TaxTMI 
TaxTMI 
2021 (7) TMI 393
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.... For the Respondents In All Writ Petitions : Mr.R.Sankaranayanan Additional Solicitor General of India Assisted by Mr.A.P.Srinivas And Mr.A.N.R.Jayaprakash COMMON ORDER THE FACTS IN BRIEF SUBMITTED BY THE PETITIONER The facts in detail presented by the petitioners are that the petitioner / assessee filed his return of income for the Assessment Year [hereinafter referred to as 'AY'] 2014-15, disclosing fully and truly his income including the "capital gains" arising out of a sale of land in the Financial Year 2013- 14. The capital gains could be assessed only in AY 2014-15 by virtue of Section 45 of the Income Tax Act, 1961 [hereinafter referred to as 'Act']. The return was taken up for scrutiny assessment under Section 143 of the Act and the Assessing Officer completed the assessment under Section 143(3). Accordingly, the return of income was accepted in toto by the Assessing Officer, including the disclosed capital gains. 2. On 31.01.2014, 27.03.2014 and 27.03.2014 in Financial Year 2013-14 pertaining to AY 2014-15, the petitioner sold his land measuring 5.11 acres by three sale deeds to M/s.Agni Estates and Foundations Private Limited at the rate o....
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....the search and also specified the alleged amount that was undisclosed income of a sum of Rs. 6,38,75,000/-. 4. The petitioner filed an application on 26.11.2019 in Crl.M.P.No.25634 of 2019 under Section 245 of Cr.P.C. before the Special Court and sought for discharge of the petitioner from CC No.15 of 2019. Under these circumstances, the Assessing Officer on 16.12.2019, issued the impugned notice under Section 153C to the petitioner and directed the petitioner to file returns for a block of six assessment years AY 2013-14 to AY 2018-19. 5. The petitioner states that he sought for information from the Assessing Officer on 27.12.2019 and the said letter was not responded. It is contended that on 31.12.2019, proceedings under Section 148 lapsed due to expiry of the time allowed without any order of re-assessment. On 06.01.2020, the Assessing Officer furnished the reasons for initiating proceedings under Section 153C recorded by him. The reasons referred to the "Satisfaction note". He also stated that he was furnishing the copies of the "Sworn statements" and the seized materials. On 07.01.2020, the Special Court dismissed the Crl.M.P.No.25634/2019 filed by the petitioner for ....
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....er and recorded that the material in the file to initiate proceedings under Section 148 was the same as the material in the file to initiate proceedings under Section 153C. However, during the pendency of the present writ petitions, on 18.03.2021, the Assessing Officer referring to the proceedings under Section 153C, issued another Show Cause Notice, reiterating the proposal to tax Rs. 6,38,75,000/- in AY 2014-15 and proposing to tax Rs. 2,00,00,000 in AY 2015-16, Rs. 35,00,000 in AY 2017-18, Rs. 64,00,000 in AY 2018-19 and Rs. 21,00,000 in AY 2019-20 Total Rs. 3,20,00,000 9. On 20.03.2021, the petitioner through his Chartered Accountant, requested the Assessing Officer to await the outcome of the pending writ petitions before this Court. THE FACTS IN BRIEF AS PER THE RESPONDENTS: 10. The writ petitioner has sold three parcels of land (total extent of 5.11 acres) belonging to him through three sale deeds dated 31.01.2014, 27.03.2014 and 27.03.2014 to M/s.Agni Estates and Foundation Private Limited at the price of Rupees Three Crore per acre. However, in respect of the contiguous piece of land owned by Smt.Nalini Chidambaram, the....
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....e writ petitioners are that: (a) The Assessing Officer, on receipt of informations and materials, elected to initiate proceedings under Section 148 of the Act. Thus, he has no jurisdiction to allow the said proceedings to lapse and initiate further proceedings under Section 153C of the Act. Thus, the action lacks jurisdiction and amounts to legal malice. (b) The alleged materials seized pertains to Rs. 6,38,75,000/- received allegedly as 'on money' in respect of the lands sold in Financial Year 2013- 14. The amount is to be taxed as 'capital gains'. Under Section 45 of the Act, capital gains can be taxed only in the relevant Assessment Year, which, in this case, is admittedly AY 2014-15. The materials seized has no "bearing on the total income" in respect of any other Assessment Year. Thus, the Assessing Officer has no jurisdiction to re-open the assessment in respect of any other Assessment Year and consequently, the impugned notices issued under Section 153C of the Act is beyond the scope of re-opening proceedings. (c) The proceedings under Section 148 of the Act admittedly lapsed on 31.12.2019. On such lapsing, in the absence of an orde....
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....on 148 of the Act in the present case falls on 31.12.2019. Perusal of the materials relied on by the Assessing Officer for initiation of proceedings under Section 148 of the Act and the impugned Show Cause Notice issued under Section 153C of the Act are one and the same and the materials are relating to the alleged payment of on cash by the buyer to the petitioner amounting to a sum of Rs. 6,38,75,000/-. When the materials and informations relied on for the purpose of initiation of reopening proceedings under Section 147 and notice under Section 148 and the impugned Show Cause Notice under Section 153C of the Act are same and such materials were within the knowledge of the Assessing Officer even at the time of initiation of re-opening proceedings under Section 148 of the Act. Thereafter, the Assessing Officer cannot reprobate and initiate further proceedings under Section 153C of the Act. It is contended that the limitation lapses on 31.12.2019 and knowing the fact that after the expiry of limitation, the return of income scrutinized and the assessment order deemed to became final, the Assessing Officer issued the impugned Show Cause Notice with an intention to extend the period of....
