2000 (8) TMI 68 - HC - Income Tax

Court quashes jurisdictional notice under Section 269C for lack of reasons, violating natural justice

Govind Versus Deputy Commissioner Of Income-Tax And Others

The court found that the initiation of proceedings under Section 269C was without jurisdiction due to the competent authority's failure to record reasons ... Notice, Conditions Precedent, Interpretation Of Taxing Statutes Issues Involved:1. Jurisdiction of the competent authority under Section 269C of the Income-tax Act, 1961.2. Delay in issuance of notice under Section 269D(2) of the Income-tax Act, 1961.3. Principles of natural justice regarding the reopening of proceedings after a long delay.Detailed Analysis:1. Jurisdiction of the competent authority under Section 269C of the Income-tax Act, 1961:The petitioner challenged the jurisdiction of the competent authority to issue the impugned notice under Section 269C of the Income-tax Act, 1961. The court noted that the competent authority must have reasons to believe that the fair market value of the property exceeds the apparent consideration by more than 15%, and such reasons must be recorded in writing before initiating proceedings. The petitioner argued that no such material or reasons were recorded prior to the issuance of the notice. The court found that the competent authority ignored the initial stage of recording reasons and directly issued the notice, which is contrary to the mandatory requirements of Section 269C(1). The absence of recorded reasons invalidated the jurisdiction to initiate proceedings, rendering the notice under Section 269D(1) vitiated.2. Delay in issuance of notice under Section 269D(2) of the Income-tax Act, 1961:The petitioner contended that the notice under Section 269D(2) was issued after a lapse of five years, which is against the scheme and spirit of the law and violates the principles of natural justice. The court observed that Section 269D(1) requires the publication of the notice in the Official Gazette within nine months from the end of the month in which the instrument of transfer is registered. Additionally, Section 269D(2) mandates that notices must be served on the concerned parties immediately after publication. The unexplained delay of five years in issuing notices to the parties was deemed wholly unjustified and rendered the publication of the notice ineffective and infructuous. This delay also violated the principles of natural justice.3. Principles of natural justice regarding the reopening of proceedings after a long delay:The petitioner argued that the reopening of proceedings after a long delay of over 4.5 years, post-conclusion of arguments, was contrary to the principles of natural justice. The court agreed, noting that the non-passing of the order for such an extended period was against the principles of fair trial and natural justice. The court held that the Revenue could not be permitted to renew the proceedings after more than 20 years, especially when the initial proceedings were vitiated by jurisdictional errors and procedural delays.Conclusion:The court concluded that the initiation of proceedings under Section 269C was without jurisdiction due to the failure of the competent authority to record reasons before issuing the notice. The delay in issuing notices under Section 269D(2) and the prolonged reopening of proceedings further violated the principles of natural justice. Consequently, the petition was allowed, and the notice and subsequent proceedings were quashed. There was no order as to costs, and any security deposit was to be refunded to the petitioner after verification.