The Madras HC dismissed the petition filed by Karti Chidambaram and Srinidhi Chidambaram against the show cause notice issued to them. According to the Court there was no malice in issuance of the show cause notice and interfering at the stage of show cause notice would be prejudicial to the due process of law.
Facts of the Case
The petitioner had sold his land to M/s. Agni Estates and Foundations Private Limited in the financial year 2013-2014 pertaining to the Assessment Year of 2014-2015. A search was conducted by the Deputy Director of Income Tax (DDIT) at the premises of the M/s. Agni Estates, where ‘small note books’ were seized. Consequently, the Assessment Officer of the petitioner initiated proceedings against the petitioner under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act) and re-opened the assessment for the year 2014-2015, with an allegation that a sum of Rs.6,38,75,000/- had escaped.
The DDIT filed a complaint against him for contravening Section 271C and Section 277 of the Act. Thereafter, the Assessment Officer issued a show cause notice under Section 153C of the Act to the petitioner and directed the petitioner to file returns from the Assessment Years of 2013-14 to 2018-19. Therefore, the petitioner filed a writ petition under Article 226 of the Constitution of India, praying for an issuance of a Writ of Certiorari towards the show cause notice that was issued to the petitioner.
Arguments by the Parties
The Counsel appearing on behalf of the petitioner stated that that the limitation period for passing an order after re-opening assessment under Section 148 of the Act expired on December 31, 2019, and that the Assessment officer had issued the show cause notice with the intention to extend the period of limitation.
According to the petitioner, the action of the respondent, “amounted to tax terrorism and was nothing, but a legal malice.” According to the petitioner, the Assessment Officer ought to have completed the proceedings under Section 148 within the period of limitation and should not have issued notice under Section 153C of the Act, without completing the proceedings initiated under Section 148 of the Act. The petitioner contended that the action was taken without jurisdiction and that it was a “classic case of legal malice.”
Observations of Madras High Court
Justice S.M. Subramaniam observed that the procedures for assessment and the re-assessment had not yet commenced. The Court states that it would not interfere at the stage of ‘show cause notice.’
The Court also observed that “the competent authority must be allowed to scrutinize the searched and impounded materials and also should provide an opportunity to the petitioner to defend their case.”
The Court opined that interfering at the stage of ‘show cause notice’ would cause prejudice to the due process of law.
The Court held that there was “No malice or procedural irregularity in issuing the show cause notice under Section 153C of the Income Tax act.” Hence, the Court dismissed the writ petitions.