RIDDHI SIDDHI INFRASPACE LLP V. ASSISTANT COMMISSIONER OF INCOME TAX CENT CIR 1(4), AHMEDABAD

SCA/7617/2021

AI Insights

The case involves Riddhi Siddhi Infraspace LLP, which sought to quash notices issued under Section 153C of the Income Tax Act, 1961, following a search operation on the Riddhi Siddhi Group of Companies. The notices were issued for several assessment years, despite the LLP being incorporated only in 2016. The primary legal contention was the mechanical issuance of notices for years prior to the LLP's existence. The court found merit in the applicant's argument for the years 2013-14 to 2016-17, leading to the quashing of those notices. For the subsequent years, where assessments had already been made, the court did not intervene, suggesting the applicant pursue the matter through appeals.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 748709 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 12-04-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: M R BHATT
• Assessee Lawyers: S N SOPARKAR; B S SOPARKAR
• Keywords: Application of mind; Assessment years; Limited Liability Partnership; Notices; Search action; Mechanical satisfaction note
• Section: 132; 153C

Judgement Text

"C/SCA/7617/2021 ORDER DATED: 12/04/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 7617 of 2021 ========================================================== RIDDHI SIDDHI INFRASPACE LLP Versus ASSISTANT COMMISSIONER OF INCOME TAX CENT CIR 1(4), AHMEDABAD ========================================================== Appearance: MR B S SOPARKAR(6851) for the Petitioner(s) No. 1 M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 12/04/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs; “(a) Quash and set aside the impugned notices at Annexure-A as well as the order disposing off the objections at Annexure-C to this petition. (b) Pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notices at Annexure-A to this petition and stay further proceedings for assessment for A.Y.2013-14 to A.Y.2018-19. (c ) Any other and further relief deemed just and proper be granted in the interest of justice. (d) To provide for the cost of this petition.” Page 1 of 6 C/SCA/7617/2021 ORDER DATED: 12/04/2022 2. The writ applicant is a Limited Liability Partnership. It appears from the materials on record that a search action under Section 132 of the Income Tax Act, 1961 (for short “the Act, 1961”) was carried out on 01.02.2019 in the cases of Riddhi Siddhi Group of Companies. In the search carried out, one of the group concerns of the writ applicant, namely, Riddhi Siddhi Gluco Boils Ltd. was also covered. 3. In view of the aforesaid, notices came to be issued to the writ applicant under Section 153C on 13.01.2021 for A.Y.2013-14, 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19 respectively. In such circumstances, referred to above, the writ applicant is here before this Court with the present writ application. 4. Mr. S.N. Soparkar, the learned senior counsel assisted by Mr.B.S. Soparkar, the learned counsel appearing for the writ applicant would submit that he has many fold contentions to raise questioning the legality and validity of the notices issued under Section 153C. He submitted that some of his submissions may be in the realm of facts and this Court may not be in a position to go into all such details at this stage. However, Mr. Soparkar is very sure of one of his submissions so far as the legality and validity of the notice issued for the A.Y.2013-14, 2014-15, 2015-16 and 2016-17 respectively are concerned. The principal submission of Mr. Soparkar Page 2 of 6 C/SCA/7617/2021 ORDER DATED: 12/04/2022 is how could such notices have been issued under Section 153C for the above referred assessment years more particularly when the Limited Liability Partnership came into existence for the first time in 2016. 5. In the aforesaid context, Mr. Soparkar invited the attention of this Court specifically to Clause (6) of the objections raised by the writ applicant to the satisfaction note recorded by the Joint Commissioner of Income Tax (OSD). In clause (6), the following has been stated; “6. Mechanical Satisfaction Note without application of mind is invalid 6.1 The satisfaction note 13.01.2021 has been recorded for combined period of AY 2013-14 to AY 2018-19 with a view to cover the maximum possible time period as permitted u/s.153C of the Act. 6.2 It is humbly submitted that the our LLP was incorporated on 30.05.2016 and thus was not in existence for AY 2013-14 to AY 2016-17, yet the AO has recorded satisfaction for such years. 