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.... under Section 147 of the Act in the case of the petitioner for the AY 2014-15. The said reasons unambiguously establishes that the informations received from the DDIT (Inv) letter vide order dated 10.08.2018, revealed that a search and seizure operation was conducted under Section 132 of the Act on 05.07.2018 in the case of M/s.Agni Estates and Foundation Private Limited. Thus, the Assessing Officer was aware of the search and seizure operations in the premises of the buyer M/s.Agni Estates on 05.07.2018. Further, the informations were also received from DDIT (Inv) on 10.08.2018, the sale price and the alleged on cash transactions were also within the knowledge of the Assessing Officer. This apart, the statements recorded from Mr.R.N.Jayaprakash (Director of M/s.Agni Estate and Foundation Private Limited) and the note book as referred and all other materials in connection with the search and seizure operations were available and within the knowledge of the Assessing Officer and based on the materials, the Assessing Officer formed an opinion that he has "reason to believe" that the tax chargeable escaped assessment and accordingly, issued Notice under Section 148 of the Act. Even t....
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....itiated, the Assessing Officer is bound to conclude the same by following the procedures. In between, he cannot change his mind and convert the proceedings to 153C and the very action indicates that the authorities have done it with a motive and amounts to legal malice. 21. The learned Senior counsel regarding the abatement Clause contemplated under Section 153-A said that, the abatement is an inapplicable concept as far as the facts of the case on hand is concerned. The Doctrine of abatement in the present case is alien, in view of the fact that the materials relied upon for re-opening of assessment under Section 148 forms the same basis for issuance of impugned Show Cause Notices under Section 153C of the Act. Thus, the abatement clause has no application. 22. The learned Senior counsel relied on the judgment of the Constitution Bench of the Hon'ble Supreme Court of India in the case of Calcutta Discount Company Limited Vs. Income Tax Officer, reported in AIR 1961 SC 372 and the relevant paragraphs are extracted hereunder: "27. Mr Sastri mentioned more than once the fact that the Company would have sufficient opportunity to raise this question viz. whether the ....
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....ior counsel for the petitioner asserted the maintainability of the writ petition, and emphasized that the existence of an alternative remedy is not however sufficient reason for refusing a litigant quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. The Constitution Bench made an observation that when the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. 24. Relying on the said observations, the learned Senior counsel made a submission that the point of maintainability raised by the respondents deserves no merit consideration as it is a classic case of legal malice and without jurisdiction and applying the principles of Constitution Bench cited, the writ petition is maintainable. 25. The Constitution Bench judgment of the Hon'ble Supreme Court of India is followed in the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and others, reported in (1998) 8 SCC 1 and the relevant paragraphs are extracted hereunder: ....
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.... result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation." 26. The Hon'ble Supreme Court of India in the said case observed that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. The observations in paragraph 15 reiterates that the alternative remedy cannot be a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. 27. Relying on the above principles, the learned Senior counsel is of an opinion that the case on hand is a classic case of no jurisdiction, legal malice and violation of the provisions of the....
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....dvertence or on account of ignorance, included in his income any amount which is exempted from payment of income tax, or is not income within the contemplation of law, he may likewise bring this to the notice of the Assessing Authority, which if satisfied, may grant him relief and refund the tax paid in excess, if any. Such matters can be brought to the notice of the authority concerned in a case when refund is due and payable, and the authority concerned, on being satisfied, shall grant appropriate relief. In cases governed by Section 240 of the Act, an obligation is cast upon the Revenue to refund the amount to the assessee without his having to make any claim in that behalf. In appropriate cases therefore, it is open to the assessee to bring facts to the notice of the authority concerned on the basis of the return furnished, which may have a bearing on the quantum of the refund, such as those the assessee could have urged under Section 237 of the Act. The authority concerned, for the limited purpose of calculating the amount to be refunded under Section 240 of the Act, may take all such facts into consideration and calculate the amount to be refunded. So viewed, an assessee will....
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....titioner in W.P.No.16689 of 2020, while adopting the arguments of the learned Senior counsel Dr.Abhishek Singhvi, in addition, submitted that, the actions of the respondents are colourable exercise of power. The capital gains are defined under Section 45 of the Act. Admittedly, the sale transaction occurred during the Financial Year 2013- 14, the Assessment Year falls on 2014-15. Therefore, the Show Cause Notice issued for the Assessment Year 2015-16 is directly in violation of Section 45 of the Act. The capital gains pertaining to the sale transaction of the Financial Year 2013-14 falls under the AY 2014-15 and thus, the Show Cause Notice issued for AY 2015-16 is without jurisdiction. 31. The learned Senior counsel referred the Calcutta Discount Company Limited (cited supra) again and pointed out that the writ petition is maintainable. The learned Senior counsel referred the Shelly Products (cited supra) case and reiterated the contentions raised by the learned Senior counsel Dr.Abhishek Singhvi. Apart from the said judgments, the learned Senior counsel Mr.Viswanathan cited the judgment of the High Court of Delhi in the case of South Asian Enterprises Ltd., and another Vs. C....
