O.n.gugan Babu v. Deputy Commissioner Of Income Tax, Central Circle, Salem – 7. Central Circle, Salem – 7

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :05.02.2018 W.P.No.41295 of 2002 O.N.Gugan Babu ...Petitioner Vs. 1.Deputy Commissioner of Income Tax, Central Circle, Salem – 7. Central Circle, Salem – 7. 2.The Additional Commissioner of Income Tax, Central Range, Coimbatore....Respondents Prayer: Petition filed under Article 226 of the Constitution ofIndia to issue a Writ of Certiorari, to call for the records inP.A.N/G.I.R.No.CCPG. 002 dated 31.10.2002, on the file of thefirst respondent and quashing the same. For Petitioner : Mr.M.P.Senthil Kumar For Respondents : Mr.A.P.Srinivas and Mr.A.N.R.Jayaprathap O R D E R Heard Mr.M.S.Senthil Kumar, learned counsel for thepetitioner and Mr.A.P.Srinivas, learned standing counsel for theRevenue. 2. The petitioner has filed this writ petitionchallenging the assessment order passed by the 2[nd] respondentdated 31.10.2002 for the block period 01.04.1990 to 06.07.2000.The assessment was made under Section 158 BD read with Section158 BC(c) and Section 143(3) of the Income Tax 1961. Thechallenge to the impugned proceedings are broadly on thefollowing grounds :(1) The notice issued to the petitioner dated 11.10.2000was issued under Section 158 BC of the Act. The period oflimitation for completion of block assessment under Section 158BC is in terms of Section 158 BE (1) (b) which states that itshould be within two years from the end of the month in whichthe last of the authorization for search under Section 132 orfor requisition under Section 132 (A), as the case may be was https://hcservices.ecourts.gov.in/hcservices/ executed in case where a search is indicated was books ofaccounts or other documents or any assets or requisition on orafter 01.01.1997. It is submitted that the impugned assessmentorder is an order under Section 158BC as the notice issued tothe petitioner dated 11.10.2000 stated that the petitioner isrequired to file a true and correct return of the total incomeincluding the undisputed income in terms of 158BC and if it isso, the limitation comes to an end on 31.07.2002 and the 1[st]respondent having passed the impugned assessment order on31.10.2002 is barred by limitation. (2) It is further submitted that the notice itself beingdefective that is not having been issued under Section 158 BD,the respondents would not be entitled to amend the notice orcure the defect, in the light of the language employed inSection 292(B) of the Act in support of such contention, thelearned counsel played reliance on the decision in the case ofV.Ramaiah Vs.Commissioner of Income Tax reported in (2013) 85CCH 0155 ChenHC (3) As the notice dated 11.10.2000 mentioned Section158BC, the petitioner had absolutely no knowledge that theassessment order is under Section158BD and came to know of itonly when the impugned assessment order was passed andtherefore, the petitioner is entitled to canvass the question oflimitation for passing the impugned assessment order. (4) It is submitted that the Division Bench in the caseof Commissioner of Income Tax-I vs. M/s.Chennai PetroleumCorporation Ltd. reported in (2013) 353 ITR 0646 (Madras)considered the issue and held that a person other than theperson with respect to whom the search was conducted, theprovision under Section 158BD would apply and the provision ofSection 158BC has no application to the case. (5) The above contentions have been raised by thepetitioner without prejudice to the other factual contentioni.e., is by accepting that there was a valid warrant of searchissued in favour of the petitioner. (4) It is submitted that the Division Bench in the caseof Commissioner of Income Tax-I vs. M/s.Chennai PetroleumCorporation Ltd. reported in (2013) 353 ITR 0646 (Madras)considered the issue and held that a person other than theperson with respect to whom the search was conducted, theprovision under Section 158BD would apply and the provision ofSection 158BC has no application to the case. (5) The above contentions have been raised by thepetitioner without prejudice to the other factual contentioni.e., is by accepting that there was a valid warrant of searchissued in favour of the petitioner. (5.1) In alternate to the above submission, the learnedcounsel for the petitioner challenged the very jurisdiction ofthe 1[st] respondent on the ground that there was no authorizationfor conducting