M/S Magnolia Infra vs Assistant Commissioner Of Income ...
2021 Latest Caselaw 18757 Guj

     C/SCA/20152/2021                                  ORDER DATED: 29/12/2021




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 20152 of 2021

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                    M/S MAGNOLIA INFRA
                          Versus
 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3),
                        AHMEDABAD
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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
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 CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
       and
       HONOURABLE 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 following

prayers:

"9...

A. YOUR LORDSHIPS may be pleased to allow the present Petition;

B. YOUR LORDSHIPS may be pleased to issue a writ of certiorari or in the nature of certiorari or any other

C/SCA/20152/2021 ORDER DATED: 29/12/2021

appropriate writ, orders or directions upon the Respondent to do duly consider the objections so filed by the Petitioner and pass appropriate adjudicatory Order either in the affirmative or in negation;

C. YOUR LORDSHIPS may be pleased to issue appropriate directions upon the Respondent to abstain from passing any Assessment Order under Section 153 C of the Income Tax Act, 1961 until the objections advanced are are properly adjudicated.

D. YOUR LORDSHIPS may be pleased to order Status Quo pending the hearing and final disposal of the present petition and direct the Respondent and its subordinates not to take any coercive action or act furtherance and pursuance of the impugned notice;

E. YOUR LORDSHIPSmay be pleased to direct the Respondent to allow sufficient time to approach appropriate forum, if so, in case of any adverse order in regard to the Objections raised by the Petitioner;

F. YOUR LORDSHIPS may be pleased to pass any further or other orders as the Hon'ble Court may deem proper in the interest of justice and in the circumstances of the case."

2. In case of search and seizure under

C/SCA/20152/2021 ORDER DATED: 29/12/2021

Section 132 of the Income Tax Act, 1961

('the Act' hereinafter) carried out at the

premises of the SSS (Satyam, Sangani,

Shaligram) Group of Companies on

06.03.2018, 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 by

the Jurisdictional Assessing Officer of the

petitioner, which is the Assistant

Commissioner of Income Tax, Central Circle-

2(3), Ahmedabad on 28.05.2021, the notice

came to be issued on 16.06.2021 by the

respondent. The petitioner categorically

requested for supplying of the copy of

C/SCA/20152/2021 ORDER DATED: 29/12/2021

satisfaction note of both the Assessing

Officer i.e. the Assessing Officer of

searched person and that of the petitioner.

3. On 21.06.2021 the petitioner furnished

the copies of return of income along with

other requisite documents and on 26.10.2021

the respondent issued further notices under

Section 143 (2) of the Act for the

Assessment Years 2015-2016 to 2018-2019.

4. The satisfaction note was provided on

27.10.2021 and the objections had been

filed by the respondent against them on

06.12.2021. The notices came to be issued

under Section 142(1) of the Act on

06.12.2021 and 23.12.2021.

5. This petition is preferred essentially

C/SCA/20152/2021 ORDER DATED: 29/12/2021

requesting the Court to direct the

respondent authority to consider the

objection and disposed of the same before

it proceeds further relying on the decision

of Commissioner of Income Tax vs.

Vijaybhai N. Chandrani, reported in (2013)

35 taxmann.com 580 (SC).

5.1 It was the case where the Assessing

Officer had issued the show cause notice

under Section 153 C of the Act to the

Assessee 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 of

documents seized from such other Assessee.

5.2            The        challenge            was        made           by         the

Assessee                for   the      notices                issued           under





   C/SCA/20152/2021                                    ORDER DATED: 29/12/2021

Section 153 of the Act and the High Court

had held that the documents seized did not

belong to the Assessee and therefore,

quashed the show cause notice.

5.3 The Apex Court in a Special Leave

Petition held that at the stage of issuance

of notice under Section 153 C of the Act,

the Assessee could have addressed his

grievance and explained his stand to the

Assessing Officer by filing an appropriate

reply to the said notices, instead of

filing the writ petition impugning the said

notices. The Apex Court said that it is a

settled law that alternative remedy is

available to the aggrieved party, it must

exhaust the same before approaching the

writ Court. The Apex Court further held

that the Assessee invoked the writ

C/SCA/20152/2021 ORDER DATED: 29/12/2021

jurisdiction of the High Court at the first

instance without first exhausting the

alternative remedies, the High Court ought

not to have entertained the same and should

have directed the Assessee to file reply to

the said notice and upon receipt of a

decision of the Assessing Officer, if for

any reason it was aggrieved by the said

decision, it could question before the

forum provided under the Act. Thus, without

expressing any opinion on the correctness

or otherwise of the construction that was

placed by the High Court on Section 153C of

the Act, the Apex Court had set aside the

judgment.

5.4 Relevant findings and observations of

the Apex Court are as follow:

"13.In the instant case, it transpires from the record that

C/SCA/20152/2021 ORDER DATED: 29/12/2021

the jurisdictional Assessing Authority, upon having a reason to believe that the documents seized indicate escapement of income, has issued Show-Cause Notices under Section 153C to the assessee for reassessment of his income during the assessment years 2001-2002 to 2006-2007. Thereafter, upon request of the assessee, the Assessing Authority has furnished him with the copies of documents seized under Section 132A. The assessee being dissatisfied with the said documents instead of filing his explanation/reply to the Show-Cause Notices, has filed a Writ Petition before the High Court impugning the said notices.

14. In our considered view, at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In Bellary Steels & Alloys Ltd. v. CCT [2009] 17 SCC 547, this Court had allowed the assessee therein to withdraw. original Writ Petition filed before the High Court as the said proceedings came to be filed against the show-cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show-cause notice. This Court further observed as follows:

C/SCA/20152/2021 ORDER DATED: 29/12/2021

"3.... In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue."

