Natural justice and section 201 proviso can justify writ review despite an alternate appeal remedy
Availability of an alternate statutory appeal does not by itself bar writ jurisdiction where the assessee alleges breach of natural justice and non-consideration of its reply. The court noted that the authority failed to deal with the petitioner's explanation and supporting material before proceeding. Liability as an assessee in default under section 201 also depends on the proviso protecting a deductor where the resident recipient has filed returns, included the sum, and paid tax due. Because that material was not examined, the default finding, demand, and attachment could not be sustained and the matter required fresh consideration after a fair hearing.
Issues: (i) Whether the writ petition was maintainable despite the availability of an alternate statutory appeal under the Income-tax Act, 1961 when the impugned order was alleged to have been passed in breach of natural justice; (ii) Whether the order treating the petitioner as an assessee in default under section 201 and the consequential demand and attachment could stand when the petitioner's reply and supporting material regarding the deductees' returns and tax payment were not considered.
Issue (i): Whether the writ petition was maintainable despite the availability of an alternate statutory appeal under the Income-tax Act, 1961 when the impugned order was alleged to have been passed in breach of natural justice.
Analysis: The availability of an appellate remedy does not bar writ jurisdiction in every case. Where the grievance is that the authority proceeded without granting a meaningful opportunity of hearing and ignored the material placed in defence, the extraordinary jurisdiction may still be invoked. The record showed that the petitioner had sought to meet the show-cause notice and requested consideration of its explanation, yet the authority did not address the reply in a real and effective manner before passing the order and initiating recovery.
Conclusion: The writ petition was maintainable and the petitioner was not to be non-suited on the ground of alternate remedy.
Issue (ii): Whether the order treating the petitioner as an assessee in default under section 201 and the consequential demand and attachment could stand when the petitioner's reply and supporting material regarding the deductees' returns and tax payment were not considered.
Analysis: Liability under section 201 depends on the statutory framework, including the proviso protecting a deductor where the resident recipient has filed returns, taken the sum into account, and paid tax due. The petitioner had asserted that the recipients had complied with the return-filing and tax-payment requirements, but the authority did not examine that claim or the supporting documents. Since those facts were material to the applicability of the proviso, a proper fact-finding exercise and opportunity of hearing were required before fastening default liability and consequential recovery.
Conclusion: The order under section 201, the consequential demand, and the attachment could not be sustained and were liable to be set aside.
Final Conclusion: The impugned assessment and recovery action were quashed, and the matter was directed to be reconsidered afresh after giving the petitioner a full opportunity to respond and produce material.
Ratio Decidendi: Where a deductor asserts that the statutory proviso to section 201 applies, the assessing authority must consider the deductor's explanation and afford a fair opportunity before treating it as an assessee in default; breach of natural justice can justify writ interference notwithstanding an alternate remedy.
TaxTMI 
AI Drafter ✕
TaxTMI 
