M/S MAGNOLIA INFRA V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), AHMEDABAD

SCA/20152/2021

AI Insights

The case involves M/S Magnolia Infra challenging the actions of the Assistant Commissioner of Income Tax, Central Circle 2(3), Ahmedabad, under Article 226 of the Constitution of India. The petitioner sought various writs including a writ of certiorari to reconsider objections filed against assessment orders under Section 153C of the Income Tax Act, 1961, following a search and seizure operation. The High Court of Gujarat, after considering the developments during the pendency of the petition, including the disposal of objections and issuance of a final show cause notice, decided not to entertain the writ petition.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 679228 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 29-12-2021
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Vijaybhai N. Chandrani, Indo Asahi Glass Co. Ltd. vs. ITO, Bajrang Tea Manufacturing Company Private Limited & Anr. vs. Union of India & Ors
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MD MEHTA
• Assessee Lawyers: DHINAL SHAH; RAVI SINGH
• Keywords: Assessment Order; Satisfaction note; Search and seizure; Show cause notice; Writ of Certiorari
• Section: 142(1); 143(2); 132; 153C

Judgement Text

"C/SCA/20152/2021 ORDER DATED: 29/12/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 20152 of 2021 ========================================================== M/S MAGNOLIA INFRA Versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), AHMEDABAD ========================================================== Appearance: MR DHINAL A SHAH(12077) ASSISTED BY MR.RAVI RAJ SINGH for the Petitioner(s) No. 1 MS MD MEHTA, AGP for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Date : 29/12/2021 ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1 . T h e p e t i t i o n e r i s b e f o r e t h i s C o u r t u n d e r A r t i c l e 2 2 6 o f t h e C o n s t i t u t i o n o f I n d i a q u e s t i o n i n g t h e a c t i o n o f t h e r e s p o n d e n t a u t h o r i t y w i t h t h e f o l l o w i n g p r a y e r s : “9… A. YOUR LORDSHIPS may be pleased to allow the present Petition; B. YOUR LORDSHIPS may be pleased to issue a writ of certiorari or in the nature of certiorari or any other Page 1 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 appropriate writ, orders or directions upon the Respondent to do duly consider the objections so filed by the Petitioner and pass appropriate adjudicatory Order either in the affirmative or in negation; C. YOUR LORDSHIPS may be pleased to issue appropriate directions upon the Respondent to abstain from passing any Assessment Order under Section 153 C of the Income Tax Act, 1961 until the objections advanced are are properly adjudicated. D. YOUR LORDSHIPS may be pleased to order Status Quo pending the hearing and final disposal of the present petition and direct the Respondent and its subordinates not to take any coercive action or act furtherance and pursuance of the impugned notice; E. YOUR LORDSHIPSmay be pleased to direct the Respondent to allow sufficient time to approach appropriate forum, if so, in case of any adverse order in regard to the Objections raised by the Petitioner; F. YOUR LORDSHIPS may be pleased to pass any further or other orders as the Hon’ble Court may deem proper in the interest of justice and in the circumstances of the case.” 2 . I n c a s e o f s e a r c h a n d s e i z u r e u n d e r Page 2 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 S e c t i o n 1 3 2 o f t h e I n c o m e T a x A c t , 1 9 6 1 ( ‘ t h e A c t ’ h e r e i n a f t e r ) c a r r i e d o u t a t t h e p r e m i s e s o f t h e S S S ( S a t y a m , S a n g a n i , S h a l i g r a m ) G r o u p o f C o m p a n i e s o n 0 6 . 0 3 . 2 0 1 8 , t h e s a t i s f a c t i o n n o t e h a d b e e n r e c o r d e d b y t h e A s s e s s i n g O f f i c e r o n 1 0 . 0 3 . 