Wp/36004/2018 Of Mr Shyamraj Singh v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24 DAY OF JANUARY, 2019. BEFORE. THE HON'BLE MRS. JUSTICE S.SUJATHA W.P.No.36004/2018 C/W_tW.P.No.36005/2018 (TIT) IN W.P.No.36004/ 2018 BETWEEN - Mr. SHYAMRAJ SINGHS/O SRI B.S.BALAJI SINGH,AGED ABOUT 40 YEARS,PRESENTLY AT EMBASSY HABITAT,NOQ.1002, NEXT TO MOUNTCARMEL COLLEGE, VASANTHNAGAR,BANGALORE-5600052 PETITIONER. (BY SMT.VANI H., ADV.) IN W.P.No.36005/ 2018 BETWEEN - M/s SVK MINERALS,PRESENTLY AT EMBASSY HABITAT,NO.1002, NEXT TO MOUNTCARMEL COLLEGE, VASANTHNAGAR, |BANGALORE-560052,REP. BY ITS MANAGING PARTNER,Mr. SHYAMRAJ SINGH,S/O B.S.BALAJI SINGH,AGED ABOUT 40 YEARS. | ..PETITIONER|. (BY SMT.VANI H., ADV.) -9.- AND :/ 1.THE DEPUTY COMMISSIONEROF INCOME TAX, CENTRAL CIRCLE-1,BELGAUM-590Q006OF INCOME TAX, CENTRAL CIRCLE-1,BELGAUM-590Q006 2.THE PRINCIPAL COMMISSIONEROF INCOME TAX, CENTRAL CIRCLE, AAYAKAR BHAVAN, NO.1,QUEENS ROAD,BENGALURU-560001 OF INCOME TAX, CENTRAL CIRCLE, AAYAKAR BHAVAN, NO.1,QUEENS ROAD,BENGALURU-560001 3THE INCOME TAX OFFICER|WARD NO.1, HOSPET-583203,BELLARY DISTRICT|WARD NO.1, HOSPET-583203,BELLARY DISTRICT| 4 THE ASSISTNAT COMMISSIONEROF INCOME TAX, CIRCLE-1,AAYAKAR BHAVAN, FORT ROAD, BELLARY-581102.OF INCOME TAX, CIRCLE-1,AAYAKAR BHAVAN, FORT ROAD, BELLARY-581102. 5,THE INCOME TAX OFFICER|WARD 1(2)(5), BMTC BUILDING),KORAMANAGALA, BENGALURU-560098|WARD 1(2)(5), BMTC BUILDING),KORAMANAGALA, BENGALURU-560098| 6.THE COMMISSIONER OF INCOME TAX.* FLOOR, AAYKAR BHAVAN,SEDUM ROAD, KALBURGI-585105* FLOOR, AAYKAR BHAVAN,SEDUM ROAD, KALBURGI-585105 7 THE TAX RECOVERY OFFICER (CENTRAL)4 FLOOR, CENTRAL REVENUE,BUILDING ANNEXE, QUEENS ROAD, |BANGALORE-560001>4 FLOOR, CENTRAL REVENUE,BUILDING ANNEXE, QUEENS ROAD, |BANGALORE-560001> RESPONDENTS.(COMMON)(COMMON) (BY SRI K.V.ARAVIND, ADV.) THESE WRIT PETITIONS ARE FILED UNDER ARTICLES|2276 AND 2277 OF THE CONSTITUTION OF INDIA PRAYING TQUASH THE IMPUGNED NOTICE DATED 09.11.2009 VIDE)ANNEXURE-S ISSUED UNDER SECTION 153C OF THE INCOME|TAX ACT, 1961 PERTAINING TO THE ASSESSMENT ORDER|DATED 31.12.2010 FOR THE ASSESSMENT YEAR 2008-09| -3- PASED UNDER SECTION 143(3) READ WITH SECTION 153C OF|THE INCOME TAX ACT VIDE ANNEXURE-B AND ETC. THESE PETITIONS COMING ON FOR ORDERSfTHIS DAY,THE COURT MADE THE FOLLOWING: ORDER Tnese petitions involving similar and akin issues,have been considered together and are taken up for final|disposal at this stage itself, with the consent of the learnedcounsel appearing for the parties. 2. Petitioner is challenging the validity of initiation ofthe proceedings under Section 153-C of the Income TaxAct,(‘Act’ for the sake of brevity) 1961, as well as theassessment order dated 31/12/2010 relating to the)assessment year 2008-09 passed under Section 143(3).read with Section 153-C of the Act. 3 It is contended that a search was carried on16/10/2008 in the case of Sri. Desu Bheemraj, Proprietor ofM/s.S.V.Logistics and others at Hospet under Section 132|of the Act. Immediately, thereafter a survey was.conducted under Section 133-A on 17/10/2018 in the business premises of the petitioner, a Partnership Firm atBasavesnwara Badawane, Hospet, Bellary District inconnection with the search conducted on 16/10/2008.After issuing notice under Section 153-C of the Act,assessment order under Section 143(3) read with 153-C ofthe Act, was passed. Being aggrieved, these writ petitions.are filed. 3 It is contended that a search was carried on16/10/2008 in the case of Sri. Desu Bheemraj, Proprietor ofM/s.S.V.Logistics and others at Hospet under Section 132|of the Act. Immediately, thereafter a survey was.conducted under Section 133-A on 17/10/2018 in the business premises of the petitioner, a Partnership Firm atBasavesnwara Badawane, Hospet, Bellary District inconnection with the search conducted on 16/10/2008.After issuing notice under Section 153-C of the Act,assessment order under Section 143(3) read with 153-C ofthe Act, was passed. Being aggrieved, these writ petitions.are filed. 