2024 (2) TMI 1579 - HC - Income Tax

Writ relief denied for delayed challenge to assessment under section 153C where petitioner slept over objections

Ranjana Agarwal Versus Assistant Commissioner Of Income Tax And 3 Others

HC refused to exercise discretionary writ jurisdiction under Article 226 to quash assessment proceedings under section 153C, finding the petitioner ... Assessment u/s 153C - as argued assessment proceedings have been initiated without jurisdiction, inasmuch as the petitioner is not the person searched and there exists no Satisfaction Note - HELD THAT:- It is true that the jurisdictional issue raised may be dealt with by the writ court, as may not give rise to fruitless proceedings (where jurisdiction may be lacking). It is equally true that the issue of writ falls under discretionary jurisdiction to be exercised at appropriate stage, considering the availability of statutory remedies. Delay and laches may deny such discretionary remedy to the petitioner. Applying that test, we find that petitioner has raised objection to assumption of jurisdiction on 13.08.2022. That objection was rejected by a written order. The Satisfaction Note relied by the revenue authority was appended thereto. The petitioner slept over the matter for more than one year. Merely because, assessment proceedings may have been transferred in the meanwhile, does not explain the laches that otherwise exist. In the context of the assessment proceedings arising as a consequence of search, the writ court may not exercise its jurisdiction at each and every prayer made for that exercise. The assessee has acted with delay. She is deprived of such interference without prejudice to her rights to raise the issues before the assessing authority itself. Since the assessment proceedings are about to become time barred and the petitioner has acted late, we decline to exercise our discretionary jurisdiction under Article 226 of the Constitution of India at this stage. ISSUES PRESENTED AND CONSIDERED 1. Whether assessment proceedings under Section 153-C of the Income Tax Act can be validly initiated against a person who was not the subject of the search in the absence of a Satisfaction Note constituting jurisdictional satisfaction under Section 153-A read with Section 153-C. 2. Whether the date and timing of the Satisfaction Note (issued subsequent to the search) affects the competence to initiate assessments beyond the statutory period, having regard to the requisition/limitation regime applicable to search-linked proceedings. 3. Whether delay and laches on the part of the taxpayer in challenging the assumption of jurisdiction before the writ court disentitle the taxpayer to exercise of discretionary relief under Article 226 where statutory remedies and assessment proceedings remain available. 4. Scope and limits of the writ court's discretionary jurisdiction to entertain pre-assessment challenges to jurisdiction in search-connected assessments, particularly when assessments are nearing statutory time-bar. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Jurisdictional requirement under Section 153-C (read with Section 153-A): Legal framework Legal framework: Section 153-A contemplates assessments consequential to search if the officer is satisfied that material seized necessitates assessments; Section 153-C permits assessment of persons other than the searched person where incriminating material relates to such persons. The existence of the requisite satisfaction (Satisfaction Note) is a jurisdictional precondition to proceed against non-searched persons. Precedent Treatment: The judgment does not rely on or discuss specific precedent authorities; the Court proceeds on statutory principles and the administrative record (rejection order and appended Satisfaction Note). Interpretation and reasoning: The Court accepts that lack of a Satisfaction Note would render proceedings under Section 153-C without jurisdiction and therefore amenable to challenge. The petitioner's objection premised on absence of Satisfaction Note was recognised as a legitimate jurisdictional contention that can be raised either before the assessing authority or the writ court. Ratio vs. Obiter: Ratio - The existence of jurisdictional satisfaction is material; absence thereof can vitiate Section 153-C proceedings. Obiter - No detailed doctrinal pronouncement on the contents or form of the Satisfaction Note is made. Conclusions: Jurisdiction under Section 153-C is conditional upon the Satisfaction Note under Section 153-A; challenge to jurisdiction on this ground is tenable. The Court, however, does not decide the factual sufficiency of the appended Satisfaction Note but leaves it open for adjudication by the assessing authority. Issue 2 - Effect of timing of Satisfaction Note and limitation/requisition considerations Legal framework: Assessments consequent to search are governed by special temporal rules, including requisition/limitation constraints; the date of any Satisfaction Note may bear on whether assessments for