Underwater Services Company Ltd.… v. Assistant Commissioner Of Income Taxcentral Circle – 5(3) & Others

Digitallysigned byYUGANDHARAYUGANDHARASHARADSHARADPATILPATILDate:2022.07.1217:12:17+0530 SRS IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2308 OF 2019 Underwater Services Company Ltd.… Petitioner Vs. Assistant Commissioner of Income TaxCentral Circle – 5(3) & Others … Respondents ------- Mr.Dinesh Kukreja i/b. Mr.Balkrishna V. Jhaveri for Petitioner. Mr.P.A.Narayanan for Respondents – Revenue. ------- CORAM :DHIRAJ SINGH THAKUR &ABHAY AHUJA, JJ. DATE :21[st] JUNE, 2022 P.C. : 1.The Petitioner herein is impugning a notice dated 29[th]November, 2018 issued under Section 153A of the Income Tax Act,1961 (“the Act”) as well as notice dated 4[th] June, 2019 underSection 92CA(2)/92(D)(3) of the Act for the assessment year 2016-2017, on the ground that there is no incriminating material inpossession of the Assessing Officer and any notice under thisSection can be issued only on the basis of incriminating materialdiscovered during the course of the search. 2.In connected matters viz., in Writ Petition No. 3015 of2019 as well as Writ Petition No. 2838 of 2019 with Writ PetitionNo.2052 of 2019 with Writ Petition No.2138 of 2019 with WritPetition No.2160 of 2019 with Writ Petition No.3056 of 2019 withWrit Petition No.3061 of 2019 with Writ Petition No.3059, on 21[st] October, 2021, this Court has passed the following order: “2We have considered the notice dated 29[th]November 2018 which is impugned in this petition. The notice isvery very brief and is bereft of any particulars. The same readsas under : Sir/Madam/M/s., In pursuance of provisions of section 153A of the IncomeTax Act, 1961, you are hereby required to prepare trueand correct return of your total income for theAssessment year 2012-13 in the prescribed form andmanner as per Rule 12 of Income Tax Rules 1962 settingforth such other particulars as may be prescribed by theIncome Tax Act, 1961. The return for the said assessment year verified inaccordance with the provisions of section 140 of theIncome Tax Act, 1961 should be furnished within 30 daysfrom the service of this notice. 3According to Mr. Chhotaray, Section 153A iscouched in mandatory language which implies that once thereis a search, the assessing officer has no option but to call uponthe assessee to file the returns of the income for the earlier sixassessment years. According to Mr. Chhotaray, it is not merelythe undisclosed income that will be brought to tax in such assessments, but the total income of the assessee, includingboth the income earlier disclosed and income found consequentto the search, would be brought to tax. Mr. Chhotaray insupport of this submission relied upon Madugula Venu V/s.Director of Income Tax[1], Commissioner of Income Tax – II,Thane V/s. Continental Warehousing Corporation (NhavaSheva) Ltd.[2], Commissioner of Income Tax (Central) – III V/s.Kabul Chawla[3]and Commissioner of Income Tax V/s. AnilKumar Bhatia[4]. 4We have no quarrel with the propositionsubmitted by Mr.Chhotaray. Section 153A is couched inmandatory language once there is a search, the assessingofficer has no option but to call upon the assessee to file thereturns of the income for the earlier six assessment years.Although Section 153A does not say that additions should bestrictly made on the basis of evidence found in the course of thesearch, or other post-search material or information availablewith the assessing officer which can be related to the evidencefound, it does not mean that the assessment can be arbitrary ormade without any relevance or nexus with the seized material.Obviously an assessment has to be made under this Section153A only on the basis of seized material. 4We have no quarrel with the propositionsubmitted by Mr.Chhotaray. Section 153A is couched inmandatory language once there is a search, the assessingofficer has no option but to call upon the assessee to file thereturns of the income for the earlier six assessment years.Although Section 153A does not say that additions should bestrictly made on the basis of evidence found in the course of thesearch, or other post-search material or information availablewith the assessing officer which can be related to the evidencefound, it does not mean that the assessment can be arbitrary ormade without any relevance or nexus with the seized material.Obviously an assessment has to be made under this Section153A only on the basis of seized material. 5Issuance of a show cause notice is the preliminarystep which is required to be undertaken. The purpose of showcause notice is to enable a party to effectively deal with the casemade out by respondent ( Om Shri Jigar Association vs Union OfIndia[5] ). 6Because Section 153A provides that anassessment has to be made under the said Section only on thebasis of seized material, the notice dated 29[th] November 2018,which is impugned in this petition, should have mentionedwhether the seized material was under Section 132 or books ofaccount, other documents or any assets are requisitioned underSection 132A. The notice is absolutely silent as could be seenfrom above. The notice says “you are required to prepare trueand correct return of income” and “setting forth such otherparticulars”. Petitioner had filed their returns for theAssessment Year in question, which they thought was the trueand correct return of income and that it contained all otherparticulars as prescribed. If respondent felt that was notenough and petitioner should file a fresh true and correct return of income because of the search, then respondent shouldcertainly indicate in its notice what were the seized materialunder Section 132 or books of accounts or other documents orany assets requisitioned under Section 132A. Otherwise anassessee would file a copy of what it had filed earlier, whichrespondent anyways had in its file. Petitioner has also beenseeking from respondent to make available copy of the allegedincriminating material found/seized during the search based onwhich the notice has been issued. Mr. Chhotaray states thatsuch material has been given later. We are not going into thataspect at this stage because what we find is that the noticeissued under Section 153A is bereft of any material. Nothingprevented respondent from mentioning in the notice the basisfor issuing the notice under Section 153A so that petitionercould comply with the same as prescribed. 7In the circumstances, the notice dated 29[th]November 2018 impugned in this petition is quashed and setaside. We do not make any observation on the merits of thecase. Respondent may issue fresh notice under Section 153Aand word it suitably, as advised so that petitioner may havesome information reading that notice the basis on which suchnotice has been issued. All rights and contentions of the partiesare kept open. 8Petition disposed.” 3.We observe that in this case also, a similar notice dated29[th] November, 2018 under Section 153A is under challenge and assuch, a similar cause of action would need to be adopted in this caseas well. 4.In the circumstances, the notice dated 29[th] November,2018 issued under Section 153A of the Act as well as notice dated4[th] June, 2019 under Section 92CA(2)/92(D)(3) of the Act for the SRS 5 13-WP-2308-2019.odt assessment year 2016-2017 are hereby quashed and set aside. 5.No observations are made on the merits of the case. The Respondents may issue fresh notices as they may be advised. 6.All rights and contentions of the parties are kept open. 7.Petition stands disposed. No cost. (ABHAY AHUJA, J.) (DHIRAJ SINGH THAKUR, J.)