2025 (3) TMI 413 - HC - Income Tax

Court Admits Appeal on Missing Tax Records 2009-2010; Questions Section 153C Validity and ITAT's Cross Objections Handling

Pr. Commissioner of Income Tax Central-3, Mumbai Versus Martand Properties Ltd.

The Bombay HC addressed an appeal concerning missing assessment records for the year 2009-2010. Despite the records being untraceable, the Court admitted ... Direction to produce assessment records so that at least one of the grounds on which the ITAT had made the impugned order could be suitably addressed - Appellant, has placed before us a communication informing him that the records are not traceable after the passage of approximately 13 to 14 years. HELD THAT:- While we proposed to consider this Appeal because we are satisfied that it raises substantial questions of law, we think that we would be failing in our duty if we do not direct the PCIT (4), Mumbai, to order an enquiry into the disappearance of records in this matter and submit a report within two months to this Court. We reluctantly record that similar directions in other matters result in conclusions that, though the records have disappeared, no officer is responsible for such disappearance. This is quite unfortunate, and because of this attitude, the instances of disappearance or selective disappearance of records are on the rise. If the records have disappeared, we fail to understand how no official can be held responsible. In such a situation, at least the highest officer must assume responsibility for the disappearance of records. PCIT must also apprise this Court of whether there is any procedure for filing police complaints where official records are stated to have disappeared in thin air. Ultimately, the Revenue Officials must be conscious of the fact that they are only trustees with respect to the positions that they hold and the powers that they discharge. Therefore, they are responsible for ensuring that the records are properly maintained. In a given case, if the records are misplaced, a proper explanation should be forthcoming. The statement in the communication addressed to Mr Suresh Kumar about the matter being 13 to 14 years old is incorrect given the fact that the revenue instituted in this Appeal in November of 2017. We presume that the records were very much available at the time of the appeal's institution. However, after the appeal's institution, we are surprised by how a statement can be made if the records are not traceable. Appeal is required to be admitted on the following substantial questions of Law:- “i) Whether on the facts and in the circumstances of the case and in Law, the Hon'ble ITAT has erred in holding that proceedings u/s 153C of the IT Act, 1961 are invalid in view of non-recording of satisfaction note by the AO of searched person, when the AO of the searched person (i.e. M/s Jogiya Properties Pvt Ltd) and third person (i.e. the assessee company) are the same and thus the common satisfaction note has been recorded?' ii) 'Whether on the facts and in the circumstances of the case and in Law, the Hon'ble ITAT while allowing the cross objection of the assessee and dismissing the Revenue's appeal in AY:09-10 erred in not considering order of the Delhi High Court in the cases of Super Malls(P) Ltd [2016 (11) TMI 1370 - DELHI HIGH COURT] and Nau Nidh Overseas Pvt. Ltd [2017 (3) TMI 108 - DELHI HIGH COURT] and order of KPC Medical College and Hospital [2015 (7) TMI 6 - ITAT KOLKATA]? The Bombay High Court heard an appeal related to the disappearance of assessment records in a case concerning the assessment year 2009-2010. The Court directed the Appellant to produce assessment records, but the records were reported as not traceable by the Income Tax Officer. The Court expressed concern over the repeated disappearance and selective disappearance of records, indicating a serious issue that needed to be addressed.The Court acknowledged that the disappearance of records was not a new occurrence, as the ITAT order being challenged was made in 2017, and the appeal was instituted in 2017. The Court highlighted the need for an inquiry into the disappearance of records and directed the Principal Chief Commissioner of Income Tax (PCIT) to submit a report within two months. The Court emphasized the responsibility of revenue officials to maintain records properly and raised questions about accountability in cases of missing records.Despite the unavailability of the records, the Court found substantial legal questions that warranted the admission of the appeal. These questions included whether the ITAT erred in holding proceedings under section 153C of the Income Tax Act, 1961 as invalid due to the non-recording of satisfaction notes by the Assessing Officer. The Court also questioned the ITAT's decision regarding cross objections and the consideration of relevant legal precedents from the Delhi High Court and ITAT Kolkata.In conclusion, the Court directed the PCIT to file a report with an affidavit by a specified date and emphasized the importance of initiating inquiries promptly. The judgment highlighted the significance of maintaining records and the need for accountability within the revenue department.