the age of 15 years shall be admitted to any entertainment whether accompanied by an adult or not'. In an extempore judgment, Lord Greene, M.R. drew attention to the fact that the word 'unreasonable' had often been used in a sense which comprehended different grounds of review. (At p. 229, where it was said that the dismissal of a teacher for having red hair (cited by Warrington, L.J. in Short v. Poole Corpn.32, as an 27 example of a 'frivolous and foolish reason') was, in another sense, taking into consideration extraneous matters, and might be so unreasonable that it could almost be described as being done in bad faith; see also R. v. Tower Hamlets London Borough Council, ex p Chetnik Developments Ltd.33 (Chapter 4, p. 73, supra). He summarised the principles as follows:
"The Court is entitled to investigate the action of the local authority with a view to seeing whether or not they have taken into account matters which they ought not to have taken into account, or, conversely, have refused to take into account or neglected to take into account matter which they ought to take into account. Once that question is answered in favour of the local authority, it may still be possible to say that, although the local authority had kept within the four comers of the matters which they ought to consider, they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it. In such a case, again, I think the court can interfere. The power of the court to interfere in each case is not as an appellate authority to override a decision of the local authority, but as a judicial authority which is concerned, and concerned only, to see whether the local authority has contravened the law by acting in excess of the power which Parliament has confided in them.' This summary by Lord Greene has been applied in countless subsequent cases.
"The modem statement of the principle is found in a passage in the speech of Lord Diplock in Council of Civil Service Unions v. Minister for Civil Service 'By "irrationality" I mean what can now be succinctly referred to as "Wednesbury unreasonableness". (Associated 28 Provincial Picture Houses Ltd. v. Wednesbury Corpn.31) It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at.'"
80. At this stage, The Supreme Court Practice, 1993, Vol. 1, pp. 849850, may be quoted :
"4. Wednesbury principle.- A decision of a public authority will be liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceedings where the court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it. (Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. 3 1, per Lord Greene, M.R.)"
81. Two other facets of irrationality may be mentioned. (1) It is open to the court to review the decision-maker's evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of State for Environment34, the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident's bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the 29 Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion.
(2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Bernet London Borough Council, ex p Johnson the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority's parks was struck down."
16. In view of the aforementioned aspects, I have carefully examined the law declared by the Hon'ble Apex Court with regard to acceptance of diaries/loose sheets by the respondent-Revenue. In the case of VC SHUKLA (supra), wherein at paragraphs 16 to 18 of the judgment, it is observed thus:
"16. To appreciate the contentions raised before us by the learned counsel for the parties it will be necessary at this stage to refer to the material provisions of the Act. Section 3 declares that a fact a relevant to another when it is connected with the other in any of the ways referred to in the provisions of the Act relating to the relevancy of facts; and those provisions are to be 30 found in Section 6 to 55 appearing in Chapter II. Section 5, with which Chapter II opens, expressly provides that evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and the facts declared relevant in the aforesaid section, and of no others. Section 34 of the Act reads as under:-
"34. Entries in books of account when relevant
- Entries in book of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire but such statements shall not alone be sufficient evidence to charge any person with liability."
17. From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence, still, the statement made therein shall not along be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfil the 31 requirements of the above section so as to be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed.
18. "Book" ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as 'book' for they can be easily detached and replaced. In dealing with the work 'book' appearing in Section 34 in Mukundram vs. Dayaram [AIR 1914 Nagpur 44], a decision on which both sides have placed reliance, the Court observed:-
" In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book...I think the term "book" in S. 34 aforesaid may properly' be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of S. 34, and I have no hesitation in holding that unbound sheets of paper in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of S.34."32
We must observe that the aforesaid approach is in accord with good reasoning and we are in full agreement with it. Applying the above tests it must be held that the two spiral note books (MR 68/91 and 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are "books" within the meaning of Section 34, but not the loose sheets of papers contained in the two files (MR 72/91 and MR 73/91)."