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....ned Senior counsel reiterated that once a search was conducted and a notice under Section 153A issued, then the question of issuing notice thereafter under Section 148 of the Act on the strength of search did not arise. It is contended that in the present case on 10.08.2018, the materials and informations regarding search and seizure operations was very much available with the Assessing Officer. The reasons recorded for re-opening of assessment under Section 148 were furnished to the petitioner and the said reasons clearly indicates that all the materials were made available to the Assessing Officer at the time of initiation of proceedings under Section 147/148 of the Act. Therefore, after initiation of 147/148 proceedings by issuing notice, thereafter the respondents cannot clutch the jurisdiction and initiate further action under Section 153C of the Act, more specifically, based on the same materials relied upon for initiation of re-opening proceedings under Section 147/148 of the Act. Thus, the impugned Show Cause Notice is without jurisdiction and thus, the writ petition is maintainable. Once the assessment became final with reference to the Financial Year 2014-15 and the fi....
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.... reassessment proceedings is, in any case, the formation of the belief, based on new materials that any income had escaped assessment. A notice under section 148 of the I.T. Act may not be issued merely on change of opinion. 50. The reassessment notice has been issued for virtually the same reasons for which rectification proceedings had earlier been initiated but dropped. The Assessing Officer has not disclosed any new materials for reopening assessment. Assessment cannot be re-opened merely on change of opinion, as has apparently been done in this case. The Assessing Officer on being satisfied that there was no apparent error in computation of income, on the basis of existing records, dropped the rectification proceedings. In the absence of any new and/or fresh materials and in the absence of any reason for formation of belief that even otherwise, income had escaped assessment even though there was no apparent mistake or error, the Assessing Officer lacked jurisdiction to issue the impugned notice." 34. In the case of Khudiram Das Vs. The State of West Bengal and others, reported in (1975) 2 SCC 81, the Hon'ble Supreme Court of India ruled as follows: "9.....
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....uction of a statute. Where this happens, the satisfaction of the authority would not be in respect of the thing in regard to which it is required to be satisfied. Then again the satisfaction must be grounded "on materials which are of rationally probative value". Machindar v. King [AIR 1950 FC 129 : 51 Cri LJ 1480 : 1949 FCR 827] . The grounds on which the satisfaction is based must be such as a rational human being can consider connected with the fact in respect of which the satisfaction is to be reached. They must be relevant to the subject-matter of the inquiry and must not be extraneous to the scope and purpose of the statute. If the authority has taken into account, it may even be with the best of intention, as a relevant factor something which it could not properly take into account in deciding whether or not to exercise the power or the manner or extent to which it should be exercised, the exercise of the power would be bad. Pratap Singh v. State of Punjab [AIR 1964 SC 72 : (1964) 4 SCR 733] . If there are to be found in the statute expressly or by implication matters which the authority ought to have regard to, then, in exercising the power, the authority must have regard t....
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....asir Ahmed Vs. Assistant Custodian General, Evacuee Property, U.P.Lucknow and another, reported in (1980) 3 SCC 1, wherein the Hon'ble Supreme Court of India in Paragraphs 4 and 5 held as follows: "4. Under Rule 6 the notice under Section 7 must be issued in the prescribed form and contain the grounds on which the property is sought to be declared evacuee property. As stated earlier, the notice that was issued in this case merely reproduced the form without mentioning the particulars on which the case against the appellant was based. It was essential to state the particulars to enable the appellant to answer the case against him. Clearly therefore the notice did not comply with Rule 6 and could not provide a foundation for the proceedings that followed. 5. What is said in the preceding paragraph makes it plain that the authority concerned did not apply his mind to the relevant material before issuing the notice. The same thing is apparent from another fact. It has been stated that on November 29, 1952 the Deputy Custodian, Deoria, dropped the proceeding seeking to declare the appellant an intending evacuee and that on the same day he directed the initiation of....
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....4 covered by notice under Section 153-C of the Act. There is a specific purpose in taking note of this aspect which would be stated by us in the concluding paragraphs of the judgment. 15. In these appeals, qua the aforesaid four assessment years, the assessment is quashed by the ITAT (which order is upheld by the High Court) on the sole ground that notice under Section 153-C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153-C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee. 17. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153-C of the Act, incriminating material which was seized had to pertain to the assessment years in question and it is an undisputed fact that the documents which w....
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.... action taken under Section 153C of the Act. Thus, the very initiation perse lacks jurisdiction and the manner in which the 148 proceedings were allowed to lapse by the Assessing Officer, knowing the date of expiry i.e., 31.12.2019 and initiation of 153C proceedings is nothing, but colourable exercise of power. 41. The learned Senior counsel Mr.R.V.Easwar appearing for the petitioner in W.P.No.16692 of 2020, by supporting the contentions raised on behalf of the writ petitioner, proceeded with by arguing that validity of the Show Cause Notices with reference to the principles laid down by the Hon'ble Supreme Court of India in Sinhgad Technical Education Society case (cited supra) would provide a clear view that the invocation of Section 153C is beyond the scope of jurisdiction vested on the respondents and the cogent facts would reveal that the actions are legal malice and colourable exercise of power. 42. With reference to the documents, the learned Senior counsel Mr.R.V.Easwar referred the Notice issued under Section 148 of the Act on 20.08.2018 and relied on the reasons furnished in proceedings dated 12.10.2018. The learned Senior counsel vehemently contended that recei....
