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Judgment
Veeraswami, J.
(1) These petitions are to quash the orders of the Income Tax Officer, Circle J. Coimbatore, relating to the assessment year 1961-62. By those
orders the reopened under S. 34 of the Income Tax Act 1922, earlier assessment orders made against each of the assessees, a Hindu undivided
family, and included in each case a sum of Rs. one lakh to the chargeable income. This is on the view that what was stated to be a loan taken by
each of the assessees in the sum of Rs. one lakh from Gopalakrishna Mills (P.) Ltd., should be deemed to be dividend within the meaning of S.
2(6-A)(e) of the Act. The Income Tax Officer overruled a contention for the assessee that at the time the loans were made. Gopalakrishna Mills
(Pte.) Ltd., had no accumulated profits within the meaning of S. 2(6-A)(e) and that the development rebate reserve with the company could not be
considered as accumulated profits for the purpose of that section. The Income Tax Officer accepted the position that but for the development
rebate reserve, there was no accumulated profits strictly so called, but was of the view that though the development rebate reserve would not be
available for distribution by way of dividends or profits nevertheless, it, in a sense, represented accumulated profits like any other reserve, and the
question whether the creation of particular reserve was a statutory necessity or not was irrelevant in considering the substantial nature or character
of the development rebate reserve. On that reasoning he further considered that it was not necessary to correlate the loans with any particular
reserve or accumulated profits so long as the same accumulated profit was there with the company. The Income Tax Officer took that view
because he thought the funds transferred from the development rebate reserve did not ipso facto go out of the funds of the company and they were
only an appropriation out of the company''s profits.
There were certain other contentions also put forward before the Income Tax Officer, which he did not accept, but which we do not think it
necessary for purposes of there petitions to refer to. The assessees filed appeals before the Appellate Assistant Commissioner of Income Tax,
Coimbatore, which were actually heard by him on 18-11-1964 Pending those proceedings they applied for stay of collection which the Income
Tax Officer declined to grant. Thereafter they moved the Inspecting Assistant Commissioner of Income Tax and later the Commissioner of Income
Tax, Madras, who gave a certain measure of relief, but not to their complete satisfaction. It was in these circumstances they moved this Court with
these petitions under Art 226 of the Constitution.
(2) Two main points were taken by the petitioners (1) levy of tax on the amounts withdrawn by the assessees from the company temporarily was
illegal and without jurisdiction, and (2) S. 2(6-A)(e) was ultra vires the Central Legislature. The second point is now concluded by Navnitlal C.
Javeri Vs. K.K. Sen, Appellate Assistant Commissioner of Income Tax, ''D'' Range, Bombay, in which the Supreme Court upheld the
constitutional validity of that statutory provision it is the first point, therefore, that is sought to be argued before us.
For the Revenue the objection is taken that since the assessees have a right of appeal and actually filed appeals, which were heard and orders are
yet to be made, this Court, in the exercise of its discretion under Art 226, should, in view of that decline to entertain these petitions. Since we have
decide to accepted this objection we have not heard learned counsel for the assessees on the first point.
(3) Article 226 of the Constitution is undoubtedly widely and does not place any restraint or restriction on the High Court in the exercise of the
jurisdiction under the Article. Even the territorial limitation which originally existed has since been removed. Though the Article refers to certain
kinds of writs including certiorari, the power under the Article is not limited to grant of writs analogous to Crown writs in English jurisdiction. The
power under the Article extends to the High Court giving any direction, orders or writs for the purpose of enforcement of fundamental rights or for
any other purpose. Wide as these powers are no question of a maintainability of any petition, which is filed under that Article, can ever arise. The
powers are, however, discretionary in character, so that in particular cases, no question of legality or lawfulness of the exercise of the jurisdiction
can properly arise, but the question would be whether, in the particular circumstances, the Court should exercise its discretion and invoke its
powers. In the nature of things that consideration will have to be applied in the context of the circumstances in each case. If the Court feels that the
circumstances and exigencies of the case taken as a whole require that the Court should exercise its power, it will do so.