(underlining by me)
17. The Hon'ble Supreme Court in the case of COMMON CAUSE (supra), at paragraphs 278 to 282 of the judgmnt, has observed thus:
"278. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla case has dealt with the matter though at the stage of discharge when investigation had been completed by same is relevant for the purpose of decision of this case also. This court has considered the entries in Jain Hawala Diaries, note books and file containing loose sheets of papers not in the form of "books of accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are made in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible.33
279. It has further been laid down in V.C. Shukla as to value of entries in the books of account, that such statements shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held that even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability.
280. This court has further laid down in V.C. Shukla that meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted herein below: (SCC pp.423-27, paras 14 and 20) "14. In setting aside the order of the trial court, the High Court accepted the contention of the respondents that the documents were not admissible in evidence under Section 34 with the following words:
"70. ....an account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debts and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arised to do for his future purpose. Admittedly the said diaries were not being maintained on day-to day basis in he course of business. There is no mention of the dates on which the alleged payment were made. In fact the 34 entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. they have been shown in abreviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to."
XXX XXX XXX
20. Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and the small pads are 'books' within the meaning of Section
34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor they were regularly kept in the course of business. he submitted that at best it could be said that those books were memoranda kept by a person for his own benefit. According to Mr. Sibal, in business parlance 'account' means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr. Sibal. He next contended that even if it was assumed for argument's sake that the above books were books of account relating to a business still they would not be admissible under Section 34 as they were not regularly kept. It was urged by him that the words 'regularly kept' mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions 35 he also relied upon the dictionary meanings of the words 'account' and 'regularly kept'.
281. With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus: (SCC p.433, para 37) "37. In Beni Vs. Bisan Dayal [ A. I. R 1925 Nagpur 445] it was observed tat entries in book s of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate an din absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal Vs. Ram Rakha [ A. I. R. 1953 Pepsu 113] the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been prove, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business re relevant whenever they refer to a matter in which the court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts.
282. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as 36 evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court."
(underlining by me)
18. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, I am of the view that the action taken by the respondent- Revenue against the petitioner based on the material contained in the diaries/loose sheets are contrary to the law declared by the Hon'ble Apex Court. In that view of the matter, impugned notices issued under Section 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ petitions, as the same are void and illegal. In this connection, it is relevant to deduce the law declared by the Hon'ble Apex Court in the case of ICICI BANK LIMITED AND ANOTHER v. MUNICIPAL CORPORATION OF 37 GREATER BOMBAY AND OTHERS reported in AIR 2005 SC 3315 wherein it is held that, "The ratio and effect of the judgment is required to be ascertained with reference to the question of law as decided by the Court. The ratio of the judgment or the principle upon which the question before the Court is decided is alone binding as a precedent. The decision of the Supreme Court upon a question of law is considered to be a binding precedent and this must be ascertained and determined by analysing all the material facts and issues involved in the case."
That apart, no opportunity was provided to the petitioner as required under Section 127 of the Act inter alia the petitioner being "searched person" and not "Other person" as required under Section 153C of the Act and in this regard, I find force in the submission made by the learned Senior Counsel appearing for the petitioners and accordingly, though the learned Additional Solicitor General for the respondent-Revenue urged about the existence of alternative remedy, I do not find acceptable ground to disallow these petitions as it is trite law that this court is having jurisdiction to entertain writ petition, if the impugned orders are passed in derogation of principles of natural justice 38 and the action taken by the respondent-Revenue is contrary to the law declared by the Hon'ble Apex Court. In the case of L.K. VERMA (supra) at paragraph 20 of the judgment, it is held as follows:
"20. The High Court in exercise of its jurisdiction under Article 226 of the Constitution, in a given case although may not entertain a writ petition inter alia on the ground of availability of an alternative remedy, but the said rule cannot be said to be of universal application. Despite existence of an alternative remedy, a writ court may exercise its discretionary jurisdiction of judicial review inter alia in cases where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right or if there has been a violation of a principle of natural justice or where vires of the Act is in question. In the aforementioned circumstances, the alternative remedy has been held not to operate as a bar. [See Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others, (1998) 1 SCC 1, Sanjana M. Wig (Ms.) v. Hindustan Petroleum Corpn. Ltd., (2005) 8 SCC 242, State of H.P. and Others v. Gujarat Ambuja Cement Ltd. and Another."
