Gujarat High Court
Bhagwandas Rupchand Parwani vs Assistant Commissioner Income ... on 6 February, 2024
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 434 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 454 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 455 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 456 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 457 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 458 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 459 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 461 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 462 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 463 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 464 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 465 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 467 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 470 of 2024
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL
and
HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
Page 1 of 15
Downloaded on : Wed Feb 07 20:42:43 IST 2024
NEUTRAL CITATION
C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024
undefined
==========================================================
BHAGWANDAS RUPCHAND PARWANI
Versus
ASSISTANT COMMISSIONER INCOME TAX,CENTRAL CIRCLE 1(1)(1)
==========================================================
Appearance:
MR RK PATEL, SR. ADV. with DARSHAN R PATEL(8486) for the
Petitioner(s) No. 1
for the Respondent(s) No. 2
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE
Date : 06/02/2024
CAV JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. At the outset, we may record that Special Civil Application No. 436 of 2024, in this bunch, is being detagged as the facts therein are somewhat different. In the remaining bunch of writ petitions, challenge is to the notice dated 06.5.2022 for the Assessment Year 2014-15, (in short A.Y. 2014-15), issued under Section 153C of the Income Tax Act, 1961 (in short as " the Act'1961) as also the order dated 02.12.2023 of rejection of the objection filed by the petitioners herein. Further challenge is to the notice dated 11.12.2023 under Section 142(1) of the Act'1961. The prayer is to restrain the respondents from enforcing the compliance of the impugned notice under Section 153C Page 2 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined dated 06.05.2022 for A.Y. 2014-15.
2. The grounds to challenge the initiation of proceedings under Section 153C of the Act'1961 are that :-
i. Satisfaction note of the searched person and satisfaction note of the petitioner (other than the searched person) are verbatim.
ii. The proceedings are invalid as the satisfaction note does not contain DIN (Document Identification Number), mandatorily to be generated as per the CBDT Circular No.19/2019 dated 14.08.2019.
iii. No incriminating material was found against the petitioners during the search carried out on 15.10.2019. iv. There is undue delay in recording the satisfaction note in the case of the petitioners.
v. Baseless allegations have been made against the petitioners without there being any material before the Assessing Officer to even record a prima facie proof that the seized material has a bearing on the petitioners' case.
3. Elaborating the above noted grounds, it was argued by Mr. R.K.Patel, learned Senior Advocate appearing for the assessee that the satisfaction note of the searched person dated 07.04.2022 and the satisfaction note of the petitioner (other than the searched person) dated Page 3 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined 27.04.2022 are verbatim. It is, thus, evident that the Assessing Officer of the petitioner did not apply his mind independently and merely proceeded on the satisfaction note recorded by the Assessing Officer of the searched person. Reliance is placed on the decision of the Apex Court in the case of Canyon Financial Services Limited vs. Income Tax Officer, [2017] taxmann.com 71 (Delhi) decided on 10.07.2017 and in the case of Super Malls (P.) Ltd. vs. Principal Commissioner of Income Tax, 8 New Delhi, [2020] 115 taxmann.com 105 (SC) decided on 05.03.2020, to agitate that in both the cases, the Delhi High Court as also the Apex Court had noted that there has to be a satisfaction of the Assessing Officer and the requirement of recording of satisfaction note before issuing notice under Section 153C of the Act'1961 is mandatory. In a case where there was no satisfaction note by the Assessing Officer of the person other than the searched person, recorded independently, there cannot be any justification to proceed under Section 153C of the Act.
4. The contention, thus, is that the notice issued under Section 153C against the petitioner on the satisfaction note prepared by the Assessing Officer of the searched person does not fulfill the legal requirement as spelt out in Section 153C(1) of the Act'1961. The satisfaction note of Page 4 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined the Assessing Officer of the petitioner assessee being a carbon copy of the satisfaction note of the Assessing Officer of the searched person, failed to fullfil the jurisdictional requirement. The Assessing Officer, thus, lacked jurisdiction to proceed under Section 153C by issuing notice dated 06.05.2022 and the resultant assessment proceedings for AY 2014-15 based on the said notice are liable to be quashed.
5. The copy of the satisfaction note of the Assessing Officer of the searched person covered under Section 153A of the Act'1961 with the covering letter dated 07.04.2022 for initiation of assessment proceedings under Section 153C of the Act'1961 proposed against the petitioner assessee is appended with the writ petition. A perusal of the said document indicates that during the course of search, on the submission made by the searched person, it was found that Survey No.287 was sold by the searched person to the petitioner herein by a document, namely Sale Deed Register No.1616 dated 21.08.2019. On consideration of the rate for the land at Survey No.287, on the statement recorded of the searched person, it was found prima facie that the petitioners herein/assessees had paid "on money"
in cash of Rs.11,25,97,290/- in A.Y. 2020-21 for purchase of the land bearing Survey No.287 at Muthiya village. It Page 5 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined was, thus, concluded that the information received during the course of search carried out on 15.10.2019 from the seized material, the information in the seized incriminating documents, pertains/relates to the petitioner herein, namely Bhagwandas Rupchand Parwani. The satisfaction note was, thus, forwarded by the Assessing Officer of the searched person to the Assessing Officer of the petitioner herein vide communication dated 07.04.2022 with the observation that during the course of search, document/ digital data related to the petitioner were found and seized and the same is being forwarded for perusal and necessary action.
