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

PDF · subscribers
WP/10376/2023HC KarnatakaKAHC01022161202328 June 2023Bench: S SUNIL DUTT YADAV5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court acknowledged a violation of the principles of natural justice, specifically concerning the mandatory hearing requirements under Section 274(1) for the penalty order and Section 143(3) for the assessment order. The Court found that the petitioner had made out a case for remanding the matter for fresh consideration. The Court also directed the authority to reconsider the contentions raised by the petitioner regarding the invocation of Section 153C, in light of the law laid down by the Apex Court in the case of Abhisar Buildwell (supra). Consequently, the Penalty Order dated September 26, 2022, and the Assessment Order were set aside. The authority was directed to fix a date for hearing, afford a personal hearing as mandated by law, and pass fresh orders. The issue of whether the authority had jurisdiction to invoke Section 153C in the absence of incriminatory material was to be reconsidered by the authority.

What were the facts?

The petitioner, Sri S D Krishnamurthy (HUF), filed a writ petition challenging a penalty order dated September 26, 2022, for Assessment Year 2017-18, passed by the Deputy Commissioner of Income Tax, Central Circle 2(1), and also sought to set aside an assessment order passed under Section 143(3) read with Section 153C of the Income Tax Act, 1961. The petitioner contended that both the assessment and penalty orders were passed without affording mandatory hearings as required by law. Specifically, the petitioner argued that Section 274(1) mandates a hearing before passing a penalty order under Section 270A, and Section 143(3) requires an opportunity of hearing for the assessment order. Furthermore, the petitioner questioned the jurisdiction of the authority to invoke Section 153C, arguing that it requires recovery of incriminatory material, and in its absence, reassessment under Sections 147-148 should have been pursued, 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 for Assessment Year 2017-18 is liable to be quashed for violation of the mandatory hearing requirement under Section 274(1) of the Income Tax Act, 1961? 2. Whether the assessment order passed under Section 143(3) read with Section 153C of the Income Tax Act, 1961, is liable to be set aside for non-compliance with the opportunity of hearing provided under Section 143(3)? 3. Whether the authority had the jurisdiction to invoke Section 153C of the Income Tax Act, 1961, in the absence of recovery of incriminatory material, and whether reassessment under Sections 147-148 was the appropriate recourse? Assessee's Contentions: The petitioner argued that the impugned penalty order under Section 270A and the assessment order under Section 143(3) read with Section 153C were passed without affording mandatory hearings as required by Sections 274(1) and 143(3) respectively. The petitioner also contended that the authority lacked jurisdiction to invoke Section 153C, as it necessitates the recovery of incriminatory material, and in its absence, reassessment under Sections 147-148 should have been initiated. Reliance was placed on the Supreme Court decision in Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited. Revenue's Contentions: No specific contentions were recorded for the revenue in the provided 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

- 1 -

NC: 2023:KHC:22506 WP No. 10376 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. 10376 OF 2023 (T-IT) BETWEEN: 1. SRI S D KRISHNAMURTHY (HUF) S/O LATE S D DHAKTAPPA AGED 67 YEARS, R/AT NO 26/A1, 1ST MAIN, 1ST CROSS, VHBCS LAYOUT, BEHIND SHANKARMUTT BASAVESHWARANAGAR, BANGALORE - 560 079 REP BY ITS KARTHA SRI S D KRISHNAMURTHY … 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

- 2 -

NC: 2023:KHC:22506 WP No. 10376 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/2022-23/1045986019(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R-3 AND ETC.

THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

- 3 -

NC: 2023:KHC:22506 WP No. 10376 of 2023 ORDER

Petitioner has challenged the Penalty Order at Annexure-'H2' for the Assessment Year 2017-18 and has also sought for setting aside of the Assessment Order at Annexure-'C'. 2. It is the contention of Sri. Aravind V. Chavan, learned counsel appearing for the petitioner that the impugned order is 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 given. It is also contended that the Authority had no jurisdiction to invoke Section 153C of the Act. 3. It is pointed out that for the purpose of initiating proceedings, there must be recovery of

- 4 -

NC: 2023:KHC:22506 WP No. 10376 of 2023 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. 4. 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). 5. 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

- 5 -

NC: 2023:KHC:22506 WP No. 10376 of 2023 mandated under law as noticed above and pass orders afresh. 6. Writ petition is allowed accordingly. Sd/- JUDGE VGR

More judgments on Section 270A

All 4,156 judgments and leading authorities on Section 270A →

Recent GST High Court judgments

Search GST case law →