19. It is well settled principle in law that administrative or judicial orders must be supported by reasons. It is the duty of 39 the respondent-Revenue being an instrumentality of state under Article 12 of the Constitution of India to give reasons for its conclusion. Recording of reason is the hallmark of a valid Order, while exercising administrative action or judicial review to disclose reasons and recording reasons, has always been insisted upon as one of the fundamentals of sound administration of justice delivery system, to make known that there have been proper and due application of mind by the authorities, which is an essential requisite of principles of natural justice. Reasons introduces clarity in Order and absence of such reasons would render the decision making process null and void. Reasons substitute subjectivity by objectivity and therefore, the recording of reasons is the principle of natural justice and it ensures transparency and fairness in decision making [see (2010)3 SCC 732]. At this juncture, it is useful to refer to the judgment of Hon'ble Apex Court in the case of BABU VERGHESE AND OTHERS v. BAR COUNCIL OF KERALA AND OTHERS, reported in (1999)3 SCC 422, wherein at paragraph 31 and 32, it is held as follows:
"31. It is the basic principle of law long settled that if the manner of doing a particular act is prescribed 40 under any Statute, the act must be done in that manner or not at all. The origin of this rule is traceable to the decision in Taylor vs. Taylor (1875) 1 Ch.D 426 which was followed by Lord Roche in Nazir Ahmad vs. King Emperor who stated as under :
"Where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all."
32. This rule has since been approved by this Court in Rao Shiv Bahadur Singh & Anr. vs. State of Vindhya Pradesh and again in Deep Chand vs. State of Rajasthan 1962(1) SCR 662 = AIR 1961 SC 1527. These cases were considered by a Three-Judge Bench of this Court in State of Uttar Pradesh vs. Singhara Singh & Ors. and the rule laid down in Nazir Ahmad's case (supra) was again upheld. This rule has since been applied to the exercise of jurisdiction by courts and has also been recognised as a salutary principle of administrative law."
20. It is also relevant to follow the reiteration of the said principle in the case of OPTO CIRCUIT INDIA LTD. v. AXIS BANK, reported in AIR 2021 SC 753, wherein at paragraph 15 of the judgment, the Hon'ble Apex Court held as follows:
"15. This Court has time and again emphasised that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner 41 alone and in no other manner. Among others, in a matter relating to the presentation of an Election Petition, as per the procedure prescribed under the Patna High Court Rules, this Court had an occasion to consider the Rules to find out as to what would be a valid presentation of an Election Petition in the case of Chandra Kishor Jha vs. Mahavir Prasad and Ors. (1999) 8 SCC 266 and in the course of consideration observed as hereunder:
"It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner".
Therefore, if the salutary principle is kept in perspective, in the instant case, though the Authorised Officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law. We have found fault with the Authorised Officer and declared the action bad only in so far as not following the legal requirement before and after freezing the account. This shall not be construed as an opinion expressed on the merit of the allegation or any other aspect relating to the matter and the action initiated against the appellant and its Directors which is a matter to be taken note in appropriate proceedings if at all any issue is raised by the aggrieved party."