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....ction 153C of the Act. 44. The learned Senior counsel Mr.R.V.Easwar referred the "Satisfaction note" prepared for initiation of assessment proceedings under Section 153C of the Act in the case of the writ petitioner. 45. Paragraph 7 of the "Satisfaction note", states that "in view of the above, since the assessee, Shri Karti Palaniappan Chidambaram had not disclosed true and full facts in his returns of income especially pertaining to on-money receipts pertaining to the sale of land belonging to him at Muttukadu, I am satisfied that the assessee Shri.Karti Palaniappan Chidambaram has failed to disclose his taxable of income., i.e., receipt of on-money pertaining to the sale of immovable property at Muttukadu. In view of the above, I am satisfied that the seized records also pertain to Shri.Karti Chidambaram and the seized papers have bearing on the taxable income for the AY 2014-15 & 2015-16. The information gathered from seized records, that is on-money receipt of Rs. 6,38,75,000/- has not been disclosed by Shri.Karti Palaniappan Chidambaram in his return of income. Hence, this is a fit case for assessment/reassessment under Section 153C of the Income Tax Act, 1961. 46....
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....r return of income on 28.08.2015 for the AY 2015-16. The sale transaction occurred during the Financial Year 2014-15. The scrutiny proceedings were undertaken and the final assessment order under Section 143(3) of the Act was passed on 29.12.2017. The re-opening of assessment proceedings was initiated under Section 147 of the Act and Notice under Section 148 of the Act was issued on 20.08.2018 for the AY 2015-16. It is contended that the Assessing Officer has "reason to believe" that the income of the petitioner chargeable to tax for the AY 2015-16 has escaped assessment within the meaning of Section 147 of the Act. Pursuant to the 148 Notice dated 20.08.2018, the reasons were furnished. The reasons furnished would reveal that "information in the possession of the "AO" reveals that the assessee had received 'on money' payment in cash over and above the registered value, which was not disclosed in the "ROI" filed or during the course of 143(3) proceedings. It is a failure on the part of the assessee in not disclosing fully and truly all material facts, which has a bearing on the taxable income of the assessee. Hence, it is a fit case for reopening under Section 148 of the Ac....
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....present case. The facts, circumstances, conduct and the materials gathered, confiscated resulted in initiation of actions under Section 153C of the Act and therefore, the careful analysis of the facts with reference to the materials relied upon and the "Satisfaction note" are important to form an opinion with reference to the alleged ground of legal malice, lack of jurisdiction, violation of Principles of Natural Justice raised on behalf of the writ petitioners. At the outset, it is reiterated none of these grounds are established by the petitioners with reference to the legal principles settled by the Hon'ble Supreme Court, and with reference to the application of facts in the present writ petitions. Thus, it is relevant to consider the dates and events. 53. The writ petitioner sold three parcels of land (total extent of 5.11 acres) belonging to him through three sale deeds dated 31.01.2014, 27.03.2014 and 27.03.2014 to M/s.Agni Estates and Foundation Private Limited at the price of Rupees Three Crore per acre. However, in respect of the contiguous piece of land owned by Smt.Nalini Chidambaram, the land was sold at Rs. 4.25 crores per acre. The writ petitioner had filed his....
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....ry issue, the learned Additional Solicitor General of India contended that, whether the existence of alternate remedy would operate as a bar in the instance case. In the instant case, it is abundantly clear that the statutory remedy provided under the Income Tax Act would be efficacious and exhaustive, which has the jurisdiction to hear and decide as to all the objections put forth by the writ petitioner. This is made clear by analysing the scheme of assessment provided under Chapter XIV of the Income Tax Act, 1961. In reliance, the Hon'ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Vijaybhai N.Chandrani, reported in 357 ITR 713(SC), categorically states that notice issued under Section 153C cannot be challenged in writ petitions. 56. The learned Additional Solicitor General of India elaborating the scheme of assessment / reassessment, contended that informations and materials available on the particular date are distinguished. M/s.Advantage Strategic Consulting Private Limited is a company owned by the petitioners and therefore, perusal of the informations recorded, materials available are to be distinguished for the purpose of initiation of procee....
