2025 (1) TMI 701 - HC - Income Tax

Validity of proceedings u/s 153C - period of limitation - validity of satisfaction note recorded by the AO - HELD THAT - The only objection of the petitioner is that the satisfaction note is undated and unsigned. The petitioner can raise this objection before the AO. The issue of limitation is also a mixed question of facts and law. As pointed out by the respondents, the proceedings are bound to be completed within 12 months which is going to be ended on 31.03.2025. The petitioner approached this Court at the very fag end of the period in the month of November December 2025, therefore, at this belated stage, the petition cannot be entertained. Objections in respect of the satisfaction note recorded by the AO of the concerned third party as well as the assessment note in respect of the petitioner - All these objections can be raised before the AO who is competent to appreciate the same after examining the documents. After the order is passed by the Assessing Officer, either party, i.e. petitioner or Department will have the remedy of appeal before the Commissioner of Income Tax and further remedy before the Income Tax Appellate Tribunal. Even in the case of Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT the matter was travelled up to the Apex Court after exhausting the remedy before the ITAT, therefore, all these objections and grounds raised by the petitioner are liable to be considered by the authorities under the Income Tax Act, not by this Court. Hence, no case for interference is made out. Writ Petition stands dismissed without expressing any opinion on the merit of the case.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the notice issued under Section 153C of the Income Tax Act, 1961, for the Assessment Year 2014-15 is valid and within the jurisdiction of the respondent.
Whether the proceedings initiated under Section 153C are time-barred as per the proviso to Section 153C.
Whether the petitioner has the right to challenge the notice under Section 153C through a writ petition before the High Court.
Whether the satisfaction note required for initiating proceedings under Section 153C was appropriately prepared and communicated.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Jurisdiction of Notice under Section 153C

Relevant Legal Framework and Precedents: Section 153C of the Income Tax Act allows the assessment of income for persons other than the searched party if incriminating materials are found. The petitioner relied on the Supreme Court's decision in Commissioner of Income Tax v. Jasjit Singh, which clarified the reckoning of assessment years.
Court's Interpretation and Reasoning: The court noted that the petitioner was served with a notice under Section 153C, which was challenged on jurisdictional grounds. The court emphasized that jurisdictional challenges could be addressed during the assessment proceedings.
Key Evidence and Findings: The petitioner argued that the incriminating material and satisfaction note were undated and unsigned, questioning the validity of the notice.
Application of Law to Facts: The court held that the petitioner could present these objections before the Assessing Officer, who is authorized to consider such issues.
Treatment of Competing Arguments: The respondents argued that the assessment was within the prescribed time limit, and the petitioner had delayed challenging the notice.
Conclusions: The court concluded that the petitioner should raise jurisdictional objections during the assessment proceedings rather than through a writ petition.

Issue 2: Time-Barred Proceedings under Section 153C

Relevant Legal Framework and Precedents: The petitioner cited the Jasjit Singh case, arguing that the assessment years should be counted from the date the Assessing Officer received the documents.
Court's Interpretation and Reasoning: The court acknowledged the petitioner's argument but noted that the issue of limitation involves mixed questions of fact and law, best addressed during assessment.
Key Evidence and Findings: The petitioner claimed the notice was issued beyond the permissible period, making it time-barred.
Application of Law to Facts: The court found that the petitioner delayed approaching the court and should have raised the limitation issue earlier.
Treatment of Competing Arguments: The respondents emphasized that the assessment was to be completed by 31.03.2025, and the petition was filed close to this deadline.
Conclusions: The court dismissed the argument of the notice being time-barred, as it was not timely raised by the petitioner.

Issue 3: Maintainability of Writ Petition

Relevant Legal Framework and Precedents: The petitioner cited cases supporting the maintainability of writ petitions in jurisdictional challenges.
Court's Interpretation and Reasoning: The court held that the petitioner should first exhaust remedies available under the Income Tax Act before approaching the High Court.
Key Evidence and Findings: The court noted that the petitioner had not exhausted alternative remedies, such as appeals before the Commissioner of Income Tax and the Income Tax Appellate Tribunal.
Application of Law to Facts: The court reasoned that the petitioner should address procedural and jurisdictional issues during the assessment process.
Treatment of Competing Arguments: The respondents argued that the petition was premature and should be dismissed.
Conclusions: The court dismissed the writ petition, directing the petitioner to pursue alternative remedies.

Issue 4: Satisfaction Note for Section 153C Proceedings

Relevant Legal Framework and Precedents: The petitioner challenged the validity of the satisfaction note, citing its undated and unsigned nature.
Court's Interpretation and Reasoning: The court noted that the satisfaction note's validity could be contested before the Assessing Officer.
Key Evidence and Findings: The court found that the petitioner had received the satisfaction note and related documents.
Application of Law to Facts: The court held that the petitioner should raise these issues during the assessment process.
Treatment of Competing Arguments: The respondents maintained that the satisfaction note was appropriately prepared and communicated.
Conclusions: The court concluded that the satisfaction note's validity should be addressed during assessment proceedings.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The petitioner can raise this objection before the Assessing Officer. The issue of limitation is also a mixed question of facts and law."
Core Principles Established: Jurisdictional and procedural objections should be raised during assessment proceedings; writ petitions are not the appropriate forum for such challenges unless alternative remedies are exhausted.
Final Determinations on Each Issue: The court dismissed the writ petition, emphasizing that the petitioner should pursue objections and remedies within the framework of the Income Tax Act.

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