4221. In the case of THE COLLECTOR (DISTRICT MAGISTRATE) ALLAHABAD v. RAJARAM, reported in AIR 1985 SC 1622, Hon'ble Supreme Court has held that where power is conferred to achieve a certain purpose, the power can be exercised only for achieving that purpose. It is useful to refer to paragraph 26 of the said judgment, which reads thus:
"26. Where power is conferred to achieve a purpose it has been repeatedly reiterated that the power must be exercised reasonably and in good faith to effectuate the purpose. And in this context 'in good faith' means 'for legitimate reasons'. Where power is exercised for extraneous or irrelevant considerations or reasons, it is unquestionably a colourable exercise of power or fraud on power and the exercise of power is vitiated. If the power to acquire land is to be exercised, it must be exercised bona fide for the statutory purpose and for none other. If it is exercised for an extraneous, irrelevant or non-germane consideration, the acquiring authority can be charged with legal mala fides In such a situation there is no question of any personal ill- will or motive. In Municipal Council of Sydney v. Compbell(1) it was observed that irrelevant considerations on which power to acquire land is exercised, would vitiate compulsory purchase orders or scheme depending on them. In State of Punjab v. Gurdial Singh and Ors. acquisition of land for 43 constructing a grain market was challenged on the ground of legal malafides Upholding the challenge this Court speaking through Krishna Iyer, J. explained the concept of legal malafides in his hitherto inimitable language, diction and style and observed as under:
"Pithily put, bad faith which invalidates the exercise of power-sometimes called colourable exercise or fraud on power and oftentimes overlaps motives, passions and satisfactions-is the attainment of ends beyond the sanctioned purposes of power by simulation or pretension of gaining a legitimate goal. If the use of the power is for the fulfilment of a legimate object the actuation or catalysation by malice is not legicidal. The action is bad where the true object is to reach an end different from the one for which the power is entrusted, goaded by extraneous considerations, good or bad, but irrelevant to the entrustment. When the custodian of power is influenced in its exercise by considerations outside those for promotion of which the power is vested the court calls it a colourable exercise and is undeceived by illusion. In a broad, blurred sense, Benjamin Disraeli was not off the mark even in Law when he stated: "I repeat-that all power is a trust-that we are accountable for its exercise-that, from the people, and for the people. all springs, and all must exist." After analysing the factual matrix, it was concluded that the land was not needed for a Mandi which was the ostensible purpose for which the land was sought to be acquired but in truth and reality, the Mandi need was hijacked to reach the private destination of depriving an enemy of his land through back-seat driving of the statutory engine. The notification was declared invalid on the ground that it suffers from legal mala fides. The case before us is much stronger, far more disturbing and unparalelled in influencing official decision by sheer weight of personal clout. The 44 District Magistrate was chagrined to swallow the bitter pill that he was forced to acquire land even though he was personally convinced there was no need but a pretence- Therefore, disagreeing with the High Court, we are of the opinion that the power to acquire land was exercised for an extraneous and irrelevent purpose and it was colourable exercise of power, namely, to satisfy the chagrin and anguish of the Sammelan at the coming up of a cinema theatre in the vicinity of its campus, which it vowed to destroy. Therefore, the impugned notification has to be declared illegal and invalid for this additional ground."
22. In the case of SRI BUDHIA SWAIN AND OTHERS v.
GOPINATH DEB AND OTHERS, reported in AIR 1999 SC 2089, Hon'ble Supreme Court, at paragraphs 8 and 9 of the judgment, held as follows:
"8. In our opinion a tribunal or a court may recall an order earlier made by it if (i) the proceedings culminating into an order suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent, (ii) there exists fraud or collusion in obtaining the judgment,
(iii) there has been a mistake of the court prejudicing a party or (iv) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented. The power to recall a judgment will not be exercised when the ground for re-opening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in 45 some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence.
9. A distinction has to be drawn between lack of jurisdiction and a mere error in exercise of jurisdiction.
The former strikes at the very root of the exercise and want of jurisdiction may vitiate the proceedings rendering them and the orders passed therein a nullity. A mere error in exercise of jurisdiction does not vitiate the legality and validity of the proceedings and the order passed thereon unless set aside in the manner known to law by laying a challenge subject to the law of limitation. In Hira Lal Patni Vs. Sri Kali Nath AIR 1962 SC 199, it was held :-
".......The validity of a decree can be challenged in execution proceedings only on the ground that the court which passed the decree was lacking in inherent jurisdiction in the sense that it could not have seisin of the case because the subject matter was wholly foreign to its jurisdiction or that the defendant was dead at the time the suit had been instituted or decree passed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject matter of the suit or over the parties to it."
