SRI. S S MADHUSUDHAN (HUF) V. DEPUTY COMMISSIONER OF INCOME TAX

WP/10588/2023

AI Insights

The case involves a writ petition filed by Sri. S S Madhusudhan (HUF) challenging the penalty and assessment orders issued by the Income Tax Department for the assessment year 2017-18. The petitioner argued that the orders were passed without a mandatory hearing, violating the principles of natural justice and the legal requirements under Sections 143(3) and 274(1) of the Income Tax Act, 1961. Additionally, the petitioner contested the jurisdiction to invoke Section 153C, which pertains to the assessment of income in certain cases of search or requisition. The court found merit in the petitioner's arguments, noting the absence of a proper hearing and the incorrect application of Section 153C, leading to the setting aside of the impugned orders.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 752548 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-07-2023
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited - 2023 SCC Online SC 481
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILIP
• Assessee Lawyers: ARAVIND CHAVAN
• Keywords: Assessment Order; Jurisdiction; Natural Justice; Penalty order; Reassessment; Incriminatory material
• Section: 147; 148; 143(3); 153C; 270A; 274(1); 226; 227

Judgement Text

" - 1 - NC: 2023:KHC:24103 WP No. 10588 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 10588 OF 2023 (T-IT) BETWEEN: 1. SRI. S S MADHUSUDHAN (HUF) S/O S.N.SHIVASHANKAR, AGED 49 YEARS, R/AT NO.11, 1ST FLOOR, 1ST CROSS, KIRLOSKAR COLONY, NEAR AVANI SHANKA MAIN, BASAVESHWARANAGAR, BANGALORE - 560 079 REP. BY ITS KARTHA SRI. S.S.MADHUSUDHAN … PETITIONER (BY SRI. ARAVIND V CHAVAN., ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(1), C.R. BUILDING, QUEENS ROAD, BANGALORE - 560 001. 2. PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, C.R. BUILDING, QUEENS ROAD, BANGALORE - 560 001. … RESPONDENTS (BY SRI. M. DILIP, ADVOCATE) Digitally signed by VIJAYA P Location: High Court of Karnataka - 2 - NC: 2023:KHC:24103 WP No. 10588 of 2023 THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE PENALTY ORDER DATED 26.09.22 BEARING NO. ITBA/PNL/F/270A/2022-23/1045989952(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE FIRST RESPONDENT AND ETC. THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER Petitioner has challenged the penalty order at Annexure-H2 for the assessment year 2017-18 and has also sought for setting aside of the assessment order at Annexure-C. 2. It is the contention of the learned counsel for petitioner that the impugned orders passed including the penalty order under Section 270A of the Income Tax Act, 1961 ('the Act') is without affording mandatory hearing in terms of the legal requirements under Section 274(1) of the Act and also insofar as the assessment order passed under Section 143(3) read with Section 153C of the Act, the opportunity of hearing as is provided for under Section 143(3) of the Act was not given. It is also contended that - 3 - NC: 2023:KHC:24103 WP No. 10588 of 2023 the Authority had no jurisdiction to invoke Section 153C of the Act. 3. It is pointed out that for the purpose of initiating proceedings, there must be recovery of incriminatory material without which recourse cannot be had to Section 153C of the Act and that the only option available under such circumstance would be to proceed for reassessment under Sections 147 to 148 of the Act. Reliance is placed on the judgment in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited - 2023 SCC Online SC 481. 4. Admittedly, there has been violation of principles of natural justice. Accordingly, case is made out for remanding the matter for fresh consideration while directing the Authority to embark upon reconsideration including the contentions raised regarding Section 153C of the Act with reference to the law laid down by the Apex Court in the case of Abhisar Buildwell (supra). - 4 - NC: 2023:KHC:24103 WP No. 10588 of 2023 5. The penalty order at Annexure-H2 and the assessment order at Annexure-C are set aside. The Authority to reconsider the matter in light of the discussion made above. The respondents are directed to fix a date for hearing and afford an opportunity of personal hearing as mandated under law as noticed above and pass orders afresh. 6. Writ petition is allowed accordingly. Sd/- JUDGE VP "