(4) Certiorari normally goes out to correct errors of jurisdiction, either the lack of it or excess or irregular exercise of it. It also goes out to correct
an error apparent on the face of the record, which does not, of course, include an error of a factual nature, or violation of the principles of natural
justice. The English Courts in issuing prerogative writs, particularly certiorari, decline to exercise that jurisdiction where an alternative remedy exists
which a party may well resort to. But, under Art 226, strictly that limitation may not be applicable, as the jurisdiction of the Hindu Courts to issue
directions is entirely based on the language of the article. Nevertheless, some of the principled applicable to English writs are borne in mind in
giving directions under the Article. Existence of an alternative remedy, which is adequate or otherwise, may not, however, always stand in the way
of this Court exercising its jurisdiction if other considerations outweigh. But, normally speaking, existence of an alternative remedy is a strong
dissuading factor when powers under Art 226 are invoked. Where a right of appeal is given by a statue from an order, of which a party may feel
aggrieved, the question for consideration will be whether the statutory mode of redress should be by-passed, and if so, on what grounds? On that
matter, decisions of Court in have not to been uniform and that with respect is what is to be expected because the Court in each case is concerned
with the facts before them and the compelling or justifiable circumstances with reference in which the powers under the Article are exercised.
Broadly speaking, where a question of vires or constitutional validity of a statutory provision or a rule or total lack of jurisdiction of the particular
officer or forum or an obviously patent error arises, the Court, in our opinion, may well be justified in exercising its powers under the Article. That
is because in the first of these cases a decision on vires or constitutionality will not be within the competence of the officer or forum other than the
superior Courts, and in the second instance, it will be total futile for a forum without jurisdiction to proceed in the matter involving harassment of the
parties and waste of official and private time. Errors of jurisdiction may also come within the purview of the second instance. The last instance
justifies interference notwithstanding an alternative remedy, for, the error may be so patent as in the case of, for example, two or two being added
as five. In such cases, it is apparent that not to interfere on ground of existence of an alternative remedy may cause gross injustice or great hardship
especially when the Court may feel that the party should get relief at the earliest possible moment. K.S. Shivji and Co. Vs. Joint Commercial Tax
Officer, Esplanade Division, Madras, falls under the last category.
(5) Learned counsel for the petitioners in support of his contention that we should entertain the petitions under Art. 226 invited our attention to
Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another, , Bhopal Sugar Industries Ltd., M. P. v. D. P.
Dube, 14 STC 410: (AIR 1967 SC 549); Shivram Poddar Vs. Income Tax Officer, Central Circle II, Calcutta, and Another, ; Santmal Pitambar
Prasad v. Income Tax Officer, 1963-17 ITR 562 and Transport Co. (P) Ltd. v. Second Income Tax Officer, 1964-51 ITR 82 . On the other
hand, for the Revenue, reference was made to Rex v. Inspector of Taxes and Commissioner of Income Tax, (1922) 8 TC 327; C.A. Abraham,
Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, ; Thansingh Nathmal and Others Vs. A. Mazid, Superintendent of
Taxes, ; Lalji Haridas v. R. H. Bhatt, 1955 55 ITR 415 ; Sales Tax Officer, Jodhpur and Another Vs. Shiv Ratan G. Mohatta, and Madhya
Pradesh Industries Ltd. Vs. Income Tax Officer, Special Investigation Circle ''B'', Nagpur, . We do not think it necessary to deal with all these
decisions. It will suffice if we refer to the last three decisions which also happen to be the latest.
(6) Lalji Haridas Vs. R.H. Bhatt and Another, , is a case where, before making an order of assessment, notice was issued against the assessee
under S. 46(1)(a) of the Saurashtra Income Tax Ordinance, 1949, which corresponds to S. 34(1)(a) of the Indian Income Tax Act. The assessee
made a return stating that the amounts in question there did not represent his income at all. The assessee preferred an appeal, with the result that
the matter, was remitted to the Income Tax Officer. Thereafter, the assessee was required to appear before the Income Tax Officer and products
his evidence. Instead of complying with that requisition, the assessee moved the High Court of Gujarat for a writ, while at the same time, he also
preferred an appeal from the remand order to the Income Tax Appellate Tribunal. The writ petition was dismissed summarily, and it was against
that order the assessee by special leave appealed to the Supreme Court. One of the contentions for the assessee was the notice issued to the
assess under S. 34(1)(a) was barred by time and was, therefore, invalid. Dealing with the contention, the Supreme Court observed:
We did not allow Mr. Pathak to develop this point, because we took the view that a plea of this kind must ordinarily be taken before respondent
No. 1 himself. The jurisdiction conferred on the High Court under Art. 226 is not intended to supersede the jurisdiction and authority of the
Income Tax officers to deal with the merits of all the contentions that the assessee may raise before the, and so it would be entirely inappropriate to
permit an assessee to move the High Court under Art 226 and contend that a notice issued against him is barred by time. That is a matter which
the Income Tax authorities must consider on the merits in the light of the relevant evidence.