23. I have also considered the arguments advanced by the learned Additional Solicitor General with regard to the 46 dismissal of the Appeal by the Appellate Authority dated 03rd May, 2022 in Appeal No:CIT(A)-11/BNG/10701 of 2019-20 (Annexure-A) in Writ Petition No.9945 of 2022. On careful consideration of the grounds urged in the said writ petition and having regard to the conclusion arrived at that the impugned notices are without jurisdiction, I am of the view that the impugned notices are liable to be set aside which are arising out of wrong interpretation of Section 153C of the Act, and the entire case be remanded to the competent authority/ respondent-Revenue for fresh consideration and to pass appropriate orders in accordance with law, after affording reasonable opportunity to the petitioners in these writ petitions.
It is made clear that as I have already concluded that the initiation of proceedings by the respondent-Revenue based on the diaries/loose sheets against the petitioners herein is without jurisdiction and contrary to the law declared by the Hon'ble Apex Court and same cannot be touched upon while conducting de novo enquiry afresh.
4724. As regards the last limb of the argument advanced by the learned Additional Solicitor General that writ petitions are not maintainable on the ground of alternative remedy and delay and laches is concerned, taking into consideration the fact that the impugned notices and the orders passed by the respondent-
Revenue are contrary to the law declared by the Hon'ble Apex Court referred to above, in that view of the matter, it is trite law that the acceptance of writ petitions, despite having alternative remedy, is a rule of practice and not of jurisdiction and in this regard, the Division Bench of this Court in the case of U.M. RAMESH RAO AND OTHERS v. UNION OF INDIA reported in 2021(3) AKR 345 at paragraphs 40 and 41 of the judgment has observed thus:
"40. The following judgments of the Hon'ble Supreme Court on the aspect of maintainability of a writ petition under Article 226 of the Constitution in the face of an alternative remedy are referred to as under:
(a) In Veerappa Pillai vs. Raman and Raman Ltd.., [AIR 1952 SC 192], it was observed that where a particular statute provides a self-
contained machinery for determination of questions arising under the Act, the remedy that is provided under the Act should be 48 followed except in cases of acts, which are wholly without jurisdiction or in excess of jurisdiction, or in violation of principles of natural justice or refusal to exercise jurisdiction vested in them or there is an error on the face of the record and such act, omission, error or excess has resulted in manifest injustice.
(b) Further, alternative remedy is no bar where a party comes to the Court with an allegation that his right has been or is being threatened to be infringed by a law which is ultra vires the powers of the legislature which enacted it and as such void, vide Bengal Immunity Co. vs. State of Bihar [AIR 1955 SC 661].
(c) Similarly, when a fundamental right is infringed, the bar for entertaining the writ petition and granting relief on the ground of alternative remedy would not apply, vide State of Bombay vs. United Motors Ltd. [AIR 1953 SC 252] and Himmat Lal vs. State of M.P. [AIR 1954 SC 403].
(d) The rule of alternate remedy being a bar to entertain a writ petition is a rule of practice and not of jurisdiction. In appropriate cases, High Court may entertain a petition even if the aggrieved party has not exhausted the remedies available under a statute before the departmental authorities, vide State of West Bengal vs. North Adjai Cool Company [1971 (1) SCC 309].
(e) Further, alternative remedy must be effective. An appeal in all cases cannot be said to have provided in all situations, where an appeal would be ineffective and writ petition in such a case is maintainable, vide Ram and Shyam Company vs. State of Harayana [AIR 1985 SC 1147].
49(f) Where an authority has acted without jurisdiction, High Court should not refuse to exercise its jurisdiction under Article 226 on the ground of existence of alternative remedy vide Dr. Smt. Kuntesh Gupta vs. Management H.K. Mahavidyaya [AIR 1987 SC 2186]. Thus, an alternative remedy is not an absolute bar to the maintainability of a writ petition.
