2019 (1) TMI 414 - HC - Income Tax

Initiation of proceedings u/s 153C - issuance of notice under section 153C without recording satisfaction by the Assessing Officer - Held that - Having regard to the submissions advanced by the learned advocate for the petitioner, issue Notice returnable on 04.02.2019. By way of ad-interim relief, the impugned notices under section 153C qua Assessment Years 2009-10 to 2012-13 are hereby stayed. In so far as notices for the remaining periods are concerned, the Assessing Officer may proceed further pursuant to the impugned notices; he, however, shall not pass the final order without the prior permission of this Court.

Summary

Issues:
1. Delay in recording satisfaction under section 153C of the Income Tax Act, 1961.
2. Interpretation of the provisions of section 153C of the Act regarding the initiation of proceedings for assessment.
3. Validity of notice issued under section 153C of the Act without prior recording of satisfaction by the Assessing Officer.
4. Validity of proceedings under section 153C of the Act based on a search conducted before the amendment in the Act.

Analysis:

Issue 1: Delay in recording satisfaction under section 153C of the Income Tax Act, 1961
The petitioner argued that there was a significant delay in recording satisfaction under section 153C of the Income Tax Act, 1961, as the assessment order was passed before the Assessing Officer recorded satisfaction. Reference was made to the Supreme Court's decision in Commissioner of IncometaxIII v. Calcutta Knitwears, emphasizing the necessity of a satisfaction note before transmitting records to the relevant Assessing Officer. The petitioner highlighted a delay of 15 months from the completion of assessment proceedings under section 153A of the Act, contending that the initiation of proceedings under section 153C was contrary to the CBDT Circular.

Issue 2: Interpretation of the provisions of section 153C of the Act regarding the initiation of proceedings for assessment
The petitioner pointed out the first proviso of section 153C, arguing that the date of initiation of search should be construed as the date of receiving seized documents by the Assessing Officer. Since the documents were received on 16.03.2018, the Assessing Officer could assess the petitioner for six years prior to that date. However, the Assessing Officer issued notices for seven years, indicating a lack of application of mind to the provisions of section 153C and the first proviso. This discrepancy suggested a failure to adhere to the statutory requirements.

Issue 3: Validity of notice issued under section 153C of the Act without prior recording of satisfaction by the Assessing Officer
The petitioner contended that the notice issued under section 153C of the Act was invalid as the Assessing Officer did not record satisfaction before issuing the notice. The petitioner highlighted that the satisfaction note was a mere reproduction of the satisfaction recorded by the Assessing Officer of the searched person, indicating a lack of independent assessment and compliance with statutory procedures.

Issue 4: Validity of proceedings under section 153C of the Act based on a search conducted before the amendment in the Act
The petitioner raised concerns regarding the validity of proceedings under section 153C of the Act, as the search took place before the amendment in the Act. The petitioner argued that the search conducted prior to the amendment rendered the proceedings under section 153C invalid, questioning the legal basis for initiating assessments based on pre-amendment search findings.

In response to these issues, the High Court issued a notice returnable on 04.02.2019, staying the impugned notices for certain assessment years and allowing the Assessing Officer to proceed for other periods subject to prior permission from the Court before passing a final order. This detailed analysis reflects the complex legal arguments and statutory interpretations involved in the judgment delivered by the High Court.