(7) In Sales Tax Officer, Jodhpur and Another Vs. Shiv Ratan G. Mohatta, , again the Supreme Court had occasion to consider the question as to
how far the High Court should interfere under Art. 226. In that case, a firm claimed that it was not liable to be assessed to sale tax in respect of a
certain turnover and contended that it was not a dealer within S. 2(f) of the Rajasthan Sales Tax Act. A further contention for the assessee was that
the sales were in the course of import within Art. 286(1)(b) of the Constitution. The Sales Tax Officer rejected the first contention, but it his order
there was no discussion on the other point based on Art. 286(1)(b). The assessee then filed a petition under Art. 226 and reiterated the two
grounds. The State raised an objection to the maintainability of the petition on the ground that the petitioner should have availed himself of the
alternative remedy of appeal provided under the Rajasthan Sales Tax Act. The High Court did not accept this objection, because, as it thought, the
contention of the petitioner was that in view of Art. 286(1)(b) of the Constitution, the Sales Tax Officer had no jurisdiction to assess the petitioner
to pay sales tax on the sale of goods in the course of import into the territory of India. The High Court proceeded to deal with the merits of the
case and came to the conclusion that the assessee was a dealer and that the were also in the course of import. In the circumstances, the State with
a certificate of fitness from the High Court filed the appeal before the Supreme Court. There, on behalf of the State, two points were raised, one of
which was that on the facts of that case the High Court should have refused to entrain that petition. The Supreme Court accepted this ground and
held:
We are of the opinion that the High Court should have declined to entertain the petition. No exceptional circumstances exist in this case to warrant
the exercise of the extraordinary jurisdiction under Art. 226. It was not the object of Art. 226 to convert High Courts into original or appellate
assessing authorities whenever an assessee choose to attack an assessment order on the ground that a sale was made in the course of import and
therefore exempt from tax. It was urged on behalf of the assessee that they would have had to deposit sales tax, while filling an appeal. Even if this
is so, does this mean that in every case in which the assessee has to deposit sales tax, he can by-pass the remedies provided by the Sales Tax Act?
Surely not. There must be something more in a case to warrant the entertainment of a petition under Art. 226, something going to the root of the
jurisdiction of the Sales Tax Officer, something to show that it would be a case of palpable injustice to the assessee to force him to adopt the
remedies provided by the Act.
Madhya Pradesh Industries Ltd. Vs. Income Tax Officer, Special Investigation Circle ''B'', Nagpur, , was concerned with a petition for a writ of
prohibition restraining the Income Tax Officer from taking any action pursuant to a notice issued under S. 34 of the Income Tax Act. The
contention for the assessee was that the notice was with our jurisdiction and the exercise of the power under that section by the Income Tax
Officer was for a colorable purpose. The Bombay High Court(Nagpur Bench) rejected the petition in liming, and the question before the Supreme
Court on appeal was whether the High Court acted not properly in refusing to investigate the ground raised by the assessee. In dealing with that
question the Supreme Court observed thus:
Jurisdiction to issue prerogative writs is designed to invest the High Court with authority to superintend the exercise of Government or other
powers by tribunals, authorities, bodies, or persons; it is intended to be exercised in cases where a person has a right and that right is infringed by a
Tribunal authority, body or person acting without or in excess of jurisdiction or in violation of principles of natural justice, or where it refuses to
exercise jurisdiction or in violation of principles of natural justice, or where it refuses to exercise jurisdiction vested it by law, or even in cases,
where there is an error apparent on the face of the record of a quasi judicial authority and the act, omission or error results in grave injustice. The
jurisdiction is discretionary and the High Court is not bound to issue a writ merely because it is lawful to do so. It is also not intended thereby to
supersede the authority and jurisdiction conferred upon the taxing authorities who are invested with power to deal with the merits do the
contentions raised before them Lalji Haridas Vs. R.H. Bhatt and Another, . The High Court must in each case consider, whether the act or
omission complained of has resulted or is likely to result in a grave injustice, and whether the party approaching it has another adequate remedy
which is equally efficacious, whether he has approached the Court without acquiesence, and without undue delay, whether the problem posed
raises complicated questions of disputed facts which it would be inappropriate for the High Court to determined, whether the aggrieved party has
been guilty of misrepresentation or suppression of material facts, and whether notwithstanding the apparent breach it would be inequitable to grant
relief"".
