Case Note & Summary
The present judgment arises from a batch of writ appeals filed by the Revenue against a common order dated 12.08.2022 passed by a Single Judge of the High Court of Karnataka. The Single Judge had allowed writ petitions filed by the assessees, quashed notices issued under Section 153C of the Income Tax Act, 1961, and all further proceedings, and remanded the matter to the Revenue for fresh consideration. The assessees had challenged the notices primarily on the ground that they were 'searched persons' and not 'other persons', and therefore proceedings under Section 153C were not maintainable. The notices in question were issued subsequent to a search conducted on 02.08.2017 at the premises of a third party and the assessee, leading to seizure of diaries and recording of statements. The jurisdiction over the assessees’ cases was centralized to the Revenue by an order under Section 127 dated 07.03.2018. A notice under Section 153C was issued on 21.08.2019 for Assessment Year 2015-2016, in response to which the assessee filed a return. An assessment order was passed on 31.12.2019, and the assessee filed a statutory appeal before the Commissioner of Income Tax (Appeals) on 30.01.2020, which remained pending. While the appeal was pending, the assessees filed writ petitions on 23.05.2022. The Single Judge allowed these petitions, quashing the notices and proceedings. In the appeals before the Division Bench, the Revenue contended that the writ petitions were not maintainable due to the availability of an efficacious alternative remedy, as the statutory appeal was still pending. It was further argued that the Single Judge had violated principles of natural justice by deciding issues that were not argued by the parties, and by not affording the Revenue a full opportunity to present its case. The Division Bench heard arguments from both sides and reserved judgment on 14.12.2023. The judgment was pronounced on 22.01.2024.
Issue of Consideration
Whether the Single Judge erred in quashing Section 153C notices and remanding without full hearing; maintainability of writ petitions during pendency of statutory appeal; whether assessee is 'searched person' or 'other person' under Section 153C; validity of centralization order under Section 127 without prior notice.
Case Details
2024 LawText (KAR) (01) 39
W.A.830/2022 c/w W.A.831/2022, W.A.832/2022, W.A.833/2022, W.A.834/2022
K. Somashekar, Rajesh Rai K
For Appellants: Balbir Singh, then ASG; Y.V. Raviraj. For Respondent Sunil Kumar Sharma: Kiran S. Javali, Sr. Counsel with Sreehari Kutsa. For Respondent Kandaswamy Rajendra: A. Mahesh Chowdhary.
Deputy Commissioner of Income Tax, Circle-1(4), Bengaluru and Others
Sunil Kumar Sharma and Kandaswamy Rajendra
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Nature of Litigation
Writ appeals by Revenue against Single Judge's order allowing writ petitions, quashing Section 153C notices and assessment proceedings, and remanding for reconsideration.
Remedy Sought
Revenue sought to set aside Single Judge's order and restore the notices and assessment proceedings.
Filing Reason
Revenue contended that writ petitions were not maintainable due to pending statutory appeal, and that the Single Judge's order violated natural justice by not affording full hearing.
Previous Decisions
Single Judge's common order dated 12.08.2022 in W.P.9937/2022 & connected matters quashing Section 153C notices and remanding; Assessment order dated 31.12.2019; Statutory appeal pending before CIT(A).
Issues
Whether writ petitions were maintainable during pendency of statutory appeal under Section 246A of Income Tax Act.
Whether the Single Judge violated natural justice by deciding points not argued and without giving Revenue full opportunity.
Whether the assessee is to be treated as 'searched person' or 'other person' for the purpose of Section 153C.
Whether the transfer of jurisdiction under Section 127 without prior notice to the assessee was valid.
Submissions/Arguments
Revenue argued that writ petitions were not maintainable as assessee had already filed a statutory appeal before CIT(A); that the Single Judge directed arguments only on the applicability of Supreme Court decisions in V.C. Shukla and Common Cause, leaving other issues unargued; that the Single Judge's order violated natural justice.
Assessees contended that notices under Section 153C were without jurisdiction as they were 'searched persons' and not 'other persons'; that no prior notice was given before centralization of jurisdiction under Section 127; and that the assessment proceedings were void ab initio.
Judgment Excerpts
The main grievance of the respondents is that impugned notices under Section 153C of the Act is to be issued on 'other person' and the respondents being 'searched person', the impugned notice under Section 153C of the Act is not maintainable.
The learned Single Judge, by its order dated 12.08.2022, has allowed all the writ petitions and has quashed the respective impugned notices issued including the further proceedings and has thereafter remanded the matter to the Revenue to re-consider the issue afresh.
the writ petitions preferred before the learned Single Judge were not maintainable, and hence the learned Single Judge had committed an error in entertaining the writ petitions which were not maintainable
Procedural History
Search action under Section 132(1) on 02.08.2017 at premises of D.K. Shivakumar and assessee; diaries and statements recovered; case centralized to Revenue under Section 127 order dated 07.03.2018; notice under Section 153C issued on 21.08.2019 for AY 2015-2016; assessee filed return on 05.09.2019; notice under Section 143(2) on 06.09.2019; assessment order dated 31.12.2019; assessee filed appeal on 30.01.2020 before CIT(A), which is pending; writ petitions filed on 23.05.2022 challenging notice and assessment; Single Judge allowed writ petitions on 12.08.2022, quashing notices and remanding; Revenue filed these writ appeals under Section 4 of High Court Act, 1961; appeals heard and reserved on 14.12.2023; judgment pronounced on 22.01.2024.
Acts & Sections
- Income Tax Act, 1961: 132(1), 127, 153C, 143(2), 246A
- High Court Act, 1961: 4