a search on the petitioner. Though this appearsto be a factually contrary stand taken by the Assesseeespecially, in the light of the three contention stated above,this is one more submission made by the learned counsel for thepetitioner. (6) It is further submitted that the Central Board ofDirect Taxes accepted the decision of Hon'ble Supreme Court in https://hcservices.ecourts.gov.in/hcservices/ the case of Commissioner of Income Tax-iii vs. M/s.CalcuttaKnitwears reported in 2014-TIOL-30-SC-IT and issued a circularbearing No.24/2015, dated 31.12.2015, with regard to recordingof satisfaction note under Section 158BD / 158BC of the Act andheld that satisfaction note can be prepared at any of thefollowing stages: “(a) at the time of or along with theinitiation of proceedings against the searched personunder Section 158 BC of the Act or(b) in the course of the assessmentproceedings under Section 158BC of the Act; or(c) immediately after the assessmentproceedings are completed under Section 158BC of theAct of the searched person.” 7. It is submitted that in the instant case, nosatisfaction note was prepared and it has been seriouslydisputed by the petitioner. 8. The Revenue, on the other hand has raised thefollowing contentions:(8.1) The legal issue involved in this writ petition issquarely covered by the decision of the Division Bench in thecase of Kailash Sarda V. CIT reported in [2014] 363 ITR 36(Madras). (8.2) The learned counsel would contend that theapplicability of the circular has not been raised before thisCourt at any earlier point of time and in the absence ofquestion being raised in the form of proper pleadings, therespondents cannot be expected the answer the allegation by wayof counter affidavit. (8.3) Referring to paragraph no.13 of the counteraffidavit, it is submitted that once Section 158BD is invoked,the only notice to be issued would be under Section 158BC (a)and not under any other section. (8.4) The assessee was fully aware of all the facts andvoluntary statement was recorded from the assessee which is partof the records and the impugned assessment is proper and if thepetitioner is aggrieved, they should file an appeal before theCommissioner of Income Tax (Appeals).* 9. After having carefully considered the abovesubmissions of the learned counsel on either side and I amunable to pursuade myself to entertain the writ petition on thegrounds canvassed by the petitioner not on the merits but onthe ground of existence of an effective alternative remedybefore the Commissioner of Income Tax (Appeals).* This Court https://hcservices.ecourts.gov.in/hcservices/ (8.4) The assessee was fully aware of all the facts andvoluntary statement was recorded from the assessee which is partof the records and the impugned assessment is proper and if thepetitioner is aggrieved, they should file an appeal before theCommissioner of Income Tax (Appeals).* 9. After having carefully considered the abovesubmissions of the learned counsel on either side and I amunable to pursuade myself to entertain the writ petition on thegrounds canvassed by the petitioner not on the merits but onthe ground of existence of an effective alternative remedybefore the Commissioner of Income Tax (Appeals).* This Court https://hcservices.ecourts.gov.in/hcservices/ while recording such findings, is conscious of the fact that thewrit petition has been pending since the year 2002. Undernormal circumstances, the Courts have held that it would beharsh on the litigant to compel him to pursue an alternateremedy after substantial length of time, when the matter waspending before the High Court. I seek to draw an exception tothe said decisions on the peculiar facts and circumstances ofthe case. As mentioned above, two of the main contentionsraised by the petitioner prima facie appear to be contrary toeach other. In my view, only if the petitioner accepts that aproper warrant of search was issued in its name and thereafter,search was conducted, it is doubtful whether the question oflimitation could be canvassed. If the petitioner's case is thatno authorization was given and no valid search was conducted,this would go contrary to the other submissions. However, I donot wish to express any opinion on this as the Court isconvinced that the assessee should be relegated to avail theappeal remedy before ITAT. 10. The issue pertaining to whether the satisfactionnote was drawn as mentioned in circular No.24 of 