It is clear, having regard to these three decisions as well as the other cases that while the power under Art. 226 is discretionary, a certain restraint
upon its exercise will be called for. The very wide amplitude of the power itself justifies such a restraint and the power could be exercised only in
proper cases. Where a statue create a liability and indicates the forum which will determine such liability and sets up a hierarchy of appellate
jurisdictions, it is but proper that the scheme of such a statue is not normally or as a matter of course, by-passed, and interference is made under,
Art 226 either at the original or at any subsequent stages envisages in the statutory scheme. It is true, the power is wide enough to clothe the High
Courts with the jurisdiction to interference even in such cases, but in the exercise of their discretion under the Article, the Court should, in our
opinion, take into consideration the statutory scheme of remedies and decline to interfere unless the alternative remedies are inadequate and to
compel a party to resort to them will amount to denial of speedy justice in the circumstances and would mean given hardship and harassment and
waste of time and money.
(8) In this case, no question of jurisdiction arises. Learned counsel for the assessees argued that if one wrong interpretation of S. 2(6--A)(c) the
Income Tax Officer charged them to tax, he would he acting without jurisdiction. We are unable to accept this contention. There is a marked
distinction between a question of law pure and simple and a question of law involving jurisdiction. The jurisdiction to reopen an assessment is
conferred, under S. 34 of the Income Tax Act. It is not the contention for the petitioners that the Income Tax Officer is not competent in this case
to act under that section. The Income Tax Officer having jurisdiction is, therefore, also competent to interpret the particular section, and it cannot
be said that merely because the petitioners consider that he has placed a wrong interpretation on that section, therefore, the office. acted without
jurisdiction or exercised his jurisdiction wrongly. The learned Chief Justice in (1922) 8 Tax Cas 327 observed:
Mr. Montgomery concedes that the question whether the deduction is or is not authorised by the Act is a question within the jurisdiction of the
Surveyor to determined in that part of the argument. Mr. Montgomery appeared to say, I do not know if he seriously great it, that if the Surveyor
decide the question correctly, the matter was within the jurisdiction, but if he decided it incorrectly, the matter was not within his jurisdiction. If that
be indeed the argument, it appears to me to confuse two things; an erroneous decision within the jurisdiction and a usurpation of a jurisdiction
which does not exist. I think it is a fact that the question which had to be determined here was a question at the outset within the jurisdiction of the
Surveyor, and if there is exception taken to the additional first assessment which he has accordingly made, there is a clear right of appeal under the
Act, and that right of appeal is at that present moment being pursued by the applicants in this case. I think therefore, that the application for the writ
of prohibition manifestly fails.
The question of interpretation of S. 2(6--A)(e) being entirely within the competence of the Income Tax Officer, or the Appellate Assistant
Commissioner, that can raise no question of his jurisdiction or irregular exercise of it. There is no question of vires of the section arising because, as
we said Navnitlal C. Javeri Vs. K.K. Sen, Appellate Assistant Commissioner of Income Tax, ''D'' Range, Bombay, has upheld the validity of the
section. It is not contended for the assessees that there is by infraction of the principles of natural justice. As a matter of fact, the assessees availed
themselves of the alternative remedy, have filed appeals, which now have been heard, and orders thereon reversed. We find no exceptional
justifiable reasons to persuade us to by-ass the statutory remedies. In view of these circumstances, as we said, we accept the contention for the
Revenue that we must leave the assessees to the remedies provide under the Act. These remedies include eventually a reference to this Court
under S. 66 of the Act.
(9) The petitions are dismissed with costs. Counsel''s fee Rs. 250 one set.
(10) Learned counsel for the petitioners say that it would be desirable that the appeals pending before the Appellate Assistant Commissioner are
disposed of at an early date. We think so. Learned counsel for the Revenue undertakes that he will communicate with the appellate authority, so
that it may dispose of the appeals within two months from today.