Writ remedy and Section 153C limits: jurisdictional defects and natural justice breach justified quashing tax proceedings.
Writ jurisdiction under Article 226 may still be invoked despite an alternative appellate remedy where the impugned action is alleged to be without jurisdiction or in breach of natural justice, and the Karnataka High Court treated the writ petitions as maintainable on that basis. It also held that notices and assessments under Section 153C, founded on diaries and loose sheets seized from another premises, could not be sustained where the material lacked the evidentiary character of regularly maintained books and the transfer and opportunity requirements were not followed. The impugned notices, assessments and appellate order were quashed and the matter remanded for fresh consideration after hearing the parties.
Issues: (i) Whether writ jurisdiction under Article 226 of the Constitution of India could be invoked despite the existence of an alternative appellate remedy, in view of alleged lack of jurisdiction and violation of natural justice. (ii) Whether the notices and assessment proceedings initiated under Section 153C of the Income-tax Act, 1961, founded on diaries and loose sheets seized from another premises and without the requisite opportunity under the transfer/satisfaction framework, were sustainable.
Issue (i): Whether writ jurisdiction under Article 226 of the Constitution of India could be invoked despite the existence of an alternative appellate remedy, in view of alleged lack of jurisdiction and violation of natural justice.
Analysis: The availability of an alternate statutory remedy does not act as an absolute bar where the impugned action is without jurisdiction, violates natural justice, or otherwise falls within the recognised exceptions to self-imposed writ restraint. The decision-making process must satisfy legality, fairness, and reasoned application of mind. Where the authority proceeds contrary to the governing statutory procedure or acts in excess of jurisdiction, judicial review remains available notwithstanding the existence of an appeal.
Conclusion: The writ petitions were maintainable and the objection based on alternate remedy was rejected.
Issue (ii): Whether the notices and assessment proceedings initiated under Section 153C of the Income-tax Act, 1961, founded on diaries and loose sheets seized from another premises and without the requisite opportunity under the transfer/satisfaction framework, were sustainable.
Analysis: Loose sheets and diaries, when not shown to be part of regularly kept books of account, do not carry evidentiary value of the kind required to sustain the impugned action. The statutory scheme also demanded compliance with the transfer and opportunity requirement under Section 127(1), and the proceedings were found to have been initiated on a wrong understanding of the scope of Section 153C. The absence of the required opportunity and the reliance on inadmissible material rendered the proceedings jurisdictionally infirm. The assessments and connected appellate order therefore could not be sustained and required fresh consideration by the competent authority.
Conclusion: The impugned notices, assessment proceedings, and the appellate order were quashed, and the matters were remanded for reconsideration in accordance with law after hearing the parties.
Final Conclusion: The petitions succeeded on the jurisdictional challenge, the impugned tax action was set aside, and the matters were sent back for fresh adjudication within the statutory framework.
Ratio Decidendi: In writ proceedings, the availability of an alternate remedy does not bar interference where the impugned tax action is without jurisdiction or violative of natural justice, and loose sheets or diaries not forming part of regularly maintained books of account cannot, by themselves, sustain proceedings under Section 153C of the Income-tax Act, 1961.