2 0 2 1 w h i c h w a s c o n c e r n i n g t h e s e a r c h e d p e r s o n . T h e r e s p o n d e n t i s s u e d t h e n o t i c e s u n d e r S e c t i o n 1 5 3 C o f t h e A c t p u r s u a n t t o t h e s e a r c h a n d s e i z u r e f o r A s s e s s m e n t Y e a r s 2 0 1 2 - 2 0 1 3 t o 2 0 1 8 - 2 0 1 9 . A f t e r t h e s a t i s f a c t i o n n o t e w a s r e c o r d e d b y t h e J u r i s d i c t i o n a l A s s e s s i n g O f f i c e r o f t h e p e t i t i o n e r , w h i c h i s t h e A s s i s t a n t C o m m i s s i o n e r o f I n c o m e T a x , C e n t r a l C i r c l e - 2 ( 3 ) , A h m e d a b a d o n 2 8 . 0 5 . 2 0 2 1 , t h e n o t i c e c a m e t o b e i s s u e d o n 1 6 . 0 6 . 2 0 2 1 b y t h e r e s p o n d e n t . T h e p e t i t i o n e r c a t e g o r i c a l l y r e q u e s t e d f o r s u p p l y i n g o f t h e c o p y o f Page 3 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 s a t i s f a c t i o n n o t e o f b o t h t h e A s s e s s i n g O f f i c e r i . e . t h e A s s e s s i n g O f f i c e r o f s e a r c h e d p e r s o n a n d t h a t o f t h e p e t i t i o n e r . 3 . O n 2 1 . 0 6 . 2 0 2 1 t h e p e t i t i o n e r f u r n i s h e d t h e c o p i e s o f r e t u r n o f i n c o m e a l o n g w i t h o t h e r r e q u i s i t e d o c u m e n t s a n d o n 2 6 . 1 0 . 2 0 2 1 t h e r e s p o n d e n t i s s u e d f u r t h e r n o t i c e s u n d e r S e c t i o n 1 4 3 ( 2 ) o f t h e A c t f o r t h e A s s e s s m e n t Y e a r s 2 0 1 5 - 2 0 1 6 t o 2 0 1 8 - 2 0 1 9 . 4 . T h e s a t i s f a c t i o n n o t e w a s p r o v i d e d o n 2 7 . 1 0 . 2 0 2 1 a n d t h e o b j e c t i o n s h a d b e e n f i l e d b y t h e r e s p o n d e n t a g a i n s t t h e m o n 0 6 . 1 2 . 2 0 2 1 . T h e n o t i c e s c a m e t o b e i s s u e d u n d e r S e c t i o n 1 4 2 ( 1 ) o f t h e A c t o n 0 6 . 1 2 . 2 0 2 1 a n d 2 3 . 1 2 . 2 0 2 1 . 5 . T h i s p e t i t i o n i s p r e f e r r e d e s s e n t i a l l y Page 4 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 r e q u e s t i n g t h e C o u r t t o d i r e c t t h e r e s p o n d e n t a u t h o r i t y t o c o n s i d e r t h e o b j e c t i o n a n d d i s p o s e d o f t h e s a m e b e f o r e i t p r o c e e d s f u r t h e r r e l y i n g o n t h e d e c i s i o n o f C o m m i s s i o n e r o f I n c o m e T a x v s . V i j a y b h a i N . C h a n d r a n i , r e p o r t e d i n ( 2 0 1 3 ) 3 5 t a x m a n n . c o m 5 8 0 ( S C ) . 5 . 1 I t w a s t h e c a s e w h e r e t h e A s s e s s i n g O f f i c e r h a d i s s u e d t h e s h o w c a u s e n o t i c e u n d e r S e c t i o n 1 5 3 C o f t h e A c t t o t h e A s s e s s e e f o r r e a s s e s s m e n t o f h i s i n c o m e o n t h e b a s i s o f t h e d o c u m e n t s s e i z e d d u r i n g t h e s e a r c h c o n d u c t e d i n t h e p r e m i s e o f a n o t h e r A s s e s s e e . U p o n r e q u e s t , t h e A s s e s s e e w a s f u r n i s h e d t h e c o p i e s o f d o c u m e n t s s e i z e d f r o m s u c h o t h e r A s s e s s e e . 5 . 2 T h e c h a l l e n g e w a s m a d e b y t h e A s s e s s e e f o r t h e n o t i c e s i s s u e d u n d e r Page 5 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 S e c t i o n 1 5 3 o f t h e A c t a n d t h e H i g h C o u r t h a d h e l d t h a t t h e d o c u m e n t s s e i z e d d i d n o t b e l o n g t o t h e A s s e s s e e a n d t h e r e f o r e , q u a s h e d t h e s h o w c a u s e n o t i c e . 5 . 3 T h e A p e x C o u r t i n a S p e c i a l L e a v e P e t i t i o n h e l d t h a t a t t h e s t a g e o f i s s u a n c e o f n o t i c e u n d e r S e c t i o n 1 5 3 C o f t h e A c t , t h e A s s e s s e e c o u l d h a v e a d d r e s s e d h i s g r i e v a n c e a n d e x p l a i n e d h i s s t a n d t o t h e A s s e s s i n g O f f i c e r b y f i l i n g a n a p p r o p r i a t e r e p l y t o t h e s a i d n o t i c e s , i n s t e a d o f f i l i n g t h e w r i t p e t i t i o n i m p u g n i n g t h e s a i d n o t i c e s . T h e A p e x C o u r t s a i d t h a t i t i s a s e t t l e d l a w t h a t a l t e r n a t i v e r e m e d y i s a v a i l a b l e t o t h e a g g r i e v e d p a r t y , i t m u s t e x h a u s t t h e s a m e b e f o r e a p p r o a c h i n g t h e w r i t C o u r t . T h e A p e x C o u r t f u r t h e r h e l