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....s & Foundation Private Limited, on 05.07.2018 along with relevant seized materials (small note books) vide annexure:ANN/ARS/AP/B&D/S and loose sheets containing sale agreements vide annexure:ANN/ARS/AGP/LS/S-2 from the premises of M/s.Agni Plots, (of Agni group) Old No:30, New No.16, Conran Smith Road, Gopalapuram, Chennai and sworn statements dated 08.07.2018 of Shri.K.Narayanan, Accountant and Cashier of Flame Advertising Company Private Limited of Agni group and the Sworn statements of Shri.R.N.Jayaprakash, dated 09.07.2018, 11.07.2018 and 17.08.2018 and the sworn statement of Shri.S.Dhilip kumar dated 08.07.2018. 59. It is contended that the verification of the satisfaction note and the seized records received, it was noticed that there was a search in the case of M/s.Agni Estates and Foundations Private Limited (AAACA7990C) group of cases on 05.07.2018 under Section 132 of the Income Tax Act, 1961. The company was incorporated in the year 1992 by Shri.Rajan Jayaprakash Narasimulu, who is a Director and the main person operating Agni group of companies. Consequently, there was search at the premises of M/s.Agni Plots, Old No:30, New No.16, Conran Smith Road, Gopalapuram, Che....
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.... years i.e., AY 2015-16, AY 2016-17, AY 2017-18 and AY 2018-19. 62. The learned Additional Solicitor General of India relied on the sworn statements of Sri.S.Dhilip kumar, Assistant General Manager of M/s.Agni Estates and Foundations Private Limited, who in turn, in his statement dated 08.07.2018, reply to Question No.6, stated that he was working as Assistant General Manager of M/s.Agni Estates and acting as Secretary looking after Finance related activities of Managing Director of Agni group of companies Shri.R.N.Jayaprakash for the past 24 years. Thus, the reliability of the sworn statements is to be trusted. He confirmed that the cash payments to Shri.Karti Chidambaram and his wife Smt.Srinidhi by M/s.Agni Estates and Foundations Private Limited and the transactions are not reflected in the books of accounts of M/s.Agni Estates and Foundations Private Limited. Further, he has deposed that the cash was handed over by him to Shri.Karti Chidambaram based on the directions of his MD Shri.Jayaprakash. He confirmed that the sale price fixed for the property was Rs. 4.25 Crore per acre against the guideline value of Rs. 3 Crore. The total consideration was Rs. 21,71,75,000/- (5.11 ....
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....sh on hand on various dates from 07.10.2014 to 30.06.2018. The sworn statements of Mr.S.Dhilip Kumar and R.N.Jayaprakash would reveal that the payments are made. The purpose of payment is to be explained by the assessee before the respondents. Thus, the respondents have not formed an opinion, whether the cash payments are made on various dates upto 30.06.2018 with reference to the completed sale transactions or for any other purposes. Thus, the details regarding the payments are not disclosed fully and truly by the assessee during the relevant Assessment Years and therefore, the authorities thought fit and invoked Section 153C of the Act in order to assess / reassess the income escaped assessment. 66. The contention raised by the petitioners that these entire sale transactions concluded during the Financial Year 2013-14 and the relevant Assessment year would be AY 2014-15 and the subsequent alleged payment of cash on hand pursuant to the materials seized are no way connected with the sale transactions and it is unbelievable that a buyer will pay cash to the seller after completion of the entire sale transaction is unsustainable. Such an inference has no basis, in view of the fac....
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.... the entire proceeding. A joint search and survey was conducted by the Income Tax Department and Enforcement Directorate (ED) in the premises of Advantage Strategic Consulting Private Limited and others on 01.12.2015. Upon analysis of the electronic devices seized by the ED in that search and handed over to the Department, transactions of purchase of immovable property inter se the petitioner company and Karthi P. Chidambaram and his family were found. The seized details revealed that unaccounted cash had been paid to the sellers and subsequent enquiries showed that the properties in question had been sold to a company by the name of Handhold Ventures Private limited. 8. On the basis of the above intel, action under Section 132 was conducted in the case of the petitioner company, its affiliates and connected personnel from 05.07.2018 to 09.07.2018, covering in all, 21 premises. As per the counter, substantial material including 175 small note books indicating unaccounted cash payments and investments in foreign entities and banks in Mauritius, Seychelles, Hong Kong, the British Virgin Islands and Singapore were found. Serious allegation are made in regard to the alleged es....
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....hin such six assessment years. Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. [(2) If any proceeding initiated or any order of assessment or reassessment made under subsection (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section(1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revised with effect from the date of receipt of the order of such annulment by the Commissioner. Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation.- For the removal of doubts, it is hereby declared that- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii....
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....so been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a sear....
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.... in assessment or reassessment orders when the search was initiated or the requisition was made." 71. Relying on the above findings, it is contended that in order to ensure this State of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee, which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee, which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. 72. Relying on the said judgment, and the scheme of assessment under the Income Tax Act, it is contended that the proceedings under Section 147/148 abated and did not lapse as Section 147 proceedings were pend....
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....r having jurisdiction over the writ petitioner on 10.08.2020 and 20.08.2020. Pursuant to the same, a notice was sent under Section 148 on 20.08.2018. This was, however, prior to the receipt of seizure of material which was received by the 2nd respondent on 22.08.2019 and satisfaction under Section 153C recorded on 28.11.2019 and 16.12.2019. The Assessing Officer received these documents from the 2nd respondent much later and therefore, it is clear that at the time of issuing notice under Section 148, the Assessing Officer had not received the material seized pursuant to the search. Consequently, the Assessing Officer, at that juncture, could not have issued a notice under Section 153C read with Section 143(2). By extension, it is clear that the proceedings initiated 147 abated upon issuance of notice under Section 153C on 16.12.2019. 75. The conduct of the petitioner post issuance of notice under Section 148 must also to be considered. The writ petitioner undertook earnest efforts in order to ensure the proceedings under Section 147/148 could not be completed. The petitioner periodically sought adjournments throughout the proceedings and the details and nature of the same are al....