4. Learned counsel for the petitioner would submitthat initiation of proceedings under Section 153-C of theAct is without jurisdiction and as such further proceedings.namely, passing of the assessment order and issuance ofthe deemed notice are vitiated under law. Hence, she'submits that alternative remedy of appeal is no bar toinvoke the writ jurisdiction under Articles 226 and 22/7 ofthe Constitution of India. Learned counsel further arguedthat Section 153-C of the Act, which is in pari materia withSections.158-BD was considered by the Hon’ble Apex.Court in the case of.Commissioner of Income Tax III yv.Calcutta Knitwears, Ludhiana,(2014) 6 SCC 444‘ -5- whereby the Hon'ble Apex Court nas neid that the said.provision is a machinery provision and inserted in the)statute book for the purpose of carrying out of aproceeding other than the searched person under Sections|132 or 132-A of the Act. Under Section 158-BD of the Act,if an officer is satisfied that there exists any undisclosed|income which may belong to any other person other tnan|tne searched person under Sections 132 or 132-A of tneAct, after recording sucn satisfaction, may transmit the.records/documents/chits/papers etc., to the assessing)officer having jurisdiction over such other person. After.receiptOf|tneabove|Salcdsatisfactionand.upon|examination of the said documents relating to such other.person, the jurisdictional assessing officer may proceed toissue notice for the purpose of completion of the:assessments under Sections 158-BD of the Act, the otherprovisions of Chapter XIV-B shall apply. 5.|It is further argued that before_ initiatingproceedings under Section 156(3) of the Act, the assessingofficer should be satisfied that there is an undisclosed| -6- income whicn has been traced out when a person wassearcned under Section 1327 or wnose books of account orother documents or any assets were requisitioned under.Section 132-A of the Act, as held by the Hon’bie ApexCourt in the decision referred to supra. The said judgmentof tne Hon'ble Apex Court nas been applied to tneproceedings under Section 153C of the Act for thepurposes of assessment of income other than the searcnedperson in terms of tne Circular No.24/2015 |[F.NO.279/MISC./140/2015/ITJ| dated 31/12/2015 issued by theCentral Board of Direct Taxes. 6. However, no satisfactory note of the officer ofsearched person is forthcoming and the satisfactory notesaid to nave been passed, stated in the objections/reply|filed by the respondents, do not satisfy the requirement ofSection 153-C of the Act. Accordingly, the assessmentorder passed without fulfilling the mandatory requirement.of recording the satisfactory note of the Assessing Officerof the searched person and handing over of the seized or. -~Tf- requisitioned belongs or belonged to a person other than)tne person referred to in Section 153-A to the AssessingOfficer having jurisdiction over such other person, is notcomplied with. Hence, seeks for setting aside thenotices/assessment orders impugned nerein. 6. However, no satisfactory note of the officer ofsearched person is forthcoming and the satisfactory notesaid to nave been passed, stated in the objections/reply|filed by the respondents, do not satisfy the requirement ofSection 153-C of the Act. Accordingly, the assessmentorder passed without fulfilling the mandatory requirement.of recording the satisfactory note of the Assessing Officerof the searched person and handing over of the seized or. -~Tf- requisitioned belongs or belonged to a person other than)tne person referred to in Section 153-A to the AssessingOfficer having jurisdiction over such other person, is