2013 (7) TMI 805 - HC - Income Tax

Notice u/s 153C - Whether the assessing authority receiving satisfaction note has already examined account books and has not found anything adverse against the assessee and further seized goods have already been released in favour of the assessee he is required to issue notice u/s 153C to file returns for six years Held that - If there is power to do something under the Act, the action taken in the fiscal matters cannot be set aside in exercise of the writ jurisdiction on the ground that such power is to be exercised needlessly without any purpose - The exercise of power in such case can only be challenged - if the power is being exercised with ulterior motive and mala fide intentions - It is not open for the petitioner to contend before the writ court that the exercise of power will expose the assessee to assessment for the same period on which assessing authority has already recorded satisfaction - If there is power to do something under the Act - the action taken in the fiscal matters cannot be set aside in exercise of the writ jurisdiction on the ground that such power is to be exercised needlessly without any purpose - The exercise of power in such case can only be challenged, if the power is being exercised with ulterior motive and mala fide intentions. It is not open for the petitioner to contend before the writ court that the exercise of power, which admittedly exists in the authority, will expose the petitioner to assessment for the same period on which assessing authority has already recorded satisfaction petition decided against assessee.

Issues Involved:

1. Seizure of silver bullion and its requisition under section 132A of the Income-tax Act, 1961.
2. Application for release of bullion under section 132B of the Act.
3. Assessment proceedings under section 153C of the Act for seven assessment years.
4. Challenge to the initiation of assessment proceedings under section 153A read with section 153B for the assessment years 2003-04 to 2009-10.
5. Challenge to the vires of sections 153A and 153C of the Act.

Detailed Analysis:

1. Seizure of Silver Bullion and Its Requisition under Section 132A:

The petitioner, engaged in the business of jewellery, dispatched 69.900 kg of silver bullion to Rajkot for manufacturing silver ornaments. The consignment was seized by the Delhi Police and requisitioned by the Deputy DIT (Inv), Unit-II (1), New Delhi, under section 132A of the Income-tax Act, 1961. Other courier service providers were also searched and seizures carried out.

2. Application for Release of Bullion under Section 132B:

The petitioner applied for the release of the bullion on July 3, 2008, under section 132B of the Act, stating the consignment was duly accounted for in his books. The petitioner provided account books and stock registers for verification. On November 30, 2009, the Income-tax Officer, Unit-II (2), Bareilly, ordered the release of the bullion after confirming it was part of the stock-in-trade and duly disclosed. The order was not challenged and attained finality, leading to the release of the seized bullion to the petitioner.

3. Assessment Proceedings under Section 153C:

On December 31, 2010, the assessment was completed for the courier, M/s. Harish Kumar Laxman Kumar, under section 153B(1)(b) read with section 143(3) for the assessment year 2009-10, confirming the silver bullion belonged to the petitioner. The income was assessed at "Nil" for the courier, and the matter was referred to the petitioner's Assessing Officer under section 153C. The Assessing Officer initiated proceedings for seven assessment years (2003-04 to 2009-10) by issuing orders for the petitioner to file returns.

4. Challenge to the Initiation of Assessment Proceedings:

The petitioner challenged the initiation of assessment proceedings under section 153A read with section 153B for the assessment years 2003-04 to 2009-10. The petitioner argued that there was no material evidence of undisclosed income for these years, and the assessments were arbitrary and unreasonable. The petitioner contended that the provisions of section 153A read with section 153C should not be invoked mechanically without material evidence of undisclosed income.

5. Challenge to the Vires of Sections 153A and 153C:

The petitioner also challenged the constitutionality of sections 153A and 153C, arguing that mandatory assessments or reassessments for six previous years should only be conducted if undisclosed income is discovered. The petitioner claimed that the second assessment was unnecessary as the bullion was already accounted for and released.

Court's Analysis and Judgment:

The court noted that the petitioner's Assessing Officer had examined the account books and found the bullion duly recorded, leading to its release. However, the court emphasized that the satisfaction note recorded by the Income-tax Officer, Ward-III(2), Ahmedabad, was valid and complied with section 153C requirements. The court referred to the Supreme Court's ruling in Manish Maheshwari v. Asst. CIT, stating that the conditions for invoking block assessments must be strictly followed. The court found that the satisfaction note and forwarding of the matter to the petitioner's Assessing Officer were lawful.

The court held that the power to act under section 153C exists and should not be interfered with unless exercised without jurisdiction or bona fide. The court dismissed the petition, stating that the second assessment was justified to investigate the source of income for the bullion purchase, despite the previous examination and release of the bullion. The court concluded that the exercise of power in fiscal matters should not be set aside unless proven to be with ulterior motives or mala fide intentions.

Conclusion:

The writ petition was dismissed, upholding the initiation of assessment proceedings under section 153C for the petitioner, and confirming the validity of the satisfaction note and the necessity to investigate the source of income for the purchase of the silver bullion.

← Previous Next →