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.... The hearing was adjourned to 17.12.2018 at 11:30 A.M. (iv) The petitioner's representative vide letter dated 17.12.2018, stated as below: "I am furnishing this letter under instructions of my client Mr.Karti P Chidambaram, residing at No.16, Pycrofts Garden Road, Chennai - 600006. On 12.12.2018, the economic offence case EOC No.266 of 2018 that was filed by the Income Tax Department against my client came up for hearing before the Ld' Additional Metropolitan Magistrate, Allikulam Complex, Chennai. On the said date, the Income Tax department had sought for time until 02-01-2019 to produce further documents for submission and marking. Copies of these documents would be made available to my client only after marking and approval by the said Hon'ble Court. Since these documents may have a direct bearing on my client's assessment proceedings, we wish to peruse the same before making any further submissions before this authority. It is therefore requested that the hearing scheduled for 17th December 2018 be adjourned to any date during the third week of January, 2019, pending receipt of the marked documents by my client". (v) The petit....
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....in Sushil Gaur & Shelly Agarwal Vs. ITO I.T.A.No.1500/Del/2017 held that proceedings under Section 147/148 were not maintainable upon receipt of seized material pertaining to a search and that only proceedings under Section 153A or Section 153C must be initiated. Thus, it is clear that the officer did not have any choice but to proceed under Section 153C, and in any event, the proceeding pending under Section 147/148 stood abated. 78. It is reiterated by the learned Additional Solicitor General of India that the instance case involves complicated question of fact and the law and the said facts cannot be adjudicated in the writ petitions and therefore, the impugned Show Cause Notices must be allowed to be proceeded with by following the procedures and thus, the writ petitions are liable to be dismissed. SCHEME OF ASSESSMENT UNDER THE INCOME TAX ACT 79. The scheme for filing of returns and procedure for conduct of assessment are contained in Chapter XIV of the Income Tax Act, 1961. Chapter XIV is titled "Procedure of Assessment" and comprises of all sections starting from Section 139, which deals with return of income till Section 158, which deals with "Intimation of assessm....
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....n pursuance to such search. These provisions broadly contain the procedure for filing returns or making assessment/reassessment in all cases, where there not involving any search or seizure operations. 82. As opposed to this general procedure, there are specific provisions contained in Section 153A to Section 153C, which deal with assessments that commence after a search has been conducted under the provisions of Section 132 or requisition has been made under Section 132A. Sections 153A to Section 153C start with a non-obstante clause that specifically excludes the applicability of Section 147/148. Where, pursuant to a search conducted under Section 132, the Assessing Officer has in his possession books of account or other documents or evidence, which reveal that income, represented in the form of asset, or any part of such income generally, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate over the relevant assessment years then the Assessing Officer may either assess/reassess for each of the preceding 6 Assessment Years immediately preceding the Assessment Year, in which, search has been ....
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....ocedures contemplated in Chapter XIV of the Income Tax Act. 85. Section 132 of the Act enumerates 'Search and Seizure'. The procedure for search and seizure are elaborately contemplated. Once the power under Section 132 is invoked, then under Sub-Section (4) of Section 132, the authorised officer may, during the course of the search or seizure, examine on oath any person, who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Act. 86. Sub-Section (4A) to Section 132 contemplates procedures to be followed with reference to the seized materials, where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed - (i) that such books of account, other documents, money, bullionjewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and ....
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....elevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years. 90. Second Proviso to Section 153A enumerates "that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate". Mainly the above Proviso clause is to be read along with Section 153A (1), which contemplates non-obstante clause with reference to Sections 139, 147, 148, 149, 151 and 153. Therefore, Section 153A shall be invoked consequent to the search and seizure conducted under Section 132 of the Act. If any proceedings are pending on the date of initiation of search under Section 132, then all such pending proceedings shall stood abated. 91. The very purpose and object of the non-obstante clause as well as the abatement clause is to ensure that no parallel proceedings are allowed with reference to the same cause of action. In the event of two actions in respect of the s....
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....ection 153A and Section 153C for assessment / reassessment. The assessment / reassessment under Section 153A or 153C is to be done, if any search and seizure is made under Section 132 of the Act. Thus, the scope of Section 153A or Section 153C cannot be compared with the re-opening of proceedings under Section 147/148 of the Act. 95. Section 147 of the Act may be invoked by the Assessing Officer, if he has "reason to believe" that any income chargeable to tax has escaped assessment. However, there is no such "reason to believe" clause or otherwise under Section 153A or Section 153C. These two provisions shall be invoked by the Assessing Officer based on the materials seized during search operations conducted under Section 132A of the Act, and handed over to the jurisdictional Assessing Officer. DISTINCTION BETWEEN SECTIONS 147, 153A and 153C 96. Section 147 contemplates "If the Assessing Officer "has reason to believe" that any income chargeable to tax has escaped assessment, he can reopen the assessment". The term "has reason to believe" is wider enough to cover various circumstances including informations, materials under assessment etc. Thus, Section 147 may be invoked,....