41. On the issue of maintainability of the writ petition, learned counsel for the appellants relied upon the following decisions:
(a) In Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Others, [(1998) 8 SCC 1], (Whirlpool Corporation), at paragraph 15, it was observed that under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But, the High Court has imposed upon itself certain restrictions, one of which is, if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But, the availability of an alternative remedy has been consistently held not to operate as a bar in at least four contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.50
In the said decision, reliance was also placed on Rashid Ahmad vs. Municipal Board, Kairana, [AIR 1950 SC 163], (Rashid Ahmad), to observe that where alternative remedy existed, it would be a sound exercise of discretion to refuse to interfere in a petition under Article 226 of the Constitution. This proposition was, however, qualified by the significant words, "unless there are good grounds therefor", which indicated that alternative remedy would not operate as an absolute bar and that writ petition under Article 226 of the Constitution could still be entertained in exceptional circumstances.
Reference was also made to State of U.P. vs. Mohd. Nooh, , [AIR 1958 SC 86], (Mohd. Nooh), wherein it was observed that the rule requiring the exhaustion of statutory remedies before the writ will be granted, is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies.
Ultimately, in paragraph 20 of Whirlpool Corporation, the Hon'ble Supreme Court observed as under: "Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the 51 jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation."
In the said case (Whirlpool Corporation), it was also observed that the High Court was not justified in dismissing the writ petition at the initial stage without examining the contention that the show cause notice issued to the appellant was wholly without jurisdiction.
In the said case, the Registrar of Trade Marks issued to the appellant therein a notice under Section 56(4) of the Trade and Merchandise Marks Act, 1958 to show cause against the proposed cancellation of appellants' Certificate of renewal. It was held that the issuance of such a notice by the Registrar was without authority and it was quashed by the High Court.
(b) In State of H.P. and others vs. Gujarat Ambuja Cement Limited and Another, [(2005) 6SCC 499], (Gujarat Ambuja Cement Limited), a detailed discussion on the plea regarding alternative remedy was made. It was held that the principle of 52 alternative remedy is essentially a rule of policy, convenience and discretion and never a rule of law. Despite the existence of an alternative remedy, it is within the jurisdiction of discretion of the High Court to grant relief under Article 226 of the Constitution. At the same time, it cannot be lost sight of the fact that though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate, efficacious, alternative remedy. If somebody approaches the High Court without availing the alternative remedy, the High Court should ensure that he has made out a strong case or that there exist good grounds to invoke the extraordinary 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. The rule of exclusion of writ jurisdiction by availability of alternative remedy is a rule of discretion and not one of compulsion and the Court must consider the pros and cons of the case and then may interfere.
However, there are well recognized exceptions to the doctrine of exhaustion of statutory remedies. First is, when the proceedings are taken before the forum under a provision of law which is ultra vires, 53 it is open to a party aggrieved thereby to move the High Court for quashing the proceedings on the ground that they are incompetent without a party being obliged to wait until those proceedings run their full course. Secondly, the doctrine has no application when the impugned order has been made in violation of the principles of natural justice. Also, that where the proceedings itself are an abuse of process of law the High Court in an appropriate case can entertain a writ petition. Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the grounds on which the writ petitions can be entertained.
But, normally, the High Court should not entertain writ petitions unless it is shown that there is something more in a case, something going to the root of the jurisdiction of the officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute. But, if the High Court had entertained a petition despite availability of an alternative remedy, it would not be justifiable for the High Court to dismiss the same on the ground of non-exhaustion of statutory remedies, unless the High Court finds that factual 54 disputes are involved and it would not be desirable to deal with them in a writ petition.
In the said case, the question was liability to pay purchase tax on the royalty paid by the respondents, i.e., the holder of mining lease, where there was a price for removal of minerals and thus, attracted liability to pay purchase tax. The Hon'ble Supreme Court in the said decision rejected the plea that the High Court should not have entertained the writ petition. Thereafter, the question relating to liability to pay purchase tax on royalty paid was taken up for consideration by discussing on the meaning of the words "royalty", "dead rent", "mining lease". It was observed that royalty paid by the holder of a mining lease under Section 9 of the Mines and Minerals (Regulation and Development) Act, 1957 was not the price for removal of minerals and hence, did not attract liability to pay purchase tax.
