Gujarat High Court Refuses To Interfere With Section 153C Income Tax Notice, Allows Assessee To Raise Objections

The petition challenged the validity of several notices and orders issued under the Income Tax Act, 1961. Specifically, it challenges a notice dated 09.06.2022 for the Assessment Year 2014-15 under Section 153C, as well as an order dated 02.12.2023 which purportedly serves as the respondent No.2's disposal of objections.

Additionally, the petition challenged a notice issued under Section 142(1) on 11.12.2023. The prayer seeks to prevent the respondents from enforcing compliance with the aforementioned notice dated 09.06.2022 for A.Y.2014-15.

The grounds for challenging the initiation of proceedings under Section 153C of the Act'1961 include:

(i) The satisfaction note of the searched person as well as the satisfaction note recorded in the case of the petitioner, have not been provided to the petitioner, though specific request was made by the petitioner vide letter dated 08.08.2022. The entire proceedings leading to the issuance of notice under Section 142, therefore, stands vitiated.

(ii) No incriminating material was found against the petitioner during the search carried out on 15.10.2019.

(iii) Baseless allegations have been made against the petitioner without there being any material before the Assessing Officer to even record the prima facie proof that the seized material has a bearing on the petitioner's case.

After careful consideration of the presented arguments, the Court noted that the petitioner did not contest the fact that the Assessing Officer had indeed recorded a satisfaction note independently before proceeding under Section 153C of the Income Tax Act, 1961, upon receiving the satisfaction note of the Assessing Officer of the searched person.

The Court further acknowledged that although the satisfaction note was later provided to the petitioner, subsequent to the notice under section 142(1) dated 11.12.2023, this fact had not been disclosed in the writ petition. Despite this, the Court emphasized that the absence of the satisfaction note at the initial stage did not invalidate the subsequent proceedings.

Given that the petitioner approached the Court after responding to the notice under Section 142(1) dated 11.12.2023 by filing a return, and considering that the notice under Section 153C for the Assessment Year 2014-15 was issued on 09.06.2022, the Court deemed it inappropriate to intervene solely on the grounds of the satisfaction note not being provided along with the initial notice.

The Court placed reliance on the decision of the Apex Court relied on by the learned counsel for the Revenue in the case of Commissioner of Income-Tax, Gujarat vs. Vijaybhai N. Chandrani, [2013] 35 taxmann.com 580(SC), wherein it was held by the Apex Court that at the stage of issuance of notice under Section 153C, the High Court ought not to have entertained the writ petition and relegate the assessee to file the reply to the said notices upon receipt of the decision of the Assessing Officer, if for any reason, it was aggrieved by the said decision, to question the same before the forum provided under the Act.

The Court further noted, “the points raised by the learned counsel for the assessee on the plea of lack of jurisdiction of the Assessing Officer in issuing notice under Section 153C of the Act, can not be appreciated by us, as it could not be demonstrated that no satisfaction note was recorded by the Assessing Officer prior to issuance of the notice under Section 153C of the Act, 1961 on 09.06.2022.”

For the aforesaid, the Court did not find any merit in the challenge made in the bunch of writ petitions to the notice under Section 153C of the Act, 1961 dated 09.06.2022 and the notice under Section 142(1) dated 11.12.2023.

However, the Court kept it open for the petitioner to raise all possible objections before the Assessing Officer during the course of assessment proceedings including that there was no satisfaction note of the Assessing Officer before issuance of the notice under Section 153C dated 09.06.2022 and that there was no occasion to record prima facie proof that the seized material pertains to or relates to the petitioner.

The Court said that the petitioner would be at liberty to raise objections that no incriminating material was found during the search carried out on 15.10.2019 of the searched person, which could have been made basis for recording satisfaction, if any, by the Assessing Officer of the petitioner.

It also said that the petitioner would be free to contend that he cannot be linked to a baseless satisfaction note, which has no material foundation.

In the Order, the Court clarified that while framing the assessment order, the Assessing Officer will not be influenced by any of the observations made by us hereinabove as we have not expressed any opinion on the correctness or otherwise of the submissions made on the merits of the proceedings initiated against the assessee based on the search carried out under Section 132 of the Act'1961.

The writ petitions were disposed of and the request for stay of the order for a period of four weeks to enable the petitioner to approach the Apex Court was rejected.

Case No.: R/Special Civil Application No. 315 Of 2024

Case Title: Shyamlal Rupchand Parwani Versus The Assistant Commissioner Income Tax , Central Circle 1(1) (1)

LL Citation: 2024 LiveLaw (Guj) 18

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