M/S. South Coast Spices Exports ... vs Principal Commissioner Of Income ...
2023 Latest Caselaw 10542 Ker

                IN THE HIGH COURT OF KERALA AT ERNAKULAM
                                    PRESENT
            THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH
         MONDAY, THE 16TH DAY OF OCTOBER 2023 / 24TH ASWINA, 1945
                           WP(C) NO. 33771 OF 2023
PETITIONER/S:

             M/S. SOUTH COAST SPICES EXPORTS PVT. LTD, AGED 59 YEARS
             BUILDING #18/253, THEMBADATH BUILDING GROUND FLOOR, NEAR
             KSRTC GARAGE, METRO PILLAR NO 94, ALUVA, ERNAKULAM
             KERALA.REPRESENTED BY ITS DIRECTOR SALIM THEMBADATH
             HYDROSE, PIN - 683106

             BY ADV PREETHA S.NAIR



RESPONDENT/S:

     1       PRINCIPAL COMMISSIONER OF INCOME TAX
             INCOME TAX DEPARTMENT REVENUE BUILDING, I.S.PRESS ROAD,
             KOCHI., PIN - 682018

     2       ASSISTANT COMMISSIONER OF INCOME TAX
             CENTRAL CIRCLE, KOLLAM, PIN - 690001

             BY JOSE JOSEPH SC IT


         THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
16.10.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 W.P.(C) No.33771/2023
                                    -2-




                        JUDGMENT

The present writ petition has been filed impugning Exts.

P1 to P6 notices under Section 153C of the Income Tax Act 1961

(for short, 'IT Act') for the Assessment Years 2015-16 to 2020-

21; Exts.P7 to P11 Assessment Orders dated 28.03.2023 for the

Assessment Years 2015-16 to 2019-20; and Exts.P12 and P13

Assessment Orders dated 29.03.2023 for the Assessment Years

2020-21 and 2021-2022 whereby the petitioner's total income

has been assessed as Rs.92,87,317/-, loss of Rs.33760/-, loss of

Rs.35,402/-, loss of Rs.3,25,893/-, loss of Rs.1,23,311/-,

Rs.10,00,000/- and Rs.5,10,00,000/- respectively for the

Assessment Years from 2015-16 to 2021-22.

2. Learned Counsel for the petitioner submits that the

petitioner has approached this Court against the Assessment

Orders because the proceedings in issuing the notices under W.P.(C) No.33771/2023

Section 153C of the IT Act for the Assessment Years 2015-16 to

2020-21 require them to file return of income for the

concerned years on the basis of the provisions of Section 153C

of the IT Act and that the Assessment Orders for the said

Assessment Years in Exts.P7 to P13 are without jurisdiction

and against law. Therefore, the petitioner has not approached

the Appellate Authority and approached this Court invoking

the writ jurisdiction of this Court under Article 226 of the

Constitution of India.

2.1 Learned Counsel for the petitioner further submits

that the Assessing Officer is required to record satisfaction

note before issuing notice under Section 153C of the IT Act to

a person other than the searched person. Notice issued under

Section 153C has not mentioned/specified the satisfaction

note recorded by the 2nd respondent of the searched person. It

is also submitted that the satisfaction notes supplied to the

petitioner in pursuance of the e-mail sent by the petitioner on W.P.(C) No.33771/2023

06.07.2023 do not bear the DIN number, and therefore, the

whole proceedings are without jurisdiction and illegal.

2.2 Learned Counsel for the petitioner has placed

reliance on the judgment of the Bombay High Court in the case

of Ashok Commercial Enterprises v. Assistant Commissioner of

Income Taxation Central Circle1 in support of his submissions.

3. The petitioner had filed its return of income

voluntarily for the Assessment Years up to 2021-22. In respect

of Assessment Year 2021-22, a net loss of Rs.6,54,555/- was

claimed. A search operation under Section 132 of the IT Act

was carried out on 23.03.2021 at the business premises as well

as the residential premises of Civil Contractor - Sri K N

Madhusoodanan Nair, his Company - M/s Mavanal Granites

Pvt Ltd and connected entities (Mavanal Group). During the

search, certain incriminating documents showing the

unaccounted income of Sri K N Madhusoodanan and his

Judgment dated 21.07.2023 in Writ Petition No.2595/2021 and connected Writ Petitions. W.P.(C) No.33771/2023

concerns about the diversion of business funds to evade

taxation were noticed. It was further noticed that by diverting

the funds, they had been expending unaccounted payments

for investment in landed properties. Based on evidence

gathered during the course of the search, the assessments

under Section 153A of the IT Act were completed in the case of

Sri K N Madhusoodanan, his concerns and connected persons.