6. We may further note that the petitioner's objection to the satisfaction note recorded by the Assessing Officer of the petitioner assessee has been dealt with and rejected vide detailed order dated 02.12.2023 passed by the respondent No.2, wherein it is categorically recorded that the Assessing Officer of the searched person has first drawn his satisfaction that the seized material pertains to the assessee and the information contained therein relates to the assessee (the petitioner herein). Thereafter, the Assessing Officer of the petitioner assessee has also drawn his satisfaction that the seized material pertains to the Page 6 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined assessee and the information contained therein relates to the assessee and have a bearing on the determination of total income of the assessee (the petitioner herein). The legal requirement as spelt out in Section 153C of the Act has duly been fulfilled in the instant case. The fact that the satisfaction note drawn by the Assessing Officer of the assessee is the carbon copy of the note of the Assessing Officer of the searched person, would not be the reason to reject the satisfaction note saying that the Assessing Officer of the petitioner assessee did not record his independent satisfaction.
7. Noticing the above, we may go through the decisions relied by learned Senior Counsel for the petitioner. The judgement in the case of Canyon Financial Services Limited (supra) is of no help to the petitioner for the simple reason that the said case was decided on the merits of the materials/documents seized during the course of search. The issue before the Delhi High Court in the said case was as to whether the seized material during the course of the search, could be said to "belong to" the assessee. The said case pertains to the period prior to the amendment of Section 153C of the Act'1961 by the Finance Act, 2015 with effect from 01.06.2015. The satisfaction notes in the said case were prepared on Page 7 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined 13/19.03.2014. In the facts and circumstances of the said case, it was noted by the Delhi High Court that from the documents seized and referred in the satisfaction notes, it may be said to "pertain to" the assessee, but it cannot be presumed to "belong to" the assessee, the person other than the searched person. It was then recorded that the Assessing Officer of the assessee ( other than the searched person) recorded as verbatim, the satisfaction as recorded by the Assessing Officer of the searched person word by word, without going through the material with regard to his satisfaction that the documents seized belong to the other person and the said documents do not belong to other person, hence, the jurisdictional requirement under Section 153C(1) of the Act'1961 of the Assessing Officer of the searched person having to be satisfied that the seized documents do not belong to the searched person but to the assessee (other than the searched person) has not been fulfilled. In these facts and circumstances of the said case, the satisfaction notes issued by the Assessing Officer of the searched person as also the assessee (other than the searched person) and all consequential proceedings thereto were quashed.
8. In the facts and circumstances of the instant case, in view of the change in the legal regime with effect from Page 8 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined 01.06.2015, the requirement is that even an information contained in the documents seized, if pertains to or relates to a person other than the searched person, the requirement of Section 153C(1) can be held to be fulfilled. In view of the categorical statement in the satisfaction note of the searched person forwarded by the Assessing Officer of the searched person to the Assessing Officer of the petitioner assessee, it cannot be assumed that no prima facie satisfaction of the seized material being "pertain to" the petitioner assessee could be recorded. The decision of the Delhi High court in Canyon Financial Services Limited (supra) relied on by learned Senior Counsel for the petitioner, therefore, is distinguishable.
9. Another decision of the Apex Court relied by learned Senior Counsel for the petitioner, in Super Malls (P) Limited (supra) also pertains to the legal regime prior to the Amendment Act of 2015. However, it may be noted that in the said case, the Apex Court recorded that there was no satisfaction note by the Assessing Officer of the searched person and then it was noted that the requirements of recording satisfaction before issuing notice under Section 153C of the Act, 1961 is mandatory. It was held that the Assessing Officer of the searched Page 9 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined person simultaneously, while forwarding the document, shall forward his satisfaction note to the Assessing Officer of the other person and he is also required to make a note in the file of the searched person that he has done so. After receipt of the aforesaid satisfaction and upon examination of such other documents relating to such other person, the jurisdictional Assessing Officer may proceed to issue notice for the purpose of completion of assessment under Sections 158B and 158D of the Act'1961 and the other provisions to issue notice to initiate the proceedings under Section 153C of the Act against the other person. It was then noted that in the said case, the Assessing Officer of the assessee and the Assessing Officer of the searched person was the same and, therefore, the satisfaction note by the Assessing Officer of the searched person, as in the said case there was no question of transmitting the documents so seized from the searched person to another Assessing Officer as he himself was the Assessing Officer of the searched person as well as the Assessing Officer of the assessee. Therefore, there was a sufficient compliance of the requirements under Section 153C of the Act. The question posed for consideration by the Apex Court as to whether there is a compliance of the provision of Section 153C of the Act by the Assessing Page 10 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined Officer and all the conditions which are required to be fulfilled before initiating the proceedings under Section 153C of the Act have been satisfied or not, was answered in favour of the Revenue having noted that it is sufficient for the Assessing Officer to note in the satisfaction note that the documents seized from the searched person belonged to the other person.