(c) In Embassy Property Developments Private Limited vs. State of Karnataka, [2019 SCC Online SC 1542], (Embassy Property), one of the preliminary questions that arose was whether the High Court ought to interfere under Article 226/227 of the Constitution, with an Order passed by the National Company Law Tribunal (NCLT) in a proceeding under the Insolvency and Bankruptcy Code, 2016 55 (IBC), ignoring the availability of a statutory remedy of appeal to the National Company Law Appellate Tribunal (NCLAT) and if so, under what circumstances.
In the said case, there is an exposition on the well recognised exceptions to the self-imposed restraint of the High Courts, namely, in cases where a statutory alternative remedy of appeal is available, or there is lack of jurisdiction on the part of the statutory/quasi-judicial authority against whose order judicial review is sought. It was observed that an "error of jurisdiction" was always distinguished from "in excess of jurisdiction", till the judgment of the House of Lords in Anisminic Ltd. Vs. Foreign Compensation Commission [(1969) 2 WLR 163] (Anisminic). In Anisminic, the real question was not, whether, an authority made a wrong decision but whether they enquired into and decided a matter on which they had no right to consider. It was observed by the Hon'ble Supreme Court that just four days before the House of Lords delivered the judgment in Anisminic, an identical view was taken by a three judge Bench of the Hon'ble Supreme Court in West Bengal & Others vs. Sachindra Nath Chatterjee & Another, [(1969) 3 SCR 92], (Sachindra Nath Chatterjee) wherein the view taken by the Full Bench of Calcutta High Court in Hirday Nath Roy vs. Ramachandra Barna 56 Sarma, [ILR LXVIII Calcutta 138], (Hirday Nath Roy) was approved. It was held therein that "before a Court can be held to have jurisdiction to decide a particular matter, it must not only have jurisdiction to try the suit brought, but must also have the authority to pass the orders sought for." This would mean that the jurisdiction must include
(i) the power to hear and decide the questions at issue and (ii) the power to grant the relief asked for. Ultimately, in paragraph 24, it was observed as follows: "Therefore, insofar as the question of exercise of the power conferred by Article 226 of the Constitution, despite the availability of a statutory alternative remedy, is concerned, Anisminic cannot be relied upon." The distinction between the lack of jurisdiction and the wrongful exercise of the available jurisdiction should certainly be taken into account by High Courts, when Article 226 of the Constitution is sought to be invoked bypassing a statutory, alternative remedy provided by a special statute.
In the said case, the question was, as to, whether, the NCLT lacked the jurisdiction to issue a direction in relation to a matter covered by Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and the Statutory Rules issued thereunder; or, there was mere wrongful exercise of a recognised jurisdiction, for instance, asking a 57 wrong question or applying a wrong test or granting a wrong relief. On a detailed discussion, it was held that the NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute Supplemental Lease Deeds for the extension of the mining lease. Since, NCLT chose to exercise jurisdiction not vested in it in law, the High Court of Karnataka was justified in entertaining the writ petition, on the basis that NCLT was coram non judice. In the instant case, the State of Karnataka had invoked the jurisdiction of the High Court under Article 226 of the Constitution without taking recourse to the appellate remedy under NCLAT. It was held that the judicial review was permissible and the High Court was justified in entertaining the writ petition assailing the order of the NCLT, directing execution of a supplemental lease deed for the extension of the mining lease.
