M/S Magnolia Infra v. Assistant Commissioner Of Income Tax, Central Circle 2(3), Ahmedabad

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 20152 of 2021 ========================================================== M/S MAGNOLIA INFRA VersusASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3),AHMEDABAD ========================================================== Appearance: MR DHINAL A SHAH(12077) ASSISTED BY MR.RAVI RAJ SINGH for the Petitioner(s) No. 1 MS MD MEHTA, AGP for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANIandHONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Date : 29/12/2021 ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1.The petitioner is before this Court under Article 226 of the Constitution of India questioning the action of the respondent authority with the followingprayers: “9… A.YOUR LORDSHIPS may be pleased to allow thepresent Petition; B.YOUR LORDSHIPS may be pleased to issue a writof certiorari or in the nature of certiorari or any other appropriate writ, orders or directions upon theRespondent to do duly consider the objections so filed bythe Petitioner and pass appropriate adjudicatory Ordereither in the affirmative or in negation; C.YOUR LORDSHIPS may be pleased to issueappropriate directions upon the Respondent to abstainfrom passing any Assessment Order under Section 153 Cof the Income Tax Act, 1961 until the objectionsadvanced are are properly adjudicated. D.YOUR LORDSHIPS may be pleased to order StatusQuo pending the hearing and final disposal of thepresent petition and direct the Respondent and itssubordinates not to take any coercive action or actfurtherance and pursuance of the impugned notice; E.YOUR LORDSHIPSmay be pleased to direct theRespondent to allow sufficient time to approachappropriate forum, if so, in case of any adverse order inregard to the Objections raised by the Petitioner; F.YOUR LORDSHIPS may be pleased to pass anyfurther or other orders as the Hon’ble Court may deemproper in the interest of justice and in the circumstancesof the case.” 2.In case of search and seizure under Section 132 of the Income Tax Act, 1961(‘the Act’ hereinafter) carried out at the premises of the SSS (Satyam, Sangani, Shaligram)GroupofCompanieson06.03.2018, the satisfaction note had been recorded by the Assessing Officer on 10.03.2021 which was concerning the searched person. The respondent issued the notices under Section 153 C of the Act pursuant to the search and seizure for Assessment Years 2012-2013 to 2018-2019. After the satisfaction note was recorded bythe Jurisdictional Assessing Officer of thepetitioner, which is the AssistantCommissioner of Income Tax, Central Circle-2(3), Ahmedabad on 28.05.2021, the notice came to be issued on 16.06.2021 by therespondent. The petitioner categoricallyrequested for supplying of the copy of satisfaction note of both the Assessing Officer i.e. the Assessing Officer ofsearched person and that of the petitioner. 3.On 21.06.2021 the petitioner furnishedthe copies of return of income along withother requisite documents and on 26.10.2021the respondent issued further notices underSection 143 (2) of the Act for theAssessment Years 2015-2016 to 2018-2019. 4.The satisfaction note was provided on27.10.2021 and the objections had beenfiled by the respondent against them on06.12.2021. The notices came to be issuedunder Section 142(1) of the Act on06.12.2021 and 23.12.2021. 5.This petition is preferred essentially requesting the Court to direct the respondent authority to consider the objection and disposed of the same beforeit proceeds further relying on the decision ofCommissioner of Income Tax vs.Vijaybhai N. Chandrani, reported in (2013)35 taxmann.com 580 (SC). 5.1It was the case where the Assessing 4.The satisfaction note was provided on27.10.2021 and the objections had beenfiled by the respondent against them on06.12.2021. The notices came to be issuedunder Section 142(1) of the Act on06.12.2021 and 23.12.2021. 5.This petition is preferred essentially requesting the Court to direct the respondent authority to consider the objection and disposed of the same beforeit proceeds further relying on the decision ofCommissioner of Income Tax vs.Vijaybhai N. Chandrani, reported in (2013)35 taxmann.com 580 (SC). 5.1It was the case where the Assessing Officer had issued the show cause noticeunder Section 153 C of the Act to theAssessee for reassessment of his income on the basis of the documents seized during the search conducted in the premise of another Assessee. Upon request, the Assessee was furnished the copies ofdocuments seized from such other Assessee. 5.2 The challenge was made by the Assessee for the notices issued under Section 153 of the Act and the High Courthad held that the documents seized did notbelong to the Assessee and therefore,quashed the show cause notice. 