K M NAGARAJ V. DEPUTY COMMISSIONER OF

ITA/758/2017

AI Insights

The case revolves around the validity of the assessment orders passed against K.M. Nagaraj for the assessment years 2005-06 to 2007-08, following a search operation under Section 132 of the Income Tax Act, 1961, at M/s. Corporate Leisure and Property Development (P) Ltd. The primary legal contention was whether the notice issued under Section 153A, without a search warrant in the name of the assessee, was valid. The Income Tax Appellate Tribunal had earlier allowed the revenue's appeal, stating that the notice was valid under Section 292B and that the assessee had participated in the proceedings, thus not prejudiced by the notice's issuance. The High Court agreed with the Tribunal's decision, emphasizing that the notice was effectively under Section 153C and that any minor defects did not invalidate the proceedings.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 692223 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-12-2019
• Assessment Year: misc
• Other Referred Cases: JINDAL STAINLESS LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX AND ANOTHER vs. MICRO LABS LTD., SARDAR HARVINDER SINGH SEHGAL vs. ASST. COMMISSIONER
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: ARAVIND
• Assessee Lawyers: VANAJA
• Keywords: Appeal; Assessment; Income Tax; Invalidity; Notice; Search warrant
• Section: 143(3); 132; 153A; 153C; 292B; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF DECEMBER, 2019 PRESENT THE HON'BLE MR.JUSTICE ARAVIND KUMAR AND THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ I.T.A. No.758 OF 2017 BETWEEN: K.M.NAGARAJ KODATHI VILLAGE GATE VARATHUR HOBLI BANGALORE – 560043 PAN : BKGPK 0079Q. … APPELLANT (BY SMT. VANAJA.M.R, ADVOCATE) AND: DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) BANGALORE …RESPONDENT (BY SRI. ARAVIND.K.V, ADVOCATE) THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 19.05.2017 PASSED IN C.O.NOS.49 TO 51/BANG/2014 IN ITA NO.1259 TO 1261/BANG/2013, FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08. THIS ITA COMING ON FOR ‘DICTATING JUDGMENT’ THIS DAY, SURAJ GOVINDARAJ J., DELIVERED THE FOLLOWING: 2 JUDGMENT Orders passed by Income Tax Appellate Tribunal (for short ‘ITAT’) dated 19.05.2017 in ITA Nos.1259- 1261/Bang/2013 is under challenge in these appeals by the assessee. 2. We have heard Smt. M.R.Vanaja, learned counsel appearing for assessee and Sri.K.V.Aravind, learned Standing Counsel appearing for the revenue. We have also perused the orders appended to the appeal memorandum and annexures referred to thereunder. 3. Search action under Section 132 of the Income Tax Act, 1961 (for short ‘Act’) was conducted in the case of M/s. Corporate Leisure and Property Development (P) Ltd. on 26.08.2009. Consequent to same a notice under Section 153A of the Act came to be issued to the assessee on 01.06.2010. In response to the same, assessee filed the return of income for the Assessment Years 2005-06, 2006-07 and 2007-08 on 30.09.2011 declaring the income at Rs.99,863/-, 3 Rs.20,32,716/- and Rs.9,49,060/-. Same was processed by the Assessing Officer under Section 143(3) r/w Section 153A of the Act and assessment order came to be passed on 29.12.2011 by assessing the income of the appellant at Rs.2,20,000/-, Rs.90,000/- and Rs.4,60,000/- respectively as per assessment orders - Annexure-C-1 to C-3. 4. Being aggrieved by the aforesaid assessment orders, appeals came to be preferred by appellant before CIT (Appeals), which came to be allowed on the ground that there was no search warrant in the name of the appellant. Consequently, assessment orders passed under Section 143(3) r/w Section 153A of the Act was held to be invalid vide common order dated 04.06.2013- Annexure-D. 5. Revenue being aggrieved by the same filed ITA Nos.1259-61/Bang/2013 challenging the said order. After considering the rival contentions, appeal came to be allowed by accepting the contention of the revenue by arriving at a conclusion that notice issued 4 to assessee on 01.06.2010 under Section 153A of the Act would not invalidate the assessment by relying upon Section 292B of the Act. It was also held by the tribunal that notice though issued under Section 153A of the Act, assessee had responded to the same by filing return of income, participated in the proceedings till the framing of assessment order. It was also held that, it was not the case of assessee that he would not fall within the scope and ambit of Section 153C of the Act. On these grounds, tribunal allowed the appeal filed by revenue and set aside the order of CIT (Appeals) and remitted matter back to CIT (Appeals) to adjudicate the matter on merits. Hence, this appeal. 6. It is the contention of Smt. Vanaja, learned counsel appearing for the assessee that assessment proceedings is to be quashed as void and bad in law, since there was no search warrant issued to the assessee under Section 132 of the Act, which is mandatory for issuing notice under Section 153A of the Act and initiating proceedings to pass the assessment 5 order. Hence, she has prayed for substantial questions of law being framed as indicated in the appeal memorandum with a further prayer to answer the same in favour of the assessee. In support of her submissions she would rely upon the judgment in the case of JINDAL STAINLESS LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX reported in 2009 (19) DTR 345. She would also rely upon the judgment of this Court rendered in the matter of COMMISSIONER OF INCOME TAX AND ANOTHER vs. MICRO LABS LTD. reported in (2012) 348 ITR 75 to contend that, if notice suffiers from vagueness and/or details mentioned therein, then such notice has to be treated as invalid. 