3.1 In the course of the search under Section 132 of the

IT Act, a document with the title of 'Palakkad Land' was seized

from the residence of Sri K R Unnikrishnan, Accountant at M/s

Mavanal Granites Pvt Ltd. This document was a folder

containing signed cash receipts of two persons, Mr Salim and

Mr Asgar. Sri K R Unnikrishnan, in his sworn statement

recorded on 24.03.2021, had stated that Sri K N

Madhusoodanan was trying to buy 100 acres of land at

Nelliampathy, Palakkad, from M/s South Coast Spices Exports

Pvt Ltd (the petitioner), and paid Rs.5 crores, out of which W.P.(C) No.33771/2023

Rs.10 lakhs was by cheque and the balance in cash paid on

various dates to one Asgar M S and one Salim from 21.10.2020

to 12.02.2021 amounting to Rs.4.90 crores. These transactions

were not accounted. Therefore, it was a case of clear evasion

of tax and escapement of income in the hands of the receiver

- M/s South Coast Spices Exports Pvt Ltd. In accordance with

the provision of Section 153C of the IT Act, the Assessing

Officer, after recording satisfaction, issued notices under

Section 153C of the IT Act to the petitioner for the Assessment

Years 2015-16 to 2020-21 on 27.01.2022 requiring them to file

the return of income.

3.2 Both Sri K R Unnikrishnan and Sri K N

Madhusoodanan, the leading persons of Mavanal Group, had

confirmed that the payments reflected in the seized

documents were actually made. Signed receipts evidencing

the cash payments and copies of cheques issued were available

in the seized folder. Several other incriminating documents W.P.(C) No.33771/2023

were discovered showing that huge cash transactions were

entered into by the petitioner with Sri K N Madhusoodanan,

which were not reflected in the books of accounts. The

Assessment Orders were therefore finalised after following the

procedure under Section 153C of the IT Act.

4. The satisfaction notes recorded by the Assessing

Authority, which have been placed on record in Exts.P19 to

P24, would suggest that the Assessing Authority has examined

the documents and recorded satisfaction for issuing notices

under Section 153C of the IT Act. The petitioner has

demanded the satisfaction note, and the letter issued by the

Assistant Commissioner of Income Tax in Ext.P18, whereby the

satisfaction notes have been provided to the petitioner on his

demand, would disclose that the letter bears the DIN number.

The satisfaction note need not bear the DIN number, and this

Court does not find any substance in the submission of the

learned Counsel for the petitioner that since the satisfaction W.P.(C) No.33771/2023

notes do not bear the DIN number, whole proceedings are

invalid.

4.1 The judgment cited by the learned Counsel for the

petitioner in the of Ashok Commercial Enterprises (supra) is of no

help to the petitioner as the facts of the said case are

distinguishable. In that case, the Bombay High Court has

taken note of Circular No.19/2019 issued by the CBDT in the

exercise of power under Section 119(1) of the IT Act dated

14.08.2019 providing that no communication shall be issued by

any Income Tax Authority inter alia relating to assessment

orders, statutory or otherwise, inquiries, approvals to an

assessee or any other person on or after 1st October 2019 unless

a computer generated DIN has been allotted. The said Circular

is extracted hereunder:

"CIRCULAR NO.19/2019 (F. NO.225/95/2019-ITA.II], DATED 14-8-2019 With the launch of various e-governance Initiatives, Income Tax Department is moving toward total computerization of W.P.(C) No.33771/2023

its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax-administration. Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as "communication" were found to have been issued manually, without maintaining a proper audit trail of such communication.

2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the Income-Tax Act, 1961 (hereinafter referred to as "the Act"), has decided that no communication shall be issued by any income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry. investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the 1st day of October, 2019 unless a computer- generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of such communication.

3. In exceptional circumstances such as,

(i) when there are technical difficulties in W.P.(C) No.33771/2023

generating/allotting/ quoting the DIN and issuance of communication electronically; or

(ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties: or

(iii) when due to delay in PAN migration. PAN is lying with non-jurisdictional Assessing Officer; or

(iv) when PAN of assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or

(v) when the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner/ Director General of income-tax. In cases where manual communication is required to be issued due to delay in PAN migration, the proposal seeking approval for issuance of manual communication shall include the reason for delay in PAN migration. The communication issued under aforesaid circumstances shall state the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner/ Director General of Income-tax for issue of manual communication in the following format- W.P.(C) No.33771/2023

"....... This communication issues manually without a DIN on account of reason/reasons given in para3(i)/3(ii)/3(iii)/3(iv)/ 3(v) of the CBDT Circular No .... dated (strike off those which are not applicable) and with the approval of the Chief Commissioner/Director General of Income Tax vide number .... dated ....

