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

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WP/10374/2023HC KarnatakaKAHC01022159202328 June 2023Bench: S SUNIL DUTT YADAV7 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that there was an admitted violation of the principles of natural justice. Consequently, the Court found that a case was made out for remanding the matter for fresh consideration. The Authority was directed to reconsider the matter, including the contentions raised regarding the invocation of Section 153C of the Act, with reference to the law laid down by the Apex Court in the case of Abhisar Buildwell (supra). The Penalty Order at Annexure-'H2' and the Assessment Order at Annexure-'C' in all Writ Petitions were set aside. The respondent-Authority was directed to fix a date for hearing, afford an opportunity of personal hearing as mandated by law, and pass orders afresh. The ratio decidendi is that orders passed without affording mandatory hearing and without proper jurisdiction are liable to be set aside and remanded for fresh adjudication.

What were the facts?

The petitioners, Sri S D Aswathnarayan (HUF), Sri S D Shivram (HUF), and Sri S N Srinivasamurthy (HUF), filed writ petitions challenging penalty orders dated 26/09/2022 for Assessment Year 2017-18, passed by the Deputy Commissioner of Income Tax, Central Circle 2(1). They also sought to set aside the assessment orders passed under Section 143(3) read with Section 153C of the Income Tax Act, 1961. The petitioners contended that the impugned orders, including the penalty order under Section 270A, were passed without affording mandatory hearing as required by Section 274(1) of the Act. Furthermore, they argued that the opportunity of hearing under Section 143(3) was not provided for the assessment order, and the authority lacked jurisdiction to invoke Section 153C. The petitioners argued that Section 153C could only be invoked if incriminatory material was recovered, and otherwise, reassessment under Sections 147-148 would be the only recourse, citing the Supreme Court judgment in Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited.

What were the issues?

1. Whether the penalty order passed under Section 270A of the Income Tax Act, 1961, is liable to be quashed for violation of the principles of natural justice, specifically the mandatory hearing requirement under Section 274(1) of the Act? (Question of law) 2. Whether the assessment order passed under Section 143(3) read with Section 153C of the Income Tax Act, 1961, is liable to be quashed for non-compliance with the opportunity of hearing under Section 143(3) and for lack of jurisdiction to invoke Section 153C? (Question of mixed law and fact) Assessee's Contentions: - The penalty order under Section 270A and the assessment order were passed without affording mandatory hearing as required by Section 274(1) and Section 143(3) respectively. - The authority lacked jurisdiction to invoke Section 153C of the Act. - Section 153C can only be invoked upon recovery of incriminatory material; otherwise, reassessment under Sections 147-148 is the only option. - Relied on the judgment in Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited. 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

Heard together (3 matters)

WP No. 10227 of 2023
WP No. 10374 of 2023
WP No. 10448 of 2023

Read from the judgment's own cause title. This page is filed under one of them.

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NC: 2023:KHC:22507 WP No. 10227 of 2023 C/W WP No. 10374 of 2023 WP No. 10448 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF JUNE, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 10227 OF 2023 (T-IT) C/W WRIT PETITION NO. 10374 OF 2023 WRIT PETITION NO. 10448 OF 2023 IN W.P. NO.10227 OF 2023 BETWEEN: 1. SRI S D ASWATHNARAYAN (HUF) S/O LATE S D DHAKTAPPA AGED 75 YEARS, R/AT NO. 36, 14TH MAIN ROAD, 2ND CROSS, 3RD STAGE, 3RD BLOCK, BASAVESHWARANAGAR, BANGALORE - 560 079 REP. BY ITS KARTHA SRI S D ASWATHANARAYAN … 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 Digitally signed by B K MAHENDRAKUMAR Location: High Court of Karnataka

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NC: 2023:KHC:22507 WP No. 10227 of 2023 C/W WP No. 10374 of 2023 WP No. 10448 of 2023 2. PRL COMMISSIONER OF INCOME TAX-5 BMTC BUILDING, 80 FEET ROAD, 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 WRIT PETITION 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/2022-23/1045981158(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R-3 AND ETC. IN W.P. NO.10374 OF 2023 BETWEEN: 1. SRI S D SHIVRAM (HUF) S/O LATE S D DHAKTAPPA AGED 70 YEARS, R/AT NO. 191, 2ND MAIN 6TH 'A' CROSS, AECS LAYOUT SANJAYANAGAR BANGALORE - 560 094

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NC: 2023:KHC:22507 WP No. 10227 of 2023 C/W WP No. 10374 of 2023 WP No. 10448 of 2023 REP. BY ITS KARTHA SRI S D SHIVARAM … 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, 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 WRIT PETITION 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/2022-23/1045978036(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R-3 AND ETC.

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NC: 2023:KHC:22507 WP No. 10227 of 2023 C/W WP No. 10374 of 2023 WP No. 10448 of 2023 IN W.P. NO.10448 OF 2023 BETWEEN: 1. SRI S N SRINIVASAMURTHY (HUF) S/O LATE S D DHAKTAPPA AGED 82 YEARS, R/AT NO.235, 7TH D MAIN 3RD CROSS, 4TH STAGE, BASAVESHWARANAGAR, BANGALORE - 560 079 REP. BY ITS KARTHA SRI S N SRINIVASAMURTHY … PETITIONER (BY SRI. ARAVIND V CHAVAN., ADVOCATE) AND: 1. INCOME TAX OFFICER WARD 5(2)(3) BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BANGALORE - 560 095 2. PRL COMMISSIONER OF INCOME TAX-5 BMTC BUILDING, 80 FEET ROAD, 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,

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NC: 2023:KHC:22507 WP No. 10227 of 2023 C/W WP No. 10374 of 2023 WP No. 10448 of 2023 QUEENS ROAD, BANGALORE - 560 001 … RESPONDENTS (BY SRI. M. DILIP., ADVOCATE)

THIS WRIT PETITION 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/2022-23/1045978117(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R-3 AND ETC.

THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER

W.P.Nos.10227/2023, 10374/2023 and 10448/2023 are taken up together and are disposed off by a common order in light of the similar factual matrix. 2. Petitioners have challenged the Penalty Order at Annexure-'H2' for the Assessment Year 2017-18 and have also sought for setting aside of the assessment order at Annexure-'C'. 3. It is the contention of Sri. Aravind V. Chavan, learned counsel appearing for the petitioners that the impugned orders passed including the penalty order under Section 270A of the Income Tax Act, 1961 ('the Act') is

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NC: 2023:KHC:22507 WP No. 10227 of 2023 C/W WP No. 10374 of 2023 WP No. 10448 of 2023 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 given. It is also contended that the Authority had no jurisdiction to invoke Section 153C of the Act. 4. 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. 5. Admittedly, there has been violation of principles of natural justice. Accordingly, case is made out

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NC: 2023:KHC:22507 WP No. 10227 of 2023 C/W WP No. 10374 of 2023 WP No. 10448 of 2023 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). 6. The Penalty Order at Annexure-'H2' and the Assessment Order at Annexure-'C' in all Writ Petitions 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. 7. Writ petitions are allowed accordingly. Sd/- JUDGE VGR

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