particular years can be validly initiated beyond prescribed periods. Precedent Treatment: No specific judicial precedents are invoked in the text concerning the temporal effect of a Satisfaction Note; the Court confines itself to recognising the petitioner's contention that a Satisfaction Note dated substantially later than the search may constrain assessment scope. Interpretation and reasoning: The petitioner contended that because the Satisfaction Note relied upon dated to 2022 for a search in 2019, assessments beyond a ten-year period from requisition might be impermissible and that incriminating material related only to two specific assessment years. The Court acknowledged these contentions as arguable points relevant to the jurisdiction and merits of assessment, but refrained from deciding them on merits in writ jurisdiction. Ratio vs. Obiter: Obiter - The Court does not determine whether the later date of the Satisfaction Note invalidates assessments for particular years; it records the issue as one which the assessing authority must consider and decide with reasons. Conclusions: The timing of the Satisfaction Note may have substantive consequences for the competence to make assessments for particular years; such temporal challenges should be adjudicated by the assessing authority by a reasoned order rather than being decided at this interlocutory writ stage. Issue 3 - Laches and delay in approaching the writ court after rejection of objection Legal framework: Exercise of discretionary writ jurisdiction under Article 226 is governed by considerations of delay, laches, availability of alternative statutory remedies and overall equity; delay may disentitle a litigant to relief even where a jurisdictional grievance exists. Precedent Treatment: The Court applies established equitable principles regarding laches and discretionary relief but cites no specific authorities in the text. Interpretation and reasoning: The petitioner raised the objection on 13.08.2022; the objection was rejected on 28.09.2022 and the Satisfaction Note furnished. The petitioner then refrained from meaningful action for over a year; assessment proceedings progressed and were approaching time-bar (statutory limitation end dated 31.03.2024). The Court found the delay unexplained and held that sleeping over the grievance for more than a year constituted laches sufficient to deny discretionary writ relief at that stage. Ratio vs. Obiter: Ratio - Unexplained delay after a formal rejection of objection to assumption of jurisdiction can disentitle a taxpayer to discretionary interference under Article 226, particularly where statutory remedies and the assessing machinery remain available. Conclusions: The petitioner's inaction for over a year after receipt of the rejection order amounted to laches; the Court declined to exercise discretionary writ relief on that ground while preserving the petitioner's right to raise the objections before the assessing authority. Issue 4 - Scope of writ court's discretionary intervention in search-linked assessments and final directions Legal framework: The writ court may, in appropriate cases, intervene to prevent futile proceedings where jurisdiction is clearly lacking, but will exercise discretion sparingly in assessment matters in view of statutory mechanisms and the need to avoid premature judicial intervention into ongoing fact-sensitive assessments. Precedent Treatment: The Court reiterates the principle that writ jurisdiction is discretionary and should not be routinely exercised to pre-empt assessment proceedings; no case law is cited in the text. Interpretation and reasoning: Applying the discretionary test, the Court determined that (a) the jurisdictional challenge was cognizable, but (b) the petitioner's delay militated against writ relief, and (c) the appropriate forum for detailed factual and legal determination of the Satisfaction Note, limitation and incriminating material was the assessing authority. Consequently, the Court declined to quash the assessment proceedings but directed that objections be considered by the assessing authority by a reasoned and speaking order. Ratio vs. Obiter: Ratio - The writ court will decline to interfere where the petitioner has delayed institution of writ relief after administrative adjudication of the objection and where statutory remedies are available, though the court may intervene earlier to prevent manifest lack of jurisdiction. Obiter - The Court's directions on the assessing authority's duty to issue a reasoned and speaking order are instructive but not an exhaustive template for decision-making. Conclusions: The writ petition is dismissed on discretionary grounds of laches without prejudice to the taxpayer's entitlement to press jurisdictional and limitation objections before the assessing authority; the assessing authority is directed to decide such objections with reasons. The Court refrains from adjudicating the substantive validity of the Satisfaction Note or limitation contentions in the writ forum.