SRI.S.D NAGESHWAR (HUF) vs. DEPUTY COMMISSIONER OF INCOME TAX

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WP/10367/2023HC KarnatakaKAHC01022157202327 July 2023Bench: S SUNIL DUTT YADAV5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court found that there was an admitted violation of the principles of natural justice. Consequently, the Court held that the case made out warrants remanding the matter for fresh consideration. The penalty order dated 26.09.2022 (Annexure-H2) and the assessment order dated 10.03.2022 (Annexure-C) were set aside. The Authority was directed to reconsider the matter, including the contentions raised regarding the invocation of Section 153C of the Act, in light of the law laid down by the Apex Court in the case of Abhisar Buildwell (supra). The respondent was further directed to fix a date for hearing, afford an opportunity of personal hearing as mandated by law, and pass orders afresh. The Court did not expressly leave any issue undecided.

What were the facts?

The petitioner, Sri.S.D Nageshwar (HUF), filed a writ petition challenging a penalty order dated 26.09.2022 for Assessment Year 2017-18, passed by the Deputy Commissioner of Income Tax, Central Circle-2(1) (Respondent No. 3). The petitioner also sought to set aside an assessment order dated 10.03.2022, passed under Section 143(3) read with Section 153C of the Income Tax Act, 1961. The writ petition was initially dismissed for non-prosecution due to non-compliance with office objections. However, upon the petitioner complying with the objections during the pendency of an application to recall the dismissal order, the application was allowed, and the petition was restored to the file. The respondents are represented by the Deputy Commissioner of Income Tax and Principal Commissioner of Income Tax.

What were the issues?

1. Whether the penalty order under Section 270A and the assessment order under Section 143(3) read with Section 153C of the Income Tax Act, 1961, were passed without affording mandatory hearing as required under Section 274(1) and Section 143(3) respectively? (Question of law and fact) 2. Whether the authority had jurisdiction to invoke Section 153C of the Income Tax Act, 1961, in the absence of recovery of incriminatory material, and if reassessment under Sections 147 to 148 would be the only recourse? (Question of law) Assessee's Contentions: - The impugned orders, including the penalty order under Section 270A, were passed without providing a mandatory hearing as required by Section 274(1) of the Act. - The opportunity of hearing under Section 143(3) was not provided for the assessment order. - The authority lacked jurisdiction to invoke Section 153C of the Act, as there was no recovery of incriminatory material. Reliance was placed on the judgment in Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited - 2023 SCC Online SC 481. Revenue's Contentions: - No specific contentions were recorded for the revenue in the judgment.

Which sections of the Income-tax Act were involved?

Section 270A,Section 274(1),Section 143(3),Section 153C,Section 147,Section 148

AI-generated summary — verify with the full judgment below

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NC: 2023:KHC:26420 WP No. 10367 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 10367 OF 2023 (T-IT) BETWEEN: 1. SRI.S.D NAGESHWAR (HUF) S/O. LATE S.D. DHAKTAPPA, AGED 72 YEARS, R/AT. NO.9/1, 13TH CROSS, 2ND MAIN ROAD, RMV 2ND STAGE, HANUMAIAH LAYOUT, SANJAYANAGAR, BANGALORE-560 094. REP. BY ITS KARTHA SRI. S.D. NAGESHWAR … PETITIONER (BY SRI. ARAVIND V CHAVAN., ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5(2)(1), BMTC BUILDING, 80 FEET ROAD, KORAMANGALA. BANGALORE-560 095. 2. PRL. COMMISSIONER OF INCOME TAX-5, BMTC BUILDING, 80 FEET ROAD, Digitally signed by VIJAYA P Location: High Court of Karnataka

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NC: 2023:KHC:26420 WP No. 10367 of 2023 KORAMANGALA. BANGALORE-560 095 3. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), C.R. BUILDING QUEENS ROAD, BANGALORE-560 001 4. PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE C.R. BUILDING QUEENS ROAD, BANGALORE-560 001 … RESPONDENTS (BY SRI. M. DILIP, ADVOCATE)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE PENALTY ORDER DTD 26.09.2022 BEARING NO. ITBA/PNL/F/270A/2022-23/1045978034(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R-3 AND ETC.

THIS W.P. COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petition was dismissed for non-prosecution due to non-compliance of office objections.

2.

During the pendency of I.A.-1/2023 for recalling the order of dismissal, the petitioner has complied the

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NC: 2023:KHC:26420 WP No. 10367 of 2023 office objections. Accordingly, I.A.-1/2023 is allowed and the order of dismissal dated 19.06.2023 is recalled and the petition is restored to file.

3.

Sri Dilip, learned counsel accepts notice for the respondents.

4.

The Petitioner has challenged the penalty order dated 26.09.2022 at Annexure-H2 for the assessment year 2017-18 and has also sought for setting aside of the assessment order dated 10.03.2022 at Annexure-C.

5.

It is the contention of Sri.Aravind V. Chavan, learned counsel for petitioner that the impugned orders passed including the penalty order under Section 270A of the Income Tax Act, 1961 ('the Act') is without affording mandatory hearing in terms of the legal requirements under Section 274(1) of the Act and also insofar as the assessment order passed under Section 143(3) read with Section 153C of the Act, the opportunity of hearing as is provided for under Section 143(3) of the Act was not

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NC: 2023:KHC:26420 WP No. 10367 of 2023 given. It is also contended that the Authority had no jurisdiction to invoke Section 153C of the Act.

6.

It is pointed out that for the purpose of initiating proceedings, there must be recovery of incriminatory material without which recourse cannot be had to Section 153C of the Act and that the only option available under such circumstance would be to proceed for reassessment under Sections 147 to 148 of the Act. Reliance is placed on the judgment in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited - 2023 SCC Online SC 481.

7.

Admittedly, there has been violation of principles of natural justice. Accordingly, case is made out for remanding the matter for fresh consideration while directing the Authority to embark upon reconsideration including the contentions raised regarding Section 153C of the Act with reference to the law laid down by the Apex Court in the case of Abhisar Buildwell (supra).

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NC: 2023:KHC:26420 WP No. 10367 of 2023

8.

The penalty order at Annexure-H2 and the assessment order at Annexure-C are set aside. The Authority to reconsider the matter in light of the discussion made above. The respondent is directed to fix a date for hearing and afford an opportunity of personal hearing as mandated under law as noticed above and pass orders afresh.

9.

Writ petition is allowed accordingly. Sd/- JUDGE NP

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