notcomplied with. Hence, seeks for setting aside thenotices/assessment orders impugned nerein. J |Learned counsel Sri.K.V.Aravind appearing fortnerevenue|justifying|the.impugnedproceedingssubmitted that before conducting the search, these files.were centralized and an order was passed under Section.127 of the Act in pursuance of the order passed on28.4.2009. The Assessing Officer of the searched personand the other person being the same, handing over of the.belongs seized to the Assessing Officer having jurisdictionover such other person, would not arise. Placing the.Original records before the Court, the satisfactory note saidto have been recorded by the Assessing Officer of theseized person, is pointed out. The said satisfactory note.reads as under: “Mr. Shymraj Singh, Hospet Asst. years 2003-04 to 2008-09|9/10/2009 Sir, The searcn and seizure action was conducted|in the case of M/s S.V. Logistics and others on|16/10/2008 anda this is a connected case with thesearch case. Based on seized material, survey|Under section 133A was conducted in the case of|M/s SVK Minerals, Hospet in witn the assessee Is apartner. Therefore, this case is convered under|Section 153C of the Income Tax Act, 1961 and)case has been notified under Section 127 by the|Commissioner of Income _ Tax, Gulbarga. viF.No.116/Notification/CIT-GLB/2009-10dated28/4/2009.Hence,theIncome|ISCObe|assessed/reassessed under section 153 A of the|Income Tax Act, 1961 for the above assessment|years. Therefore, notices under Section 153C|issued calling for the returns of income for the|Assessment Year’s 7003-04 to 2008-09.” 8.Further, it was argued that the writ petition isnot maintainable as the petitioners have not availed)alternative remedy of appeal available under law. -9Q- QO.iaNave|carefullyconsideredthe.rival submissions of tne learned counsel appearing for tne.parties and perused tne material on record. 10.It is apt to refer to Section 153-C of the Actapplicable for the relevant year which reads thus: “Notwithstanding anything contained insection 159, section 14/7, section 148, section149, section 151 and section 153, where the|Assessing Officer is satisfied that any money,bullion, Jewellery or other valuable article orthing or books of account or documents seizedor requisitioned belongs or belong to a personotner than tne person referred to in section153A, then the books of account or documentsor assets seized or requisitioned snall behanded over to the Assessing Officer having.jurisdiction over sucn otner person” The Hon’‘ble Apex Court in the case ofCalcutta Knitwears, Ludniana(supra) Nas observed tnus: “35. Having said that, fet us revert tothe discussion of Section 158-BD of the Act.The said provision is a macninery provision ana -10 - | “Notwithstanding anything contained insection 159, section 14/7, section 148, section149, section 151 and section 153, where the|Assessing Officer is satisfied that any money,bullion, Jewellery or other valuable article orthing or books of account or documents seizedor requisitioned belongs or belong to a personotner than tne person referred to in section153A, then the books of account or documentsor assets seized or requisitioned snall behanded over to the Assessing Officer having.jurisdiction over sucn otner person” The Hon’‘ble Apex Court in the case ofCalcutta Knitwears, Ludniana(supra) Nas observed tnus: “35. Having said that, fet us revert tothe discussion of Section 158-BD of the Act.The said provision is a macninery provision ana -10 - | inserted in the statute book for the purpose ofcarrying out assessments of a person otherthan the searched person under Sections 132or 137-A of the Act. Under Section 158-BD ofthe Act, if an officer is satisfied that tnereexists any unadisclosed income which maybelong to any otner person otner than tnesearcned person under Sections 132 or 132-Aof the Act, after recording such satisfaction,may transmit the’ recoras/documents/cnits/papers, etc. to the assessing officer navingjurisdiction over sucn other person. Afterreceipt of the aforesaid satisfaction and uponexamination of the said other documents|relating to sucn other person, the Jurisdictionalassessing officer may proceed to issue a noticeforthePUrPOSeOf|completion|Of|theassessments under Section 158-BD of tne Act,the other provisions of Chapter XIV-B snailapply. 