d t h a t t h e A s s e s s e e i n v o k e d t h e w r i t Page 6 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 j u r i s d i c t i o n o f t h e H i g h C o u r t a t t h e f i r s t i n s t a n c e w i t h o u t f i r s t e x h a u s t i n g t h e a l t e r n a t i v e r e m e d i e s , t h e H i g h C o u r t o u g h t n o t t o h a v e e n t e r t a i n e d t h e s a m e a n d s h o u l d h a v e d i r e c t e d t h e A s s e s s e e t o f i l e r e p l y t o t h e s a i d n o t i c e a n d u p o n r e c e i p t o f a d e c i s i o n o f t h e A s s e s s i n g O f f i c e r , i f f o r a n y r e a s o n i t w a s a g g r i e v e d b y t h e s a i d d e c i s i o n , i t c o u l d q u e s t i o n b e f o r e t h e f o r u m p r o v i d e d u n d e r t h e A c t . T h u s , w i t h o u t e x p r e s s i n g a n y o p i n i o n o n t h e c o r r e c t n e s s o r o t h e r w i s e o f t h e c o n s t r u c t i o n t h a t w a s p l a c e d b y t h e H i g h C o u r t o n S e c t i o n 1 5 3 C o f t h e A c t , t h e A p e x C o u r t h a d s e t a s i d e t h e j u d g m e n t . 5 . 4R e l e v a n t f i n d i n g s a n d o b s e r v a t i o n s o f t h e A p e x C o u r t a r e a s f o l l o w : “13.In the instant case, it transpires from the record that Page 7 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 the jurisdictional Assessing Authority, upon having a reason to believe that the documents seized indicate escapement of income, has issued Show-Cause Notices under Section 153C to the assessee for reassessment of his income during the assessment years 2001-2002 to 2006-2007. Thereafter, upon request of the assessee, the Assessing Authority has furnished him with the copies of documents seized under Section 132A. The assessee being dissatisfied with the said documents instead of filing his explanation/reply to the Show-Cause Notices, has filed a Writ Petition before the High Court impugning the said notices. 14. In our considered view, at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In Bellary Steels & Alloys Ltd. v. CCT [2009] 17 SCC 547, this Court had allowed the assessee therein to withdraw. original Writ Petition filed before the High Court as the said proceedings came to be filed against the show-cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show-cause notice. This Court further observed as follows: Page 8 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 \"3.... In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue.\" 15. We are fortified by the decision of this Court in Indo Asahi Glass Co. Ltd. v. ITO [2002] 254 ITR 210/122 Taxman 123 (SC) wherein the assessee had approached this Court against the judgment and order of the High Court which had dismissed the Writ Petition filed by the assessee wherein challenge was made to the show-cause notice issued by the Assessing Authority on the ground that alternative remedy was available to the assessee. This Court concurred with the findings and conclusions reached by the High Court and dismissed the said appeal with the following observations: \"5. This and the other facts cannot be taken up for consideration by this Court for the first time. In our opinion, the High Court was right in coming to the conclusion that it is appropriate for the appellants to file a reply to the show-cause notice and take whatever defence is open to them.\" 17. In view of the above, without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C, we set aside the imp judgment and order. Further, we grant time to the assessee, Page 9 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 if it so desires, to file reply/objections, if any, as contemplated in the said notices within 15 days' time from today. If such reply/objections is/are filed within time granted by this Court, the Assessing Authority shall first consider the said reply/objections and thereafter direct the assessee to file the return for the assessment years in question. We make it clear that while framing the assessment order, the Assessing Authority will not be influenced by any observations made by the High Court while disposing of the Writ Petition. If, for any reason, the assessment order goes against the assessee, he/it shall avail and exhaust the remedies available to him/it under the Act, 1961.” 