2025 (3) TMI 817 - HC - Income Tax

Tax authorities can proceed with assessment after giving adequate opportunity for objections under Section 153C

DNH Spinners Private Limited Versus Deputy Commissioner of Income-tax, Central Circle -1 (2), Mumbai, Principal Commissioner of Income-tax Central-1 Mumbai, Union of India.

The Bombay HC dismissed a writ petition challenging notices issued under Section 153C of the Income Tax Act. The court held that petitioner was given ... Validity of notices issued u/s 153C within the prescribed time limits - Whether the petitioner was provided with an opportunity to challenge the satisfaction note? HELD THAT:- AO has given the opportunity to the petitioner to decide its course of action, and therefore, the petitioner has approached this Court by filing writ petition. Insofar as non-entertainment of further objections is concerned, we do not find any infirmity since at some stage the filing of objections to the proceeding has to stop. Otherwise, there will be no end to the petitioner's time and again filing objections and the officer passing order every time. Therefore, the contention raised by the petitioner on this issue for this Court to exercise its discretionary jurisdiction must also be rejected. Satisfaction note is not for all the assessment years, and in the absence of any co-relation of the document with the assessment years for which the notice is issued, the same constitutes a violation of condition of Section 153C - In our view, this would require examining the documents with the assessment year for which the notice is issued. This investigation of co-relation of the documents assessment year wise cannot be done by this Court and more so while exercising discretionary extraordinary jurisdiction under Article 226 of the Constitution of India. This factual co-relation must be done by the authorities under the Act and therefore the efficacious and alternate remedy is more appropriate for adjudication of this issue and this Court cannot be converted into the role of an assessing officer for carrying out this investigation. Therefore, even this submission is required to be rejected. Question of limitation is a mixed question of law and facts. Furthermore, Section 153B (1) (ii) provides that the period of limitation for assessing case of other persons referred to under Section 153C shall be the period of 12 months from the end of the financial year in which the last of the authorization for search under Section 132A was executed or 12 months from the end of the financial year in which books of accounts or documents or assets seized or requisition are handed over u/s 153C to the assessing officer having jurisdiction over such person whichever is later. To examine whether the limitation for deciding whether the assessment has become time-barred or not would require this Court to ascertain what was the last date of authorisation for search in the case of Alankit Group. We have not been shown by the petitioner the date of last authorisation. Therefore, it would not be appropriate for this Court to examine the issue of limitation raised in the present proceedings. It would be premature to presume that the assessment order passed under Section 153C would be against the petitioner. If during the assessment proceedings, and based on the submissions made by the petitioner, if the assessing officer is convinced on the merits of the case, then no prejudice would be caused to the petitioner. However, if the assessment proceedings are intricated at this stage, it would undoubtedly preclude the assessing officer from investigating. This is the case of search and seizure where huge unaccounted income in accommodation entry has been detected. In our view, this Court cannot exercise its discretionary jurisdiction in such type of cases by which the officer should be prevented to proceed with such type of assessment proceedings. The petitioner has relied upon various case laws. However, these are the case laws on the merits of the case. As observed above, the issues raised in this petition require investigation of facts and raised mixed questions of law and facts. We do not wish to exercise our discretionary jurisdiction by entering the arena of factual investigation. This course of action is best left for the authorities under the Act to be examined. We do not propose to deal with the case laws since as observed above, we are not inclined to entertain the present petition, but the petitioner is relegated to raise all the issues raised in these petitions before the authorities under the Act in accordance with law. WP dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the notices issued under Section 153C of the Income-tax Act were valid and within the prescribed time limits.Whether the satisfaction note prepared by the Assessing Officer (AO) was valid and timely.Whether there was incriminating material justifying the initiation of proceedings under Section 153C.Whether the petitioner was provided with an opportunity to challenge the satisfaction note.Whether the interpretation of 'relevant assessment year' and the calculation of the limitation period were correct.Whether the proceedings were time-barred under the provisions of the Act.Whether the petitioner had an efficacious alternative remedy through appellate proceedings.ISSUE-WISE DETAILED ANALYSIS1. Validity of Notices under Section 153CThe Court examined whether the notices issued under Section 153C were valid. The petitioner argued that the notices were time-barred and lacked incriminating material. The respondents contended that the notices were based on documents received from the New Delhi AO and that the issue of limitation was a mixed question of law and fact.The Court noted that the issue of whether there was incriminating material for the assessment years required investigation and was not suitable for adjudication in writ proceedings. The Court emphasized that this issue should be examined during assessment proceedings and by the Appellate Authority.2. Timeliness and Validity of Satisfaction NoteThe petitioner contended that the satisfaction note was prepared after a significant delay, rendering it invalid. The respondents argued that the satisfaction note was valid and that the delay did not affect its legality.The Court found that the satisfaction note's validity could be challenged during appellate proceedings. It emphasized that the satisfaction note was part of the assessment process and should be scrutinized by the authorities under the Act.3. Incriminating Material and Opportunity to ChallengeThe petitioner argued that no incriminating material was found for certain years and that they were not given an opportunity to challenge the satisfaction note. The respondents maintained that incriminating material was found and that the petitioner had the opportunity to challenge the satisfaction note.The Court held that the presence of incriminating material was a factual issue best left to the assessing officer and the Appellate Authority. It also noted that the petitioner had been given an opportunity to challenge the satisfaction note, as indicated in the order rejecting the objections.4. Interpretation of 'Relevant Assessment Year' and Limitation PeriodThe petitioner challenged the interpretation of 'relevant assessment year' and argued that the limitation period had expired. The respondents contended that the interpretation was correct and that the limitation issue involved factual determinations.The Court concluded that the interpretation of 'relevant assessment year' and the calculation of the limitation period were mixed questions of law and fact. It determined that these issues should be addressed during assessment and appellate proceedings.5. Availability of Alternative RemedyThe petitioner claimed that they had no alternative remedy, justifying the writ petition. The respondents argued that the petitioner could pursue appellate proceedings under the Act.The Court agreed with the respondents, stating that the petitioner had an efficacious alternative remedy through appellate proceedings. It emphasized that the issues raised could be agitated before the Appellate Authority.SIGNIFICANT HOLDINGSThe Court dismissed the petitions, holding that:The issues raised were primarily factual and should be addressed during assessment and appellate proceedings.The presence of incriminating material and the validity of the satisfaction note were matters for the assessing officer and Appellate Authority to determine.The interpretation of 'relevant assessment year' and the calculation of the limitation period were mixed questions of law and fact, unsuitable for writ proceedings.The petitioner had an adequate alternative remedy through the appellate process under the Act.In conclusion, the Court declined to exercise its discretionary jurisdiction, emphasizing that the issues required factual investigation and were better suited for resolution through the statutory appellate process. The petitions were dismissed without costs.