15. We are fortified by the decision of this Court in Indo Asahi Glass Co. Ltd. v. ITO [2002] 254 ITR 210/122 Taxman 123 (SC) wherein the assessee had approached this Court against the judgment and order of the High Court which had dismissed the Writ Petition filed by the assessee wherein challenge was made to the show-cause notice issued by the Assessing Authority on the ground that alternative remedy was available to the assessee. This Court concurred with the findings and conclusions reached by the High Court and dismissed the said appeal with the following observations:

"5. This and the other facts cannot be taken up for consideration by this Court for the first time. In our opinion, the High Court was right in coming to the conclusion that it is appropriate for the appellants to file a reply to the show-cause notice and take whatever defence is open to them."

17. In view of the above, without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C, we set aside the imp judgment and order. Further, we grant time to the assessee,

C/SCA/20152/2021 ORDER DATED: 29/12/2021

if it so desires, to file reply/objections, if any, as contemplated in the said notices within 15 days' time from today. If such reply/objections is/are filed within time granted by this Court, the Assessing Authority shall first consider the said reply/objections and thereafter direct the assessee to file the return for the assessment years in question. We make it clear that while framing the assessment order, the Assessing Authority will not be influenced by any observations made by the High Court while disposing of the Writ Petition. If, for any reason, the assessment order goes against the assessee, he/it shall avail and exhaust the remedies available to him/it under the Act, 1961."

6. The case of Bajrang Tea Manufacturing

Company Private Limited & Anr. vs. Union

of India & Ors in W.P.A.11894 of 2021

relied upon by the petitioner also while

addressing the challenge to the Assessment

Order under Section 153 C read with Section

144 of the Act has considered the issue

whether before passing the impugned

Assessment Orders, the objections/

representations of the petitioner against

C/SCA/20152/2021 ORDER DATED: 29/12/2021

initiation of the impugned proceedings

under Section 153C of the Act were required

to be considered or not and if not done,

whether it is a violation of principle of

natural justice? The Court addressed the

issue and held thus:

"Since in this case it appears from record that the aforesaid representations/objections of the petitioners were not considered and disposed of before passing the aforesaid impugned assessment orders an no opportunity of hearing was given to the petitioners which is a clear violation of principle of natural justice, without going into the merits. of the impugned assessment orders and the aforesaid objections/representations of the petitioners, on the ground of violation of principle of natural justice alone, I am setting aside the aforesaid impugned assessment orders dated 22nd May, 2021 being Annexure P-10 to the writ petition and remanding the case of the petitioners to the respondents concerned to consider and dispose of the aforesaid two representations/objections dated 23rd April, 2021 and 4th May, 2021 made by the petitioners in accordance with law and by passing a reasoned and speaking order and after giving an opportunity of hearing to the petitioners or their authorised representative within four weeks from the date

C/SCA/20152/2021 ORDER DATED: 29/12/2021

of communication of this order and further continuation of the assessment proceedings in question will depend upon the outcome of the final order to be passed upon the aforesaid objections/representations of the petitioners.

It is recorded that this COurt has set aside the aforesaid impugned assessment orders on limited ground of violation of principle of natural justice of not considering and disposing of the aforesaid representations/objections of the petitioners and this Court has not gone into the merits of the case. In this matter, the respondent Assessing Officer will proceed strictly in accordance with law while disposing of the aforesaid representations/objections of the petitioners."

7. It is made quite clear that where any

proceedings under Section 153 C of the Act

is initiated against the person, other than

the searched person in whose case the power

under Section 132 of the Act, the search

has been carried out, is entitled to file

reply/objection to the satisfaction note

furnished to that person by the

Jurisdictional Assessing Officer (other

C/SCA/20152/2021 ORDER DATED: 29/12/2021

than the Assessee Searched) and once those

objections are furnished, a reasonable time

is to be furnished. In the case of

Vijaybhai N. Chandrani (supra) the Apex

Court though directed alternative remedy to

be resorted to, it had permitted 15 days'

time once the objections were filed and the

Assessing Authority is held duty bound to

consider such objections and thereafter, to

direct the Assessee to file a return of

Assessment year in question. Thus, giving

of an opportunity is a must before

proceeding against the person other than

searched person after providing note of

satisfaction and passing of a reasoned and

speaking order after such opportunity is

made available and the assessee avails such

opportunity 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 furnished

and the objections were raised against the

satisfaction 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 authority

concerned 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 be

challenged by the petitioner, however, in

absence of any pleading in the present

petition, if the law permits, the

C/SCA/20152/2021 ORDER DATED: 29/12/2021

petitioner will be entitled to raise them

taking recourse to law.

10. Request of one week time is made to

reply to the final show cause notice dated

27.12.2021 which has been issued after

disposing of the objections, as the

apprehension on the part of the petitioner

is of framing of the Assessment on or

before 31.12.2021 and the demand raised in

the last show cause notice has been almost

doubled.

11. Noticing the disposal of the objections

on 27.12.2021 and issuance of demand on

27.12.2021 itself, the petitioner shall be

at liberty to make a request to the

authority concerned of grant of reasonable

time of minimum one week for him to reply

and 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 is

though not entertained, request to permit

the adjournment before the Assessing

Officer is permitted considering the date

of disposal and final show cause notice.

11. With                the      above            direction                    and

observation,                  present            petition               stands

disposed of accordingly.


12. Over            and    above       the       regular           mode          of

service,                direct     service           is         permitted

through speed post as well as e-mode.

(SONIA GOKANI, J)

(VAIBHAVI D. NANAVATI,J) M.M.MIRZA