5.3 The Apex Court in a Special LeavePetition held that at the stage of issuanceof notice under Section 153 C of the Act,the Assessee could have addressed hisgrievance and explained his stand to theAssessing Officer by filing an appropriatereply to the said notices, instead offiling the writ petition impugning the saidnotices. The Apex Court said that it is asettled law that alternative remedy isavailable to the aggrieved party, it mustexhaust the same before approaching thewrit Court. The Apex Court further held that the Assessee invoked the writ jurisdiction of the High Court at the first instance without first exhausting thealternative remedies, the High Court oughtnot to have entertained the same and shouldhave directed the Assessee to file reply to the said notice and upon receipt of adecision of the Assessing Officer, if forany reason it was aggrieved by the saiddecision, it could question before theforum provided under the Act. Thus, withoutexpressing any opinion on the correctnessor otherwise of the construction that wasplaced by the High Court on Section 153C ofthe Act, the Apex Court had set aside thejudgment. 5.4 Relevant findings and observations of the Apex Court are as follow: “13.In the instant case, it transpires from the record that the jurisdictional Assessing Authority, upon having a reasonto believe that the documents seized indicate escapement ofincome, has issued Show-Cause Notices under Section 153Cto the assessee for reassessment of his income during theassessment years 2001-2002 to 2006-2007. Thereafter, uponrequest of the assessee, the Assessing Authority has furnishedhim with the copies of documents seized under Section132A. The assessee being dissatisfied with the saiddocuments instead of filing his explanation/reply to theShow-Cause Notices, has filed a Writ Petition before theHigh Court impugning the said notices. 14. In our considered view, at the said stage of issuance ofthe notices under Section 153C, the assessee could haveaddressed his grievances and explained his stand to theAssessing Authority by filing an appropriate reply to the saidnotices instead of filing the Writ Petition impugning the saidnotices. It is settled law that when an alternate remedy isavailable to the aggrieved party, it must exhaust the samebefore approaching the Writ Court. In Bellary Steels & AlloysLtd. v. CCT [2009] 17 SCC 547, this Court had allowed theassessee therein to withdraw. original Writ Petition filedbefore the High Court as the said proceedings came to befiled against the show-cause notice and observed that theHigh Court should not have interfered in the matter as theWrit Petition was filed without even reply to the show-causenotice. This Court further observed as follows: "3.... In the circumstances, we could have dismissedthese civil appeals only on the ground of failure toexhaust statutory remedy, but for the fact that hugeinvestments involving the large number of industriesis in issue." 15. We are fortified by the decision of this Court in IndoAsahi Glass Co. Ltd. v. ITO [2002] 254 ITR 210/122 Taxman123 (SC) wherein the assessee had approached this Courtagainst the judgment and order of the High Court which haddismissed the Writ Petition filed by the assessee whereinchallenge was made to the show-cause notice issued by theAssessing Authority on the ground that alternative remedywas available to the assessee. This Court concurred with thefindings and conclusions reached by the High Court anddismissed the said appeal with the following observations: "5. This and the other facts cannot be taken up forconsideration by this Court for the first time. In ouropinion, the High Court was right in coming to theconclusion that it is appropriate for the appellantsto file a reply to the show-cause notice and takewhatever defence is open to them." 17. In view of the above, without expressing any opinion onthe correctness or otherwise of the construction that is placedby the High Court on Section 153C, we set aside the impjudgment and order. Further, we grant time to the assessee, if it so desires, to file reply/objections, if any, ascontemplated in the said notices within 15 days' time fromtoday. If such reply/objections is/are filed within time grantedby this Court, the Assessing Authority shall first consider thesaid reply/objections and thereafter direct the assessee to filethe return for the assessment years in question. We make itclear that while framing the assessment order, the AssessingAuthority will not be influenced by any observations made bythe High Court while disposing of the Writ Petition. If, forany reason, the assessment order goes against the assessee,he/it shall avail and exhaust the remedies available to him/itunder the Act, 1961.” 6.The case of Bajrang Tea Manufacturing Company Private Limited & Anr. vs. Unionof India & Ors in W.P.A.11894 of 2021relied upon by the petitioner also whileaddressing the challenge to the AssessmentOrder under Section 153 C read with Section144 of the Act has considered the issuewhether before passing the impugnedAssessmentOrders,theobjections/ representations of the petitioner against initiation of the impugned proceedingsunder Section 153C of the Act were requiredto be considered or not and if not done,whether it is a violation of principle ofnatural justice? The Court addressed theissue and held thus: “Since in this case it appears from record that theaforesaid representations/objections of the petitioners werenot considered and disposed of before passing theaforesaid impugned assessment orders an no opportunityof hearing was given to the petitioners which