36.The opening words of Section158BD of the Act are that the assessing officermust be satisfied that “undisclosed income’|belongs to any otner person otner than tneperson with respect to whom a searcn wasmade under Section 1372 of tne Act or @ -|]]-| requisition of books were made under Section132A of the Act and thereafter, transmit therecords for assessment of such other person.Therefore, the snort question tnat falls for ourconsideration and decision is at wnat stage oftne proceedings should the satisfaction note beprepared by the assessing officer: whether atthe time of initiating proceedings under Section158BC for the completion of the assessmentsof the searched person unaer Section 132 and132A of the Act or during the course of tneassessment proceedings under Section 158BCof.theActOF|aftercompletion|of.theproceedings under Section 158BC of the Act. 3/7. The Tribunal and the High Court areof the opinion that it could only be prepared bythe assessing officer during tne course of tneassessment proceedings under Section 158BCof the Act and not after the completion of theSaid proceedings. Tne Courts below nave reliedupon the limitation period provided in Section158BE(2)(b) of the Act in respect of theassessmen.proceedingsInitiatedUnderSection 158BD, t.e., two years from the end ofthe month in whicn tne notice under CnapterXIV-B was served on sucn other person in -10-| respect of search initiated or books of account:OrotherdocumentsOF|anyassetsake|reguisitioned on or after 01.01.1997. We wouldexamine whether the Tribunal or tne HignCourt are Justified in coming to tne aforesaidConclusion. 38. We would certainly say that before|initiating proceedings under Section 158BD ofthe Act, the assessing officer who has initiatedproceedings for completion of the assessmentsUnder Section J58BC of tne Act should be!Satisfied that there is an Undisclosed income|whicn nas been traced out wnen a person was_searched under Section 137 or the books ofaccounts were requisitioned under Section137A of the Act. This is [n contrast to theprovisions of Section 148 of tne Act whererecoraing of reasons in writing are a sine quanon. Under Section 158BD the existence ofcogent and demonstrative material is germaneTo theassessingofficers’SatisfactionInconciuaing that the seized documents belongto a person otner than tne searcned person isnecessary for initiation of action under Section158BD. Tne bare reading of the provisionIndicates that tne satisfaction note could be| -13-| -13-| prepared by the assessing officer either at thetime of initiating proceedings for completion ofassessment of a searched person underSection 158BC of the Act or during tne stage ofthe assessment proceedings. It does not meanthat after completion of the assessment, theassessingofficercannotgprepare theSatisfaction note to the effect that there exists|income tax belonging to any person other thanthe searcned person in respect of whom asearch was made under Section 132 £4oreguisition of books of accounts were madeunder Section 132A of the Act. The language ofthe provision is clear and unambiguous. [Tnelegisiature nas not imposed any embargo onthe assessing officer in respect of the stage ofproceedings during which the satisfaction is tobe reacned and recorded in respect of theperson otner than the searcned person.” 12.