6 . T h e c a s e o f B a j r a n g T e a M a n u f a c t u r i n g C o m p a n y P r i v a t e L i m i t e d & A n r . v s . U n i o n o f I n d i a & O r s i n W . P . A . 1 1 8 9 4 o f 2 0 2 1 r e l i e d u p o n b y t h e p e t i t i o n e r a l s o w h i l e a d d r e s s i n g t h e c h a l l e n g e t o t h e A s s e s s m e n t O r d e r u n d e r S e c t i o n 1 5 3 C r e a d w i t h S e c t i o n 1 4 4 o f t h e A c t h a s c o n s i d e r e d t h e i s s u e w h e t h e r b e f o r e p a s s i n g t h e i m p u g n e d A s s e s s m e n t O r d e r s , t h e o b j e c t i o n s / r e p r e s e n t a t i o n s o f t h e p e t i t i o n e r a g a i n s t Page 10 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 i n i t i a t i o n o f t h e i m p u g n e d p r o c e e d i n g s u n d e r S e c t i o n 1 5 3 C o f t h e A c t w e r e r e q u i r e d t o b e c o n s i d e r e d o r n o t a n d i f n o t d o n e , w h e t h e r i t i s a v i o l a t i o n o f p r i n c i p l e o f n a t u r a l j u s t i c e ? T h e C o u r t a d d r e s s e d t h e i s s u e a n d h e l d t h u s : “Since in this case it appears from record that the aforesaid representations/objections of the petitioners were not considered and disposed of before passing the aforesaid impugned assessment orders an no opportunity of hearing was given to the petitioners which is a clear violation of principle of natural justice, without going into the merits. of the impugned assessment orders and the aforesaid objections/representations of the petitioners, on the ground of violation of principle of natural justice alone, I am setting aside the aforesaid impugned assessment orders dated 22nd May, 2021 being Annexure P-10 to the writ petition and remanding the case of the petitioners to the respondents concerned to consider and dispose of the aforesaid two representations/objections dated 23rd April, 2021 and 4th May, 2021 made by the petitioners in accordance with law and by passing a reasoned and speaking order and after giving an opportunity of hearing to the petitioners or their authorised representative within four weeks from the date Page 11 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 of communication of this order and further continuation of the assessment proceedings in question will depend upon the outcome of the final order to be passed upon the aforesaid objections/representations of the petitioners. It is recorded that this COurt has set aside the aforesaid impugned assessment orders on limited ground of violation of principle of natural justice of not considering and disposing of the aforesaid representations/objections of the petitioners and this Court has not gone into the merits of the case. In this matter, the respondent Assessing Officer will proceed strictly in accordance with law while disposing of the aforesaid representations/objections of the petitioners.” 7 . I t i s m a d e q u i t e c l e a r t h a t w h e r e a n y p r o c e e d i n g s u n d e r S e c t i o n 1 5 3 C o f t h e A c t i s i n i t i a t e d a g a i n s t t h e p e r s o n , o t h e r t h a n t h e s e a r c h e d p e r s o n i n w h o s e c a s e t h e p o w e r u n d e r S e c t i o n 1 3 2 o f t h e A c t , t h e s e a r c h h a s b e e n c a r r i e d o u t , i s e n t i t l e d t o f i l e r e p l y / o b j e c t i o n t o t h e s a t i s f a c t i o n n o t e f u r n i s h e d t o t h a t p e r s o n b y t h e J u r i s d i c t i o n a l A s s e s s i n g O f f i c e r ( o t h e r Page 12 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 t h a n t h e A s s e s s e e S e a r c h e d ) a n d o n c e t h o s e o b j e c t i o n s a r e f u r n i s h e d , a r e a s o n a b l e t i m e i s t o b e f u r n i s h e d . I n t h e c a s e o f V i j a y b h a i N . C h a n d r a n i ( s u p r a ) t h e A p e x C o u r t t h o u g h d i r e c t e d a l t e r n a t i v e r e m e d y t o b e r e s o r t e d t o , i t h a d p e r m i t t e d 1 5 d a y s ’ t i m e o n c e t h e o b j e c t i o n s w e r e f i l e d a n d t h e