(d) Learned Senior counsel appearing for the respondent in Writ Appeal No.538 of 2020 placed reliance on Authorised Officer, State Bank of Travancore and another vs. Mathew K.C. [(2018) 3 SCC 85], (Mathew K.C.) wherein it was observed that SARFAESI Act is a complete Code by itself, providing for expeditious recovery of dues arising out of loans granted by financial institutions. The remedy of appeal by the aggrieved under Section 58 17 before the Debt Recovery Tribunal, followed by a right to appeal before the Appellate Tribunal under Section 18 was adequately provided under the Act. Therefore, the High Court ought not to have entertained the writ petition in view of the adequate alternative statutory remedies available. In that case, an interim order granted by the High Court in exercise of jurisdiction under Article 226 of the Constitution, staying further proceedings at the stage of Section 13(4) of the SARFAESI Act, on certain deposit to be made was questioned. It was observed that the writ petition ought not have been entertained and interim order granted for the mere asking without assigning special reasons, that too, without even granting opportunity to the other side to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. In the said case, it was also observed that the discretionary jurisdiction under Article 226 of the Constitution is not absolute but had to be exercised judiciously in the given facts of a case and in accordance with law.
The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well defined exceptions as observed in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal, [(2014) 1 SCC 59 603], (Chhabil Dass Agarwal). In the latter decision, it has been held that the exceptions to the rule of non-interference when efficacious, alternative remedy is available are as under which are illustrative and non-exhaustive:
(i) where remedy available under statute is not effective but only mere formality with no substantial relief;
(ii) where statutory authority not acted in accordance with provisions of enactment in question, or;
(iii) where statutory authority acted in defiance of fundamental principles of judicial procedure, or;
(iv) where statutory authority resorted to invoke provisions which are repealed, or;
(v) where statutory authority passed an order in total violation of principles of natural justice.
(e) In United Bank of India vs. Satyawati Tondon and others, [(2010) 8 SCC 110], (Satyawati Tondon) it was observed that it is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective, alternative remedy by filing an application, appeal, 60 revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
(f) Of course in ICICI Bank Limited vs Umakanta Mohapatra and others, [(2019) 13 SCC 497], (Umakanta Mohapatra), it was held, the writ petition was not maintainable and therefore, allowed the appeals.
(g) In Authorised Officer, State Bank of India vs. Allwyn Alloys Private Limited and others, [(2018) 8 SCC 120], the Hon'ble Supreme Court opined that Section 34 of the SARFAESI Act clearly bars filing of a civil suit. No civil court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT or DRAT is empowered by or under the Act to determine and no injunction can be granted by any court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act."
25. Following the aforementioned judgment rendered by the Division Bench of this Court, I am of the opinion that since the impugned notices are issued under Section 153C of the Act, are contrary to the judgment of the Hon'ble Apex Court, the writ 61 petitions filed under Article 226 of the Constitution of India, in the instant case, are maintainable.
26. In the backdrop of the finding recorded above, it is useful to cite the law declared by the Hon'ble Apex Court in the case of BRIGADIER NALIN KUMAR BHATIA v. UNION OF INDIA AND OTHERS, reported in (2020)4 SCC 78, wherein at paragraph 22 of the said judgment, it is observed thus:
"22. There is no presumption that a decision taken by persons occupying high posts is valid. All power vested in the authorities has to be discharged in accordance with the principles laid down by the Constitution and the other Statutes or Rules/Regulations governing the field. The judicial scrutiny of a decision does not depend on the rank or position held by the decision maker. The Court is concerned with the legality and validity of the decision and the rank of the decision maker does not make any difference."
27. Taking into the account the law enunciated by the Hon'ble Apex Court referred to above, the points for determination is answered in favour of petitioner. In the result, I pass the following:
62ORDER (1) Writ Petitions No.9937, 9938 and 9939 of 2022 are allowed and impugned Notices dated 21st August, 2019 and further proceedings thereof are quashed by remanding the matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above;
(2) Writ petition No.9945 of 2022 is allowed and Order dated 03rd May, 2022 passed in Appeal No. CIT(A)-11/BNG-10701/2019-20 is quashed.
The Respondent No.1 shall reconsider the Appeal filed by the petitioner referred to above and to dispose of the same in accordance with law after providing an opportunity of hearing to both the sides, considering the observation made above;
(3) Writ Petition No.9946 of 2022 is allowed and proceedings initiated under Section 153C of the Act culminating in issuance of Notice dated 22nd 63 August, 2019 are quashed and further proceedings thereof are quashed by remanding the matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above.
Sd/-
JUDGE lnn