2015 (4) TMI 262 - HC - Income Tax

Assessment under Section 143 (3) read with Section 153C - the whole assessment procedure was vitiated on account of the fact that the assessing authority had relied on the materials obtained during the course of the search and the search was not witnessed by any 'Panchas' - Held that - It would be incumbent upon the appellate authority to consider the contention of the petitioners with regard to the validity of the search, as also on the aspect of whether the assessing authority had jurisdiction to initiate proceedings under Section 153A on the basis of that search, prior to deciding the issue on merits. The appellate authority would also be required to consider the request of the petitioners for cross examining the Authorised Officer of the Department in accordance with the provisions of law applicable. Therefore, dispose the writ petition with a direction to the 2nd respondent appellate authority to consider the said contention of the petitioners, including the contention regarding validity of search and consequent lack of jurisdiction. The appellate authority shall also consider the request of the petitioners for an opportunity to cross examine the witnesses and the Authorised Officer of the Department in accordance with the applicable provisions. The 2nd respondent appellate authority shall do this prior to proceeding with the appeal on merits.

Summary

Issues:
Challenge to assessment procedure under Income Tax Act - Reliance on materials obtained during search - Lack of 'Panchas' during search - Request for cross-examination of witnesses - Legality of search proceedings - Jurisdiction of assessing authority under Section 153A.

Analysis:
The petitioners challenged orders passed under Section 143 (3) read with Section 153C of the Income Tax Act by filing appeals before the 2nd respondent. They contended that the assessment procedure was flawed due to the absence of 'Panchas' during the search, leading to the materials obtained during the search being unreliable for assessment purposes. The petitioners sought an opportunity to cross-examine witnesses to substantiate their claims regarding the legality of the search and the jurisdiction of the authorities involved. The High Court directed the 2nd respondent appellate authority to consider these contentions before proceeding with the appeals on merits. The appellate authority was instructed to assess the validity of the search, jurisdiction of the assessing authority under Section 153A, and the request for cross-examination in accordance with the law. The High Court emphasized the importance of addressing these issues before delving into the merits of the appeals.

This judgment highlights the significance of procedural fairness and the need to address challenges to the legality of search proceedings and the jurisdiction of assessing authorities before making substantive decisions on tax assessments. The court's direction for the appellate authority to consider the petitioners' contentions regarding the validity of the search and the opportunity for cross-examination underscores the principles of natural justice and due process in tax matters. By emphasizing the need to address these fundamental issues first, the court ensures that the assessment process is conducted in a manner that upholds the rule of law and protects the rights of taxpayers. The judgment serves as a reminder of the importance of procedural regularity and adherence to legal requirements in tax assessments to maintain the integrity and fairness of the tax administration system.