A s s e s s i n g A u t h o r i t y i s h e l d d u t y b o u n d t o c o n s i d e r s u c h o b j e c t i o n s a n d t h e r e a f t e r , t o d i r e c t t h e A s s e s s e e t o f i l e a r e t u r n o f A s s e s s m e n t y e a r i n q u e s t i o n . T h u s , g i v i n g o f a n o p p o r t u n i t y i s a m u s t b e f o r e p r o c e e d i n g a g a i n s t t h e p e r s o n o t h e r t h a n s e a r c h e d p e r s o n a f t e r p r o v i d i n g n o t e o f s a t i s f a c t i o n a n d p a s s i n g o f a r e a s o n e d a n d s p e a k i n g o r d e r a f t e r s u c h o p p o r t u n i t y i s m a d e a v a i l a b l e a n d t h e a s s e s s e e a v a i l s s u c h o p p o r t u n i t y t o f i l e o b j e c t i o n . Page 13 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 8 . I n t h e i n s t a n t c a s e , w e c o u l d n o t i c e f r o m t h e m a t e r i a l w h i c h h a s b e e n f u r n i s h e d a n d t h e o b j e c t i o n s w e r e r a i s e d a g a i n s t t h e s a t i s f a c t i o n n o t e s u p p l i e d b y a s p e a k i n g o r d e r a n d t h o s e o b j e c t i o n s h a v e b e e n d i s p o s e d o f o n 2 7 . 1 2 . 2 0 2 1 . T h i s H a s h a p p e n e d s u b s e q u e n t t o t h e f i l i n g o f t h e p r e s e n t p e t i t i o n a n d t h e r e f o r e , t h i s p e t i t i o n w o u l d n o t s u r v i v e a s t h e e s s e n t i a l p r a y e r w a s t o d i r e c t t h e a u t h o r i t y c o n c e r n e d t o c o n s i d e r t h e o b j e c t i o n s . 9 . A t t h i s s t a g e , t h e l e a r n e d a d v o c a t e , M r . D h i n a l S h a h h a s u r g e d t h i s C o u r t t h a t t h e r e a r e o t h e r i s s u e s t o b e r a i s e d o n m e r i t , w h i c h m a y b e r e q u i r e d t o b e c h a l l e n g e d b y t h e p e t i t i o n e r , h o w e v e r , i n a b s e n c e o f a n y p l e a d i n g i n t h e p r e s e n t p e t i t i o n , i f t h e l a w p e r m i t s , t h e Page 14 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 p e t i t i o n e r w i l l b e e n t i t l e d t o r a i s e t h e m t a k i n g r e c o u r s e t o l a w . 1 0 .R e q u e s t o f o n e w e e k t i m e i s m a d e t o r e p l y t o t h e f i n a l s h o w c a u s e n o t i c e d a t e d 2 7 . 1 2 . 2 0 2 1 w h i c h h a s b e e n i s s u e d a f t e r d i s p o s i n g o f t h e o b j e c t i o n s , a s t h e a p p r e h e n s i o n o n t h e p a r t o f t h e p e t i t i o n e r i s o f f r a m i n g o f t h e A s s e s s m e n t o n o r b e f o r e 3 1 . 1 2 . 2 0 2 1 a n d t h e d e m a n d r a i s e d i n t h e l a s t s h o w c a u s e n o t i c e h a s b e e n a l m o s t d o u b l e d . 1 1 .N o t i c i n g t h e d i s p o s a l o f t h e o b j e c t i o n s o n 2 7 . 1 2 . 2 0 2 1 a n d i s s u a n c e o f d e m a n d o n 2 7 . 1 2 . 2 0 2 1 i t s e l f , t h e p e t i t i o n e r s h a l l b e a t l i b e r t y t o m a k e a r e q u e s t t o t h e a u t h o r i t y c o n c e r n e d o f g r a n t o f r e a s o n a b l e t i m e o f m i n i m u m o n e w e e k f o r h i m t o r e p l y a n d l e t t h e s a m e b e c o n s i d e r e d b y t h e Page 15 of 16 C/SCA/20152/2021 ORDER DATED: 29/12/2021 a u t h o r i t y c o n c e r n e d . A s t h i s p e t i t i o n i s d i s p o s e d o f w i t h o u t i s s u a n c e o f n o t i c e i n t h e c i r c u m s t a n c e s m e n t i o n e d a b o v e w h i c h d e v e l o p e d d u r i n g p e n d e n c y , p e t i t i o n i s t h o u g h n o t e n t e r t a i n e d , r e q u e s t t o p e r m i t t h e a d j o u r n m e n t b e f o r e t h e A s s e s s i n g O f f i c e r i s p e r m i t t e d c o n s i d e r i n g t h e d a t e o f d i s p o s a l a n d f i n a l s h o w c a u s e n o t i c e . 1 1 .W i t h t h e a b o v e d i r e c t i o n a n d o b s e r v a t i o n , p r e s e n t p e t i t i o n s t a n d s d i s p o s e d o f a c c o r d i n g l y . 1 2 .O v e r a n d a b o v e t h e r e g u l a r m o d e o f s e r v i c e , d i r e c t s e r v i c e i s p e r m i t t e d t h r o u g h s p e e d p o s t a s w e l l a s e - m o d e . (SONIA GOKANI, J) (VAIBHAVI D. NANAVATI,J) M.M.MIRZA Page 16 of 16 "