|It is not in dispute that the Department hasapplied the said dictum laid down by the Hon’pie Apex.Court to Section 153-C of the Act. A comprenensive.reading of the provisions along with the Circular of theDepartment makes it clear that the Assessing Officer nas to mandatorily record the satisfaction before initiatingproceedings under Section 153-C of tne Act. 13.)The ingredients to be satisfied to attractSection 153-C are: Firstly, the satisfaction report/note has to be.prepared by the Assessing Officer of the searched person. Secondly, any money, bullion, jewellery or other|valuable article or thing, seized or requisitioned, belongs or.belonged to a person other than the searched person. Thirdly, the books of account or documents or|assets, seized or requisitioned snall be nanded over to tne.Assessing Officer having jurisdiction over such otherperson. — For the purpose of Section 153-C of the Act, asatisfaction note is sine qua non and must be prepared by.the Assessing Officer before he transmits the records totne Assessing Officer wno nas jurisdiction over such other. -15-| person, as held by the Hon’ble Apex Court in|CalcuttaKnitwears,(supra). 14The arguments of the learned counsel for therevenue tnat the files were centralized subsequent to the)search conducted on 16.10.2008 and the files wereassigned to a single Assessing Officer as per the order.dated 28.4.2009 of the Commissioner of Income Tax,nence, nanding over books of account or documents,|seized or requisitioned, appears to nave been complied.with may be acceptable, but the satisfactory note nowplaced on record by the revenue is not in conformity with|the mandatory requisite of Section 153-C. The ingredientsof Section 153-C snould be _ explicitly expressed irecording the satisfaction report by the Assessing Officer ofthe searched person. In the said satisfaction note, theseized or requisitioned belongs to a person other than the.person referred to the seized person, is not forth comina.Merely stating that the case is covered under Section153-C of the Act and the case has been notified underSection 153 of the Act would not be suffice and the same| -16-| cannot be construed as the satisfaction recorded under|Section 153-C of the Act. On the other nand, the said note|would disclose that it is only a note prepared for initiatingproceedings under Section 153-C of tne Act. The same,neither has any )heading/title, to indicate it as asatisfaction recorded nor the contents suggests tnesatisfaction of the Assessing Officer. Hence, the said noteis incomplete in as mucn as the satisfaction of the)Assessing Officer as required under Section 153-C of tneAct. On this ground alone, the proceedings initiated by tne.revenue cannot be sustained. | LD.|Tne aforesaid aspect goes to the root of thematter. Further proceedings initiated under Section 153-C)of the Act are without jurisdiction and can be held to be.vitiated in law. In such circumstances, there is no bar for.tne writ Court to entertain the writ petitionde horsthealternative remedy of appeal available under the Act. 16.For the foregoing reasons, the writ petitionsare allowed. Tne impugned notices and the assessment. �������� 5�<1�(�;�1�(13�;(4<1����5B171����1716>1�4(�;3�84?1�3C�35� LD.|Tne aforesaid aspect goes to the root of thematter. Further proceedings initiated under Section 153-C)of the Act are without jurisdiction and can be held to be.vitiated in law. In such circumstances, there is no bar for.tne writ Court to entertain the writ petitionde horsthealternative remedy of appeal available under the Act. 16.For the foregoing reasons, the writ petitionsare allowed. Tne impugned notices and the assessment. �������� 5�<1�(�;�1�(13�;(4<1����5B171����1716>1�4(�;3�84?1�3C�35� 46434;31�;6C�;22�52�4;31�2�5@11<469(�4A�21�:4((4?81�>6<1��301��@3���� �(>��7�/� ��� � !"�#��