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....7/148 of the Act. On handing over of the seized or requisitioned materials, the Assessing Officer is bound to issue notice under Section 153C of the Act. Reassessment under Section 153C of the Act is wider enough to cover six assessment years. At each stage, the Income Tax Act provides various procedures, considering the instances and developments in the matter of gathering informations and during the search operations. Unless such powers are contemplated, it would be difficult for the authorities to deal with cases of tax evasions. 100. Section 153C further contemplates that on receipt of the seized materials, assets etc., shall proceed and issue notice and assess or reassess the income, if the Assessing Officer is satisfied. Thus, handing over of material should happen and thereafter, the Assessing Officer shall proceed, issue notice, and assess or reassess, if the Assessing Officer is satisfied. Thus, satisfaction of the Assessing Officer is mandatory. Such a satisfaction must be recorded in writing and if the satisfaction recorded is sufficient enough, then the Assessing Officer shall proceed to assess or reassess under Section 153C of the Act. The assessee will get an op....
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....ent case, admittedly, the search was conducted in the premises of M/s.Agni Estates and Foundation Private Limited. The materials of the searched person was handed over to the assessment officer of the searched person on 28.11.2019. It was forwarded to the Assessing Officer of the other person (petitioner) on 28.11.2019 and thereafter, the Assessing Officer completed the "Satisfaction note" on 16.12.2019 and issued Show Cause Notice, which is mandatory under Section 153C of the Act. Thus, the procedure would be that, the seized materials are to be handed over to the Assessing Officer of the searched person at the first instance for initiation of action under Section 153A of the Act and such materials must be handed over to the jurisdictional Assessing Officer of the other persons and on receipt of the materials, the Assessing Officer shall have no option, but to issue notice under Section 153C of the Act to the other persons, after recording satisfaction. 104. The cogent understanding of the procedures contemplated under Chapter XIV of the Income Tax Act would provide a clear picture that the legislatures thought fit that the assessment and reassessment in case of search operatio....
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....urnished in the answers. However, no other particulars are found in the first file, which was the basis for issuing a notice under Section 148 of the Income Tax Act on 20.08.2018. 108. With reference to the next file, the proceedings dated 6t h January, 2020 is available, furnishing reasons for re-opening of assessment under Section 153 and the said proceedings were communicated to the petitioners. Further, handing over of search files and seized materials in the case of Mr.R.N.Jayaprakash, Managing Director of M/s.Agni Estates and Foundations Private Limited & Group was communicated to the Deputy Commissioner of Income-tax in proceedings No.DDIT/U-3(2)/Agni/2019-20 dated 22.08.2019. The said letter contains numerous materials and the letter states that the Search operations under Section 132 of the Income Tax Act, 1961 were conducted in the case of Mr.R.N.Jayaprakash, Managing Director of M/s.Agni Estates and Foundations Pvt Ltd & Group on 05.07.2018. Since the case has been Centralised to the Deputy Commissioner's jurisdiction vide letter dated 06.05.2019, the materials seized and impounded during the Search operations along with the Search folders, Seized materials and ot....
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....EEBROS Hariharan Apartments, Lloyd's Road, Royapettah, Chennai - 12. (q) Item No.20 contains 25 documents from Agni Plots, No.30/16, Conron Smith Road, Gopalapuram, Chennai - 600 086. (r) Item No.21 contains 12 documents from Mr.K.L.Narayana, A-3, Sreeshti Srinivasa Vihar, No.161/140, Luz Church Road, Mylapore, Chennai - 4. (s) Item No.22 contains 20 documents from Mr.K.L.Narayana, 169/73, Surya Apartments, Flat No.15, Luz Church Road, Mylapore, Chennai - 4. (t) Item No.23 contains 3 documents from Mr.K.L.Narayana, 169/73, Surya Apartments, Flat No.7, Luz Church Road, Mylapore, Chennai - 4. (u) Item No.24 contains 10 documents from Mr.A.Ganesan, No.2-A, Sundaram Apartments, 5th Avenue, Besant Nagar, Chennai - 600 090. 111. The list of Inventory of Electronic Devices and the materials seized and impounded were also furnished along with the said letter. The said letter constituted a basis for initiation of proceedings under Section 153C of the Income Tax Act. The Assessing Officer, on receipt of the said materials on 22.08.2019, prepared the "Satisfaction Note" in respect of the petitioners and forwarded the "Satisfaction Note" along with the seized materials in....
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....ormations and materials communicated to the Assessing Officer and the materials in entirety subsequently handed over to the Assessing Officer on 28.11.2019 are different and it cannot be said as identical, though the documents are connected and pertain to the same assessees including the searched person and the other persons. ANALYSIS 114. The contentions of the petitioners are that, admittedly, the return of income was filed by the petitioners. Final assessment orders were also passed by the Assessment officer. Subsequently, the Assessing Officer received information upon which, he has "reason to believe" that income chargeable to tax has escaped assessment. Thus, he has issued notice under Section 148 of the Act. Upon request, reasons for initiation was provided. The reasons provided by the Assessing Officer for re-opening of assessment under Section 147 are relied upon by the petitioners to establish the informations, materials available for initiation of 147/148 proceedings as well as the materials and informations prompted the respondents to initiate action under Section 153C of the Act are one and the same. Thus, the intention of the respondents was to extend the tim....
