2021 (2) TMI 373 - HC - Income Tax

Validity of notice issued u/s 153C - recording of satisfaction note - whether the impugned notice under Section 153C of the Act should be quashed? - proper or satisfactory explanation for gold found in search or not - whether the materials collected at the time of the search at the Rajkot Airport falls within the ambit of the expression belongs to or pertains to or relates to ? - HELD THAT - An exhaustive reading of the satisfaction note referred to above would indicate that the Assessing Officer was satisfied and it is specifically mentioned therein that the gold belongs to the writ-applicant and was not sent by Chhunnumal for the purpose of job work and the documents so seized pertains to the writ-applicant / other persons, therefore, it cannot be said that the mandatory requirement of Section 153C of the Act in the facts and circumstances of the case have not been complied with. The satisfaction note referred to above reveals that initially i.e. 27.10.2017, it was a case of survey, which was converted to search. In the instant case, therefore, it is case of the department that Jewellery or other valuable article or things seized 'belongs' to the petitioner and also document 'pertains' to and that any information contained therein 'relates' to the petitioner. The ingredients of Section 153(1)(a) and (b) both are complied with. In the satisfaction note, it has been recorded that the version put forth by the searched person that the Jewellery being given to the writ-applicant for job work was found not correct. Further, there was complete failure in producing the Forms 402 and 403 respectively of the GST which is a statutory requirement for the interstate transafer of goods for job work or sales. We are convinced that we should not interfere at the stage of showcause notice under Section 153C of the Act, 1961. Ultimately, if the assessment order goes against the writ-applicant (assessee), he/it shall avail and exhaust the remedies available to him/it under the Act, 1961 - writ-applications fail and are hereby rejected.

Summary

Issues Involved:
1. Validity of notices issued under Section 153C of the Income Tax Act, 1961.
2. Jurisdictional correctness of the proceedings initiated under Section 153C.
3. Adequacy and correctness of the satisfaction note recorded by the Assessing Officer.
4. Applicability of the alternative remedy principle.
5. Compliance with procedural requirements under Section 153C.

Detailed Analysis:

1. Validity of Notices Issued Under Section 153C:
The petitioner challenged the validity of notices issued under Section 153C of the Income Tax Act, 1961, arguing that the seized gold did not belong to them but was sent for job work by another party. The court noted that the Assessing Officer had recorded a satisfaction note indicating that the gold articles seized from the parcels belonged to the petitioner and had a bearing on the determination of their total income. The court observed that the satisfaction note provided a detailed account of the investigation and the inability of the parties involved to prove the genuineness of the transactions. Therefore, the court held that the notices issued under Section 153C were valid.

2. Jurisdictional Correctness of the Proceedings:
The petitioner argued that the proceedings under Section 153C were without jurisdiction as the gold belonged to another party and was merely sent to them for job work. The court held that the jurisdiction under Section 153C was correctly invoked as the satisfaction note indicated that the seized gold articles and related documents pertained to the petitioner. The court emphasized that the satisfaction of the Assessing Officer, as recorded in the note, was sufficient to initiate proceedings under Section 153C.

3. Adequacy and Correctness of the Satisfaction Note:
The petitioner contended that the satisfaction note was based on incorrect facts and did not meet the legal requirements. The court examined the satisfaction note in detail and found that it adequately recorded the Assessing Officer's satisfaction that the seized gold articles and related documents had a bearing on the petitioner's total income. The court noted that the satisfaction note clearly stated that the documents furnished by the parties failed to prove the genuineness of the transactions, and the efforts made by the parties were futile attempts to color the unaccounted transactions. Therefore, the court held that the satisfaction note was adequate and correct.

4. Applicability of the Alternative Remedy Principle:
The revenue argued that the petitioner had an alternative efficacious remedy available under the Act and should not have approached the court directly. The court referred to the Supreme Court's decision in Commissioner of Income Tax, Gujarat Vs. Vijaybhai N. Chandrani, which emphasized that the assessee should first exhaust the alternative remedies available under the Act before approaching the court. The court acknowledged this principle but chose to address the merits of the case due to the detailed objections and satisfaction note already on record. Ultimately, the court held that the petitioner should avail the alternative remedies available under the Act if aggrieved by the assessment order.

5. Compliance with Procedural Requirements Under Section 153C:
The petitioner argued that the procedural requirements under Section 153C were not followed, particularly the need for separate satisfactions by the Assessing Officer of the searched person and the other person. The court referred to the Supreme Court's decision in M/s. Super Malls Private Limited Vs. Principal Commissioner of Income Tax-8, New Delhi, which clarified that the satisfaction note must indicate that the documents seized belonged to the other person. The court found that the satisfaction note in the present case met this requirement, as it clearly stated that the seized gold articles and related documents pertained to the petitioner. Therefore, the court held that the procedural requirements under Section 153C were complied with.

Conclusion:
The court rejected the writ applications, holding that the notices issued under Section 153C were valid, the jurisdiction was correctly invoked, the satisfaction note was adequate and correct, and the procedural requirements were complied with. The court also emphasized that the petitioner should avail the alternative remedies available under the Act if aggrieved by the assessment order.