2021 (7) TMI 262 - HC - Income Tax

Assessment u/s 153C - satisfaction on the basis of the borrowed information - whether the books of accounts or documents or assets seized or requisitioned by the other AO in the proceedings under section 153A? - HELD THAT - The respondent had initiated the proceedings under section 142(1) read with section 153C of the said Act by recording the satisfaction that the documents found and seized from the premises of the accommodation entry provider group of Ahmedabad, pertained to the petitioner - assessee and had a bearing on the determination of the total income of the petitioner for the A.Y. 2012-13. As stated earlier, the petitioner filed the objections against the said satisfaction recorded by the respondent and the said objections have been duly considered by the respondent. Under the circumstances, it could not be said that the respondent had recorded the satisfaction on the basis of the borrowed information. Impugned notice u/s 153C was issued on the basis of incorrect facts - Such satisfaction would be in the realm of subjective satisfaction of the concerned Assessing Officer. The sufficiency or correctness of the documents or material handed over by the other Assessing Officer to him also could not be gone into by the Courts at this stage. In the case of Raymond Woolen Mills Ltd. 1997 (12) TMI 12 - SUPREME COURT it has been held that in determining whether the commencement of reassessment proceeding is valid, the Court has only to see whether there is prima facie some material on the basis of which the department has opened the case, and that the sufficiency or correctness of the material could not be considered at this stage. It is true that the supreme Court has made the said observations while considering the validity of the reasons recorded by the Assessing Officer for reopening of the assessment of the assessee under Section 147, whereas the present case arises out of the proceedings initiated and the satisfaction recorded by the Assessing Officer for initiating the proceedings under section 153C of the said Act, nonetheless such reliance of the decision of Supreme Court by the respondent could not be said to be out of place when the matter was concerning about the reopening of the assessment of the petitioner - assessee.

Issues Involved:
1. Validity of the impugned notice under Section 153C of the Income Tax Act.
2. Jurisdiction of the authority issuing the notice.
3. Alleged violation of principles of natural justice.
4. Consideration of objections raised by the petitioner.
5. Alleged use of borrowed information for recording satisfaction.
6. Alleged mistaken identity in the proceedings.
7. Sufficiency and correctness of the material for reopening the assessment.

Detailed Analysis:

1. Validity of the Impugned Notice under Section 153C of the Income Tax Act:
The petitioner challenged the notice dated 31.03.2019 issued under Section 153C, the preliminary order dated 10.10.2019 rejecting the objections, and the subsequent order dated 30.10.2019. The petitioner received the notice to prepare a return for A.Y. 2012-13, filed a return, and later received a notice under Section 142(1) for scrutiny assessment. The objections filed by the petitioner were rejected by the respondent.

2. Jurisdiction of the Authority Issuing the Notice:
The court noted that the petitioner did not raise the question of jurisdiction in the objections before the respondent. The court emphasized that the petitioner failed to demonstrate how the impugned orders were without jurisdiction.

3. Alleged Violation of Principles of Natural Justice:
The court observed that the objections raised by the petitioner were considered and rejected by the respondent, indicating no violation of natural justice principles. The court referenced the Supreme Court's stance in Commissioner of Income-Tax Gujarat vs. Vijaybhai N. Chandrani, which stated that the High Court should not interfere at the notice stage and that the petitioner should first exhaust alternative remedies.

4. Consideration of Objections Raised by the Petitioner:
The court found that the respondent had duly considered the objections raised by the petitioner against the satisfaction note. The objections were disposed of through detailed orders dated 10.10.2019 and 30.10.2019.

5. Alleged Use of Borrowed Information for Recording Satisfaction:
The petitioner argued that the satisfaction was recorded based on borrowed information. The court dismissed this claim, noting that the respondent received information from the DCIT Cen, Circle-1(3), Ahmedabad, and initiated proceedings based on documents seized during a search. The court found that the respondent had applied his mind and the satisfaction was not merely borrowed.

6. Alleged Mistaken Identity in the Proceedings:
The petitioner contended that the proceedings were based on mistaken identity, claiming the transactions pertained to another individual. The court noted that this issue was raised for the first time during arguments and was not mentioned in the initial objections or the petition. The court found it unlikely that the petitioner would miss raising such a crucial point earlier if it were true.

7. Sufficiency and Correctness of the Material for Reopening the Assessment:
The court stated that the sufficiency or correctness of the documents or material could not be questioned at this stage. It referenced the Supreme Court's decision in Raymond Woolen Mills Ltd. vs. ITO, which held that the court should only determine if there is prima facie material for reopening the case, not the sufficiency or correctness of that material.

Conclusion:
The court concluded that the petition lacked merit and dismissed it. The court emphasized that the petitioner should have exhausted alternative remedies available under the Act before approaching the High Court. The interim relief granted earlier was vacated.

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