2021 (10) TMI 879 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Whether case falls within the parameters of Section 153A to Section 153C? - materials relied upon were obtained during a search under Section 132 of the Act of another party at New Delhi - As contended that where the material relied upon was obtained in the course of search of another party, the proceedings of the appellant can be initiated only under Section 153C - HELD THAT - The Court had proceeded to consider the effect of Section 153C and has observed that nowhere in Section 147, the provisions of Section 153C stands excluded. However, we find that the contentions which were raised by the appellant with regard to the validity of the reopening proceedings which were sought to be controverted by the respondent have not been decided which in our opinion was the case to be decided by the Writ Court. In any event, the appellant has filed appeals before the First Appellate Authority well within the period of limitation. Therefore, we are of the view that the appellant should pursue the appellate remedy instead of agitating the matter before this Court in these appeals - observations/findings rendered by the learned Writ Court may cause prejudice to the appellant or to the Department. Therefore, if the appellant is to be relegated to pursue the appellate remedy, all such findings needs to be vacated, otherwise it would tantamount to putting fetters on the exercise of the powers of the appellate remedy which should not be done. Thus, all issues are left open and the appellant is at liberty to canvas all factual and legal issues before the First Appellate Authority which shall be considered and decided by the First Appellate Authority in accordance with law. Writ appeals are allowed, the common order passed in the Writ Petitions is set aside and the appellant is at liberty to raise all issues in the appeals which they have filed before the First Appellate Authority. The appellant is also granted liberty to raise additional grounds if a need arises to do so.

Summary

Issues:
Validity of reopening proceedings under Section 147/148 of the Income Tax Act for assessment years 2016-17 and 2017-18.

Analysis:
The appellant challenged the validity of the reopening proceedings under Section 147/148 of the Income Tax Act for the assessment years 2016-17 and 2017-18. The appellant argued that the respondent lacked jurisdiction to issue notice under Section 148 and propose assessment under Section 143(3) r/w. 147, as the materials relied upon were obtained during a search of another party in New Delhi under Section 132 of the Act. The appellant contended that re-assessment should be under Section 153C, not Section 147, as per the Supreme Court decision in Manish Maheshwari vs. Assistant Commissioner of Income Tax. The appellant also claimed that Sections 153A to 153C, commencing with a non-obstante clause, limited the Assessing Officer's jurisdiction to issue notice under Section 148. The Writ Court found a prima facie case and granted interim stay on re-assessment proceedings.

The respondent countered by questioning the maintainability of the writ petitions, citing statutory appellate remedies. Referring to the Supreme Court decision in Raj Kumar Shivhare vs. Assistant Director, Directorate of Enforcement, the respondent argued against entertaining a writ petition for reopening proceedings. The respondent stated that the assessment was reopened based on information from the Deputy Director of Income Investigation, New Delhi, and no search material pertaining to the appellant was found. The respondent contended that Sections 153A to 153C did not apply to the appellant's case, and notice under Section 148 was valid. The Single Bench heard the writ petitions and reviewed sealed records, but the effect of Section 153C was not conclusively addressed.

The High Court found that the Writ Court did not decide the validity of the reopening proceedings, emphasizing the need for the appellant to pursue appellate remedies. The Court directed the appellant to present all factual and legal issues before the First Appellate Authority, which should decide in accordance with the law. All findings of the Writ Court were vacated to prevent hindrance to the appellate process. The writ appeals were allowed, the common order was set aside, and the appellant was granted liberty to raise issues before the First Appellate Authority, including additional grounds if necessary. The appellate authority was instructed to decide on merit and not be influenced by the vacated findings of the Writ Court. The re-assessment proceedings were stayed pending the decision of the First Appellate Authority to protect the appellant's interests.