10. Having gone through the decision of the Apex Court in the case of Super Malls (P) Limited (supra), we find that the observations made therein with regard to the mandatory requirement of Section 153C of the Act to record a satisfaction note by the Assessing Officer of the petitioner assessee herein, before issuing notice under Section 153C of the Act has been fulfilled in the facts of the instant case.
11. Having noted the fact that the satisfaction note of the Assessing Officer of the petitioner assessee has not been brought on record and moreover, the assessment note of the Assessing Officer of the searched person indicates a prima facie case of inquiry against the petitioner, we do not find any substance in the argument of the learned Senior Counsel that the satisfaction note of the Assessing Officer of the petitioner is to be discarded being a copy in verbatim of the satisfaction note of the Assessing Officer Page 11 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined of the searched person. It is not a case where it can be argued that the satisfaction recorded by the Assessing Officer of the petitioner in his satisfaction note supplied to the petitioner is without any basis.
12. The first ground of challenge is, therefore, liable to be turned down.
13. Coming to the second ground of challenge based on the CBDT Circular No.19 of 219 dated 14.08.2019, suffice it to note that the said ground is misconceived, inasmuch as, the copy of the letter of communication to the petitioner of satisfaction note to initiate assessment proceedings under Section 153C of the Act has not been brought on record. However, Mr. Varun K.Patel, learned Panel Counsel appearing for the Revenue has brought the attention of the Court to the communication dated 23.07.2022 addressed to the petitioner, a copy of which was supplied in the Court, which contains the DIN number, to assert that the requirement of CBDT Circular No. 19 of 2019 dated 14.08.2018 has been fulfilled. We may also note from the order of disposal of the objection of the petitioner wherein it is noted that the DIN number is mandatory for communication by the Income Tax authority/officer to the assessee or another person and it is not to be generated Page 12 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined for the covering letter forwarded by the Assessing Officer of the searched person to the Assessing Officer of the assessee, i.e. the petitioner herein. Having gone through the language of CBDT No.19 of 2019 dated 14.08.2019, we do not find any error in the conclusion drawn by the respondent No.2 in rejection of the objection of the petitioner in this regard.
14. For the remaining grounds that the allegations against the petitioner are baseless or there was no incriminating material against the petitioner, we may note the decision of the Apex Court relied on by that learned Counsel for the Revenue in the case of Commissioner of Income- Tax, Gujarat vs. Vijaybhai N. Chandrani, [2013] 35 taxmann.com 580(SC), wherein the Apex Court has held that at the stage of issuance of notice under Section 153C, the High Court ought not to have entertained the writ petition and relegated the assessee to file reply to the said notices and upon receipt of a decision from the Assessing Officer, if for any reason, it was aggrieved by the said decision, to question the same before the forum provided under the Act.
15. Lastly on the question of delay agitated in the writ petition, no submission has been made by the learned Page 13 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined Senior Counsel and as such the same is not being dealt with.
16. We may further note that no jurisdictional error could be found in the decision of the Assessing Officer in the proceedings under Section 153C of the Act'1961 and the points raised by the learned Senior Counsel appearing for the petitioner assessee on the plea of lack of jurisdiction of the Assessing Officer in issuing notice under Section 153C did not find favour with us.
17. We may clarify that within the scope of judicial review under Article 226 of the Constitution of India, we do not find any jurisdictional error in the proceedings under Section 153C drawn against the petitioner, at this stage.
18. For the above, we do not find any merit in the challenge.
The writ petitions are, accordingly, dismissed. However, it is further clarified that while framing the assessment order, the Assessing Officer will not be influenced by any of the observations made by us hereinabove. It is also clarified that while disposing of the writ petitions, we have not expressed any opinion on the correctness or otherwise of the submissions made on merits of the proceedings initiated against the assessee, based on the search carried Page 14 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024 NEUTRAL CITATION C/SCA/434/2024 CAV JUDGMENT DATED: 06/02/2024 undefined out under Article 132 of the Act' 1961.
Further Order
19. The request for stay of the order for a period of four weeks to enable the petitioner to approach the Apex Court is hereby rejected.
(SUNITA AGARWAL, CJ ) (ANIRUDDHA P. MAYEE, J.) SUDHIR Page 15 of 15 Downloaded on : Wed Feb 07 20:42:43 IST 2024