Gujarat High Court Declines To Intervene In Case Challenging Validity of Notices Issued Under Section 153C of the IT Act

Gujarat High Court Declines To Intervene In Case Challenging Validity of Notices Issued Under Section 153C of the IT Act

In a significant judgment, the Gujarat High Court has declined to intervene in a case contesting the legality of notices issued under Section 153C of the Income Tax Act, 1961.

The petition contested the legality of notices and orders issued under the Income Tax Act, 1961. Particularly, it disputed a notice dated 09.06.2022 concerning the Assessment Year 2014-15 under Section 153C, along with an order dated 02.12.2023, purportedly representing the respondent No.2's resolution of objections.

Additionally, the petition challenged a notice issued under Section 142(1) on 11.12.2023, seeking to restrain the respondents from enforcing compliance with the aforementioned notice dated 09.06.2022 for the Assessment Year 2014–15.

The grounds to challenge the initiation of proceedings under Section 153C of the Income Tax Act, 1961 included:

i. The satisfaction note of the searched person and the satisfaction note recorded in the case of the petitioner were not provided, despite specific requests made by the petitioner via a letter dated 08.08.2022. This omission rendered the entire proceedings leading to the issuance of notice under Section 142 invalid.

ii. No incriminating material was discovered against the petitioner during the search conducted on 15.10.2019.

iii. The petitioner has been subjected to baseless allegations without any material presented to the Assessing Officer to establish prima facie evidence that the seized material is relevant to the petitioner's case.

The Court observed that the petitioner did not dispute the fact that the Assessing Officer had independently recorded a satisfaction note before initiating proceedings under Section 153C of the Income Tax Act, 1961, upon receipt of the satisfaction note from the Assessing Officer of the searched person.

While acknowledging that the satisfaction note was furnished to the petitioner after the issuance of the notice under Section 142(1) dated 11.12.2023, the Court noted that this detail was not disclosed in the writ petition. However, the Court emphasized that the lack of the satisfaction note at the outset did not invalidate the subsequent proceedings.

Given that the petitioner responded to the notice under Section 142(1) dated 11.12.2023 by filing a return before approaching the Court, and considering that the notice under Section 153C for the Assessment Year 2014–15 was issued on 09.06.2022, the Court deemed it inappropriate to intervene solely on the grounds of the satisfaction note not being provided along with the initial notice.

The Gujarat High Court relied on the decision of the Supreme Court in the case of Commissioner of Income-Tax, Gujarat v. Vijaybhai N. Chandrani, which held that at the stage of issuing a notice under Section 153C, the High Court should not entertain a writ petition. Instead, the assessee should file a reply to the notices upon receiving the decision of the assessing officer. If aggrieved by the decision, the assessee should then question it before the forum provided under the Income Tax Act.

Furthermore, the High Court emphasized that the points raised by the assessee regarding the jurisdiction of the Assessing Officer in issuing the notice under Section 153C could not be appreciated, as it was not demonstrated that no satisfaction note was recorded by the Assessing Officer prior to the issuance of the notice under Section 153C.

Nevertheless, the Court allowed the petitioner to bring forth any conceivable objections before the Assessing Officer throughout the assessment proceedings. This included the argument that there was no satisfaction note from the Assessing Officer before the issuance of the notice under Section 153C dated 09.06.2022. Additionally, the petitioner could contend that there was no occasion to establish prima facie evidence that the seized material was connected to or concerned the petitioner.

The Court said that the petitioner would be at liberty to raise objections that no incriminating material was found during the search carried out on 15.10.2019 of the searched person, which could have been the basis for recording satisfaction, if any, by the Assessing Officer of the petitioner.

The Court affirmed that the petitioner had the liberty to assert that they could not be associated with a satisfaction note lacking material foundation. In the order, the Court clarified that the Assessing Officer should not be influenced by any of the observations made by them earlier while framing the assessment order. They emphasized that no opinion was expressed on the correctness or otherwise of the submissions made on the merits of the proceedings initiated against the assessee based on the search carried out under Section 132 of the Income Tax Act of 1961.

The High Court disposed of the writ petitions and rejected the request for a stay of the order to enable the petitioner to approach the Supreme Court.