The admitted facts in common to both sets of writ petitions are that a search was conducted in the premises of C. Vijayabaskar on the 7th of April, 2017. All files relating to the searched entity as well as those associated with him were centralized on the 24th of September, 2019. Notices under Section 153C were issued on the 25th of October, 2019. The petitioner filed responses against the questionnaires and after taking note of the same, assessments on 30th December 2019 in terms of Section 143(3) read with Section 153C of the Act. The matter was heard and decided upon by Hon’ble Justice Anita Sumanth.
A Writ Petition filed under Article 226 of the Indian Constitution as a writ of Certiorari to challenge the impugned Assessment order passed by the Respondent under Section 143(3) read with Section 153C of the Income Tax Act, 1961 for the Assessment Year 2012-13 dated 30th December 2019 and to quash the same as illegal, unreasonable, arbitrary and contrary to law.
- Whether a notice under Section 143(2) of the Act is to be mandatorily issued before completion of an assessment in consequence of a notice under Section 153C?
- Whether the provisions of natural justice have been satisfied in these cases?
- Whether the Assessing Authority was right in relying on a valuation report sought for and obtained by the investigating officer post-proceedings for search?
Arguments by the Parties
The issues raised under Section 143(2) of the Act, the Petitioner relies on the judgment of the Supreme Court in the case of Assistant Commissioner of Income Tax & Anr vs. Hotel Bluemoon, in which the Bench held that a notice under Section 143(2) was mandatory, in the absence of which, the assessment made would stand vitiated.
The Delhi High Court in Ashok Chaddha case the Bench after an elaborate discussion negated the plea of the assesses, concluding that the issuance of notice was not mandatory in the case of an assessment under Section 153A.
On the question to the principles of natural justice, the relevant sequence of dates and events is that a notice under Section 153C was issued on 25th October 2019 regarding the search conducted in 2017, neither the affidavit filed in support of the writ petitions nor the impugned orders of assessment anywhere mention on the date of search. The notice under Section 153C called upon the Petitioner to file returns within a period of eight days from service of the notice and the returns have been filed on 7th December 2019.
The impugned assessments proceed on the basis that the petitioner had purchased certain immovable properties, which were not admitted in the petitioner’s returns of income. In its response, the Petitioner has stated that all details of movable and immovable properties have been disclosed in the return of income filed, and the purchased cost of which has been added as undisclosed income.
The bench objected to the jurisdiction of the Income Tax Act, 1961 there was no seized material found at Shri. C. Vijayabaskar’s search to warrant assessment jurisdiction of the Act and according to the Bench from the issues raised by the petitioner in assessment proceedings notice, it is observed that the assessment is being proceeded based on the valuation report, which is an opinion having more than two views and not on the seized materials.
The bench observed that the time limit for completion of the assessment is 31st December 2020 and not 31st December 2019. Therefore, the assessment on 31st December 2019 will be legally untenable. When the search was completed on the 7th of April, 2017, there was no necessity to have waited till 20th September, 2019 for centralization, observed by the court.
The Investigating Officer is thus empowered to refer an issue to valuation even during the process of search. However, such a report has to be put to assess and his complete response was sought before using the same against him. This has not been done in the present case. Thus, while the reference to valuation is in order, the decision-making process is flawed and in violation of the principles of natural justice.
As it is solely a matter of prudence, the Bench set aside the assessments with the direction to the respondent to issue notices afresh, hear the Petitioner and pass orders of assessments within a period of eight weeks from 9th of April, 2021 with sufficient time being given to the petitioner to put forth his submissions on merits and hence the writ petitions are disposed of.
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