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....acts in one route and the other aspects and the actual reason for initiation of Section 153C of the Act were not elaborated by the petitioners. 118. In order to repudiate the grounds raised on behalf of the petitioners, the learned Additional Solicitor General of India relied on the "Satisfaction Note", which was communicated to the petitioners on 6th January 2020. The said "Satisfaction Note" reveals that a satisfaction note along with the seized materials were received from the Assessing Officer of M/s.Agni Estates and Foundations Private Limited. In the case of Karti Chidambaram regarding receipt of on-money on the sale of immovable property at Muttukadu during the course of search in the case of M/s.Agni Estates & Foundation Private Limited, on 05.07.2018 along with relevant seized materials were also made available. However, it is contended by the learned Additional Solicitor General that loose sheets containing sale agreements and the question and answers as well as the details regarding the statements from the officials of the M/s.Agni Estates and Foundations Private Limited were received by the Assessing Officer only on 22.08.2019. Thus, only after receipt of all thos....
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...., the Assessing Officer had the knowledge about the alleged information regarding the on cash payments beyond the Assessment Year and in spite of that the Assessing Officer initiated 147 proceedings. This Court is of the considered opinion that admittedly the seized and impounded materials of the searched person was not handed over to the Assessing Officer at the time of initiation of 147 proceedings. As per the files, the seized materials in accordance with the provisions of the Act was handed over to the Assessing Officer of the searched person on 22.08.2019 and on 28.11.2019, the Assessing Officer recorded satisfaction and issue notice under Section 153A of the Act to the searched person and subsequently, the materials seized were handed over to the Assessing Officer of the other person namely petitioner herein and thereafter, the "Satisfaction Note" was recorded and the show cause notice was issued on 16.12.2019. Therefore, certain informations made available prior to handing over of the materials would not confer any power on the Assessing Officer to initiate proceedings under Section 153C of the Act. The mandatory requirement under Section 153C of the Act is that on handing o....
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....bject. Pertinently, for initiation of actions and for its completion, limitations are provided under the Act. Thus, on receipt of information from the DDIT (Inv), the Assessing Officer thought fit to initiate action without prolonging the matter and accordingly, initiated proceedings under 147 of the Act. However, the Assessing Officer was not in a position to initiate 153C proceedings at that point of time. Even as per the informations provided to the Assessing Officer in vide letter dated 10.08.2018 and 20.08.2018, the petitioners are the other person and they are not the searched persons. Thus, the initial actions of the Assessing Officer regarding initiation of proceedings under Section 147 of the Act at the first instance cannot be faulted with. However, the handing over of the seized materials by the Assessing Officer of the searched person happened on 22.08.2019 in respect of the other persons / petitioners on 28.11.2019 and thereafter, "Satisfaction Note" was recorded and notice was issued on 16.12.2019. Even before receipt of the searched material, the searched person was centralised with the third respondent on 06.05.2019 vide Notification No.3/19-20 by the Principa....
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....es produced before this Court. Certain facts were not available at the initial stage. The complete documents and materials were handed over to the Assessing Officer only on 22.08.2019, after the centralization was done on 06.05.2019. Thereafter, the Assessing Officer prepared the "Satisfaction Note" and issued Show Cause Notice under Section 153C of the Act. 123. Therefore, the contentions raised on behalf of the petitioners that there is no impediment for the Assessing Officer to proceed under Section 147/148 of the Act and pass an order of reassessment based on the material available on record before the expiry of the limitation on 31.12.2019 in the present stage cannot be accepted and such a course is impermissible, in view of the fact that Section 153A and 153C contemplates handing over of the seized materials to the Assessing Officer of the searched person and thereafter to the other person, and the Assessing Officer has no option but to issue notice. Once the proceedings under Section 153 is initiated, all pending proceedings under Section 147/148 stood abated as per the proviso clause. Thus, the very arguments raised on behalf of the petitioner that the Assessing Officer ....
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....rt. However, a writ may be entertained, if the Show Cause Notice was issued without jurisdiction or on malafide grounds. Even in case of raising a malafide against any authority, such an authority must be impleaded as party respondent in the writ proceedings in his personal capacity. In the present case, the petitioner has raised the point of no jurisdiction and the ground of legal malice. As far as the jurisdiction is concerned, this Court is of an opinion that the lack of jurisdiction was not established by the petitioners. The application and implications of Section 153C of the Act was questioned. In view of the elaborate discussions regarding the facts and circumstances with reference to the provisions made in the aforementioned paragraphs, this Court is of an opinion that no malafide or lack of jurisdiction is identifiable nor established and thus, the point raised in this regard stands rejected. Thus, the judgments relied upon in this regard are of no avail to the petitioners. 147 proceedings were initiated for a particular Assessment Year and only after invoking Section 153C, the Assessing Officer could able to prepare "Satisfaction Note" and 5 assessment years are reopened.....