7. Per contra, Sri. K.V.Aravind, learned Standing Counsel appearing for respondent would submit that consequent to search conducted in the premises of M/s. Corporate Leisure & Property Development (P) Ltd. on 26.08.2009, which is not disputed by the assessee a notice dated 01.06.2010 6 under Section 153A of the Act came to be issued to the assessee-appellant and in response to the same return of income was filed and thereafter notices under Sections 142(1) and 143(2) of the Act was issued calling upon the appellant to furnish certain details, which was also furnished by the Chartered Accountant representing the appellant and as such, assessment order came to be framed. He would also submit that appellant being aware of the nature of proceedings, cannot be heard to contend that assessment proceedings are to be invalidated on the ground of validity of notice. He submits that there is no substantial question of law involved and prays for dismissal of the appeal. 8. Having heard the learned Advocates appearing for parties and on perusal of entire records we are of the view, there cannot be any dispute to the proposition sine-qua-non for issuing notice under Section 153A of the Act there should be warrant of search in the name of a assessee to whom such notice 7 is issued. It is not in dispute in the facts obtained in the instant case, that no search warrant was issued in the name of the appellant-assessee. The purported notice issued under Section 153A of the Act dated 01.06.2010, which is appended to the written submissions of the assessee filed before the appellate tribunal would disclose that caption of the notice is styled as “notice under Section 153A of the Income Tax Act, 1961”, whereas in the text or body of the notice Assessing Officer has proceeded to issue said notice to the assessee proposing to assess the income under Section 153C of the Act for the respective years. Pursuant to same assessee filed his return of income and during the assessment proceedings certain details were called for which came to be produced by the representative of the assessee. On account of documentary proof in support of statement made having not been filed, Assessing Officer did not accept the oral statements and in the absence of any valid documentary proof of payments said to have been made to the appellant–assessee by M/s.Corporate Liezure & 8 Property Development (P) Ltd, assessing Officer added the said amount as business income of the assessee received by way of commission for the respective assessment years and accordingly framed the assessment order. When it is not the case of appellant- assessee that he does not fall within the scope and ambit of provisions of Section 153C of the Act and no prejudice having been alleged during the course of assessment proceedings, notice issued to assessee and consequential assessment order passed would not get invalidated. In fact, Section 292B of the Act would be a complete answer to the defect pointed out in the notice, even if any. Section 292 is explicit and clear namely it would indicate that no notice issued in pursuance of the provisions of the Act shall be invalid merely by reason of any mistake, defect or omission in such notice. In fact tribunal has rightly relied upon the judgment of this Court in the case of MICRO LABS referred to herein supra. 9 9. At the cost of repetition when the notice dated 01.06.2010 is perused it would establish though heading is under Section 153A of the Act, DCIT has categorically stated in the said notice that he proposes to assess the appellant’s income under Section 153C of the Act. Juxtaposing the contents of the notice dated 1.06.2010 with the satisfaction note, it is clear that notice is not one under Section 153-A of the Act, but one under Section 153-C of the Act. The copy of said notice has been received by the appellant and appellant having full knowledge of the fact that Deputy Commissioner of Income Tax has proposed to assess/reassess the appellant’s income under Section 153C of the Act. Therefore, appellant cannot now be allowed to contend by taking hyper-technical defence to state that notice received is one under nomenclature of Section 153-A of the Act to invalidate the entire assessment proceedings and said contention also cannot be entertained as provision of Section 153C is specifically mentioned in the notice. Hence, we are of the view that notice issued under Section 153C is 10 proper and valid. Mere fact that heading indicates that it is one issued under Section 153A of the Act cannot vitiate the assessment proceedings. 10. It is further relevant to note Section 292-B of the Act in terms whereof any manner defect or omission in the notice does not cause any prejudice to the parties and it cannot be invalidated on the basis of such minor defect or omission. This view gets fortified by the Judgment of Gauhati High Court in the matter of SARDAR HARVINDER SINGH SEHGAL –VS- ASST. COMMISSIONER reported in 1997 (227) UTR 512. 11. The proceedings which have been initiated against assessee by the Assessing Officer in the instant case by issuance of notice dated 01.06.2010 indicate that suitable and necessary particulars have been provided by the Assessing Officer to the appellant to answer all the queries and appellant having replied to said notice has been unable to establish existence of oral contract for the payments received from M/s. Corporate Liesure & Property Development (P) Ltd. 11 Hence, matter is required to be re-examined with regard to merits of the addition made by Assessing Officer and the order of remand made by the appellate tribunal is just and proper. In the aforestated circumstances, we are of the considered view that there is no substantial question of law involved in this appeal to be framed by admitting this appeal. Hence, appeal stands dismissed. Sd/- JUDGE Sd/- JUDGE ln/DR "