4. Any communication which is not in conformity with Para- 2 and Para-3 above, shall be treated as invalid and shall be deemed to have never been issued.

5. The communication issued manually in the three situations specified in para 3- (i), (ii) or (iii) above shall have to be regularised within 15 working days of its issuance, by i. uploading the manual communication on the System. ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro forma available on the System.

6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance.

7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the Income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by W.P.(C) No.33771/2023

31st October 2019."

4.2 The satisfaction note is a document prepared by the

Assessing Authority which is kept in the file, and unless an

assessee demands the satisfaction note, it is not required to be

provided to the assessee. Therefore, there is no requirement

to have a DIN number in the satisfaction note recorded by the

Assessing Authority. When the satisfaction notes have been

provided to the petitioner, the communication in Ext.P18

bears DIN, and therefore, I find that the judgment cited by the

learned Counsel for the petitioner has no application to the

facts of the present case.

5. Considering the facts and circumstances of the case,

it cannot be said that the impugned notices and assessment

orders are without jurisdiction as submitted by the learned

Counsel for the petitioner. Therefore, this Court would not

like to entertain the writ petition in the exercise of the writ

jurisdiction. The petitioner may avail the remedy of appeal W.P.(C) No.33771/2023

against the impugned assessment orders if so advised.

Thus, the writ petition, with the aforesaid observation, is

hereby dismissed.

Sd/-

DINESH KUMAR SINGH JUDGE

jjj W.P.(C) No.33771/2023

APPENDIX OF WP(C) 33771/2023

PETITIONER EXHIBITS

Exhibit P1 TRUE COPY OF THE NOTICE UNDER SECTION 153C FOR THE ASSESSMENT YEAR 2015-16 DATED27-01-2022

Exhibit P2 TRUE COPY OF THE NOTICE UNDER SECTION 153C FOR THE ASSESSMENTYEAR2016-17 DATED27-01-2022

Exhibit P3 TRUE COPY OF THE NOTICE UNDER SECTION 153C FOR THE ASSESSMENT YEAR 2017-18 DATED 27- 01-2022

Exhibit P4 TRUE COPY OF THE NOTICE UNDER SECTION 153C FOR THE ASSESSMENT YEAR 2018-19 DATED 27-01-2022

Exhibit P5 TRUE COPY OF THE NOTICE UNDER SECTION 153C FOR THE ASSESSMENT YEAR 2019-20 DATED 27-01-2022

Exhibit P6 TRUE COPY OF THE NOTICE UNDER SECTION 153C FOR THE ASSESSMENT YEAR 2020-21 DATED 27-01-2022

Exhibit P7 TRUE COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2015-16 DATED 28-03-2023

Exhibit P8 TRUE COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2016-17 DATED28-03-2023

Exhibit P9 TRUE COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2017-18 DATED 28- 03-2023

Exhibit P10 TRUE COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2018-19 DATED 28-03-2023

Exhibit P11 TRUE COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR2019-20 DATED 28-03-2023

Exhibit P12 A TRUE COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2020-21 DATED 29-03-2023 W.P.(C) No.33771/2023

Exhibit P13 A TRUE COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2021-22 DATED 29-03-2023

Exhibit P14 TRUE COPY OF THE BANK STATEMENT FOR THE PERIOD 01-04-2020 TO 31-03-2021 DATED 19-10- 2022

Exhibit P15 TRUE COPY OF THE LETTER DATED 29-05-2023

Exhibit P16 TRUE COPY OF THE LETTER DATED 19- 06-2023

Exhibit P17 TRUE COPY OF THE EMAIL DATED 06-07-2023

Exhibit P18 TRUE COPY OF THE LETTER DATED 27-07-2023

Exhibit P19 A TRUE COPY OF THE SATISFACTION NOTE FOR THE ASSESSMENT YEAR 2015-16 DATED 27-01-2022

Exhibit P20 A TRUE COPY OF THE SATISFACTION NOTE FOR THE ASSESSMENT YEAR 2016-17 DATED 27-01-2022

Exhibit P21 A TRUE COPY OF THE SATISFACTION NOTE FOR THE ASSESSMENT YEAR 2017 -18 DATED 27-01-2022

Exhibit P22 A TRUE COPY OF THE SATISFACTION NOTE FOR THE ASSESSMENT YEAR 2018 -19 DATED 27-01-2022

Exhibit P23 A TRUE COPY OF THE SATISFACTION NOTE FOR THE ASSESSMENT YEAR 2019 -20 DATED 27-01-2022

Exhibit P24 A TRUE COPY OF THE SATISFACTION NOTE FOR THE ASSESSMENT YEAR 2020-2021 DATED 27-01-2022