is a clearviolation of principle of natural justice, without going intothe merits. of the impugned assessment orders and theaforesaid objections/representations of the petitioners, onthe ground of violation of principle of natural justicealone, I am setting aside the aforesaid impugnedassessment orders dated 22nd May, 2021 being AnnexureP-10 to the writ petition and remanding the case of thepetitioners to the respondents concerned to consider anddispose of the aforesaid two representations/objectionsdated 23rd April, 2021 and 4th May, 2021 made by thepetitioners in accordance with law and by passing areasoned and speaking order and after giving anopportunity of hearing to the petitioners or theirauthorised representative within four weeks from the date of communication of this order and further continuation ofthe assessment proceedings in question will depend uponthe outcome of the final order to be passed upon theaforesaid objections/representations of the petitioners. of communication of this order and further continuation ofthe assessment proceedings in question will depend uponthe outcome of the final order to be passed upon theaforesaid objections/representations of the petitioners. It is recorded that this COurt has set aside the aforesaidimpugned assessment orders on limited ground of violationof principle of natural justice of not considering anddisposing of the aforesaid representations/objections of thepetitioners and this Court has not gone into the merits ofthe case. In this matter, the respondent Assessing Officerwill proceed strictly in accordance with law whiledisposing of the aforesaid representations/objections of thepetitioners.” 7. It is made quite clear that where any proceedings under Section 153 C of the Actis initiated against the person, other thanthe searched person in whose case the power under Section 132 of the Act, the search has been carried out, is entitled to filereply/objection to the satisfaction note furnished to that person by the Jurisdictional Assessing Officer (other than the Assessee Searched) and once thoseobjections are furnished, a reasonable timeis to be furnished. In the case ofVijaybhai N. Chandrani (supra)the ApexCourt though directed alternative remedy tobe resorted to, it had permitted 15 days’time once the objections were filed and theAssessing Authority is held duty bound toconsider such objections and thereafter, todirect the Assessee to file a return ofAssessment year in question. Thus, givingof an opportunity is a must beforeproceeding against the person other thansearched person after providing note ofsatisfaction and passing of a reasoned andspeaking order after such opportunity ismade available and the assessee avails suchopportunity to file objection. C/SCA/20152/2021 ORDER DATED: 29/12/2021 8.In the instant case, we could notice from the material which has been furnishedand the objections were raised against thesatisfaction note supplied by a speaking order and those objections have been disposed of on 27.12.2021. This Has happened subsequent to the filing of the present petition and therefore, this petition would not survive as the essential prayer was to direct the authorityconcerned to consider the objections. 9.At this stage, the learned advocate,Mr.Dhinal Shah has urged this Court that there are other issues to be raised on merit, which may be required to bechallenged by the petitioner, however, in absence of any pleading in the present petition, if the law permits, the petitioner will be entitled to raise themtaking recourse to law. 10. Request of one week time is made toreply to the final show cause notice dated27.12.2021 which has been issued after disposing of the objections, as theapprehension on the part of the petitioner is of framing of the Assessment on orbefore 31.12.2021 and the demand raised inthe last show cause notice has been almostdoubled. 11. Noticing the disposal of the objectionson 27.12.2021 and issuance of demand on27.12.2021 itself, the petitioner shall beat liberty to make a request to theauthority concerned of grant of reasonabletime of minimum one week for him to replyand let the same be considered by the C/SCA/20152/2021 ORDER DATED: 29/12/2021 authority concerned. As this petition is disposed of without issuance of notice in the circumstances mentioned above which developed during pendency, petition isthough not entertained, request to permit the adjournment before the Assessing Officer is permitted considering the dateof disposal and final show cause notice. 11. With the abovedirectionand observation, present petition standsdisposed of accordingly. C/SCA/20152/2021 ORDER DATED: 29/12/2021 authority concerned. As this petition is disposed of without issuance of notice in the circumstances mentioned above which developed during pendency, petition isthough not entertained, request to permit the adjournment before the Assessing Officer is permitted considering the dateof disposal and final show cause notice. 11. With the abovedirectionand observation, present petition standsdisposed of accordingly. 12. Over and above the regular mode ofservice, direct service is permittedthrough speed post as well as e-mode. (SONIA GOKANI, J) (VAIBHAVI D. NANAVATI,J)