2015, requiresto be verified by going through the factual matrix. In anyevent, the circular was issued in the year 2015 and the decisionof the Hon'ble Supreme Court in M/s.Calcutta Knitwears (citedsupra) was rendered only on 12.03.2015 and much prior, thepresent writ petition had been filed. Admittedly, the petitionerdid not raise any additional ground in this regard. However, Ido not wish to foreclose the rights of the petitioner, since thepetitioner is permitted to canvass all points before theTribunal. In the decision relied on by the Revenue in the caseof Kailash Sarda V. CIT reported in [2014] 363 ITR 36 (Madras)it was pointed out that the fact that the assessment is madebased on the materials seized in the course of the searchoperation of two other persons, does not mean that theassessment is not under section 158BD of the Income Tax Act. Aspointed out earlier, since the procedure given under Section158BC is the only procedure given under Chapter XIV-B for makingblock assessment, the reference to section 143(3) notice readwith proceedings under Section 158BC does not make theassessment as the one not falling under Section 158BD. 11. In the light of the above decision, I find thatcomplicated factual issues are to be first thrashed out beforeone goes into the aspect as to which of the legal principles asput forth would apply. This has necessarily to be done beforethe Commissioner of Income Tax (Appeals)* not by way of the writpetition. Therefore, I hold that the writ petition is notmaintainable and the factual and disputed question of fact haveto be analysed and thrashed out before the ITAT. 11. In the light of the above decision, I find thatcomplicated factual issues are to be first thrashed out beforeone goes into the aspect as to which of the legal principles asput forth would apply. This has necessarily to be done beforethe Commissioner of Income Tax (Appeals)* not by way of the writpetition. Therefore, I hold that the writ petition is notmaintainable and the factual and disputed question of fact haveto be analysed and thrashed out before the ITAT. 12. Record of proceedings shows that there has been anorder of interim stay granted by this Court in this writpetition, when the writ petition was entertained on 26.11.2002and till date, interim order is in force and infact, it has beenmade absolute on 31.12.2002, much prior to the filing of thecounter affidavit by the 1[st] respondent, dated 22.08.2003.Therefore, while relegating the assessee to avail the appellateremedy before the Commissioner of Income Tax (Appeals)* thisCourt is inclined to direct that the impugned assessmentproceedings shall continue to remain stayed till the disposal ofthe appeal by the Tribunal. 13. In the result, the writ petition is held to be notmaintainable and accordingly dismissed and the petitioner isgranted liberty to file an appeal before the Commissioner ofIncome Tax (Appeals)* as against the impugned assessment order.Considering the fact that the assessment has been pending since2002 and the writ petition was filed well within a period ofthirty days from the receipt of the impugned assessment order,the writ petitioner is granted thirty days time from the date ofreceipt of a copy of this order to file an appeal before theCommissioner of Income Tax (Appeals)* and if the appeal is filedwithin the said time, the appeal shall not be rejected on theground of limitation, and it shall be entertained and decided onmerits. 14. The petitioner as well as the Revenue are entitledto canvass all points including the contentions advanced beforethis Court and produce factual material in support of theirclaim, which shall be considered by the Commissioner of IncomeTax (Appeals)*, uninfluenced by any observation made in thisorder. No costs. Consequently connected miscellaneous petitionis closed. Sd/-Assistant Registrar(CS VIII)dt. 02/03/2018 Corrected as per order dt.16.3.2018 made in WP.No.41295/02 Sd/-Assistant Registrar(CS-VIII)dt.23/03/2018 //True copy// Sub Assistant Registrar sk/rka To 1.Deputy Commissioner of Income Tax, Central Circle, Salem – 7. 2.The Additional Commissioner of Income Tax, Central Range, Coimbatore. Copy TOThe Section Officer,ER Section, High Court,Madras. To be substitutedto the order already despatched on 15.3.2018 +1cc to Mr.A.P.Srinivas, Advocate SR.No.8840+2cc to Mr.Mallika srinivasan, Advocate SR.No.8484, 19967* W.P.No.41295 of 2002 SS(CO)GN(07/03/2018)EU 26.3.2018