6.3 This fact proves that the satisfaction has been recorded in mechanical manner and without verifying the information.” 6. Mr. Soparkar pointed out that the aforesaid objection ought to have been taken into consideration by the Assessing Officer, more particularly, when it is evident from the documentary evidence itself that the Limited Liability Partnership came into existence for the first time in 2016. However, the Assessing Officer seems to have Page 3 of 6 C/SCA/7617/2021 ORDER DATED: 12/04/2022 taken the view that although the Limited Liability Partnership might have come into existence for the first time in 2016, yet, all this can be looked into at the time of the assessment proceedings. Mr. Soparkar invited the attention of this Court to the relevant part of the order passed by the Assessing Officer disposing of the objections, more particularly, Para-8.1 which reads thus; “8.1 Contention of the assessee perused carefully but not found tenable in view of the following observations/facts/evidences. 8.1.1 Contention of the assessee that satisfaction has been recorded in mechanical manner and without verifying the information is not acceptable as on verification of the satisfaction note, it is clearly evident that the AO has examined the entire document seized from the business premises of the Riddhi Siddhi Group as well as digital evidences seized during the search proceedings. 8.1.2 On verification of the satisfaction note, it will be noticed that the AO has made detailed analysis of the document seized during the search proceedings and after the detailed analysis, the AO came to conclusion that the proceedings u/s.153C of the Income Tax Act has to be initiated in the case of the assessee. The same is amply clear from the plain reading of the satisfaction note. Further, in respect of initiating proceedings for A.Y.2013-14 to A.Y.2018-19, it is stated by the assessee that the LLP was incorporated on 30.05.2016 and hence there was no existence of the LLP duly for A.Y.2013-14 to A.Y.2016-17. In this connection, it is stated that the contention of the assessee will be considered while passing assessment order u/s.143(3) r.w.s. 153C & 153A for Page 4 of 6 C/SCA/7617/2021 ORDER DATED: 12/04/2022 the A.Y.2013-14 to A.Y. 2016-17. Therefore, contention of the assessee is not acceptable and the objection that the satisfaction has been drawn mechanically is baseless and devoid of any merit.” 7. In the last, Mr. Soparkar pointed out something important. There is no any interim order passed in this particular writ application. In such circumstances, the assessment proceedings proceeded further, however, we are informed that the Assessing Officer has thought fit not to frame the assessments for the A.Y.2013-14, 2014-15, 2015-16 and 2016-17 respectively. 8. In such circumstances, referred to above, Mr. Soparkar prays that there being merit in his principal submission, this writ application may be allowed so far as the four impugned notices for the relevant assessment years are concerned. 9. Per contra, Mr. M.R. Bhatt, the learned senior counsel appearing for the revenue has vehemently opposed this writ application. 10. Mr. Bhatt would submit that this Court, in exercise of its extraordinary jurisdiction under Article 226 of the Constitution may not interfere at the stage of Section 153C. He would submit that let the inquiry be concluded and the assessment orders be framed. 11. Having heard the learned counsel appearing for the parties and having gone through the materials on record, Page 5 of 6 C/SCA/7617/2021 ORDER DATED: 12/04/2022 we are of the view that we need not enter into any debate as regards the constitution or registration of the LLP. We say so because when the assessment orders are not passed for the A.Y. 2013-14, 2014-15, 2015-16 and 2016- 17 respectively, the matter ends over here. So far as 2017-18 and 2018-19 are concerned, as the assessment orders have already been passed, we decline to go into any other issues with respect to these two notices. 12. In view of the aforesaid, this writ application succeeds in part. The impugned notices with respect to A.Y.2013-14, 2014-15, 2015-16 and 2016-17 are hereby quashed and set aside. So far as the assessment orders which have already been passed with respect to A.Y.2017- 18 and 2018-19, it shall be open for the writ applicant to file appropriate appeal in accordance with law. We have kept all the questions of law open to be agitated by the writ applicant before the CIT(A) while challenging the assessment orders. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Vahid Page 6 of 6 "