SRI. SHIVAKUMAR SULEGAI SRINIVASAMURTHY (HUF) vs. INCOME TAX OFFICER

PDF · subscribers
WP/10594/2023HC KarnatakaKAHC01024190202308 June 2023Bench: S SUNIL DUTT YADAV9 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that there was an admitted violation of the principles of natural justice concerning the mandatory hearing requirements. Consequently, the Court found that a case was made out for remanding the matters for fresh consideration. The Court set aside the penalty order at Annexure-H2 and the assessment order at Annexure-C in all the writ petitions. The Authority was directed to reconsider the matters, 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 also directed to fix a date for hearing, afford an opportunity of personal hearing as mandated by law, and pass fresh orders. The Court expressly left no issue undecided.

What were the facts?

The petitioners, identified as HUFs (Sri. S S Vinayak (HUF), Sri. Shivakumar Sulegai Srinivasmurthy (HUF), Sri. S S Dhondusa (HUF), and Sri. Sulegai Narayana Shivashankar (HUF)), filed writ petitions challenging penalty orders dated September 26, 2022, for Assessment Year 2017-18, and also sought to set aside the assessment orders. The penalty orders were passed under Section 270A of the Income Tax Act, 1961, and the assessment orders were passed under Section 143(3) read with Section 153C of the Act. The petitions were filed before the High Court of Karnataka under Articles 226 and 227 of the Constitution of India.

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 mandatory hearing requirements 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 Act is liable to be quashed for non-compliance with the opportunity of hearing under Section 143(3) of the Act? (Question of mixed law and fact) 3. Whether the Assessing Authority had the jurisdiction to invoke Section 153C of the Act, or if reassessment under Sections 147 to 148 was the only recourse, considering the absence of recovery of incriminatory material? (Question of law) Assessee's Contentions: The petitioners argued that the impugned penalty and assessment orders were passed without affording mandatory hearings as required by law. Specifically, they contended that Section 274(1) mandates a hearing before imposing a penalty under Section 270A, and Section 143(3) also requires an opportunity of hearing. Furthermore, they argued that the authority lacked jurisdiction to invoke Section 153C, as it requires the recovery of incriminatory material, and in its absence, reassessment under Sections 147-148 should have been pursued. They relied on the judgment in Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited (2023 SCC Online SC 481). Revenue's Contentions: The judgment does not record any specific contentions made by the revenue.

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. 10559 of 2023
WP No.10594/2023
W.P. NO.10674/2023

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

- 1 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8TH DAY OF JUNE, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 10559 OF 2023 (T-IT) C/W WRIT PETITION NO.10594/2023 WRIT PETITION NO.10674/2023 WRIT PETITION NO.10699/2023 IN W.P. NO.10559/2023 BETWEEN: 1. SRI. S S VINAYAK (HUF) S/O S.N.SHIVASHANKAR, AGED 45 YEARS R/AT NO.11, 1ST CROSS, 2ND STAGE, NEAR SHANKARMUTT, BASAVESHWARANAGAR, BANGALORE- 560 079 REP. BY ITS KARTHA SRI. S.S.VINAYAK … PETITIONER (BY SRI. M.V. SHESHACHALA, SENIOR ADVOCATE FOR SRI ARAVIND V CHAVAN, ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX INCOME TAX, CENTRAL CIRCLE-2(1), C.R.BUILDING, Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023. Digitally signed by B K MAHENDRAKUMAR Location: High Court of Karnataka

- 2 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 QUEENS ROAD, BANGALORE - 560 001 2. 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/2022-23/1045984832(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R3 AND ETC. IN W.P. NO.10594/2023 BETWEEN: 1. SRI. SHIVAKUMAR SULEGAI SRINIVASAMURTHY (HUF) S/O.S.N.SRINIVASAMURTHY AGED 51 YEARS R/AT NO.273, SUBEDAR CHATRAM ROAD, BANGALORE-560 009 REP. BY ITS KARTHA SRI.SHIVAKUMAR SULEGAI SRINIVASAMURTHY. … PETITIONER (BY SRI. M.V. SHESHACHALA, SENIOR ADVOCATE FOR SRI ARAVIND V CHAVAN, ADVOCATE) Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

- 3 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 AND: 1. INCOME TAX OFFICER WARD-5(2)(3), BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BANGALURU-560 095. 2. PRL. COMMISSIONER OF INCOME TAX-5 BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BANGALURU-560 095. 3. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(1), C.R.BUILDING, QUEENS ROAD, BANGALURU-560 001. 4. PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, C.R.BUILDING, QUEENS ROAD, BANGALURU-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/2022-23/1045978038(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R3 AND ETC. Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

- 4 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 IN W.P. NO.10674/2023 BETWEEN: 1. SRI. S S DHONDUSA (HUF) S/O S.N. SRINIVASAMURTHY, AGED 56 YEARS, R/AT NO.235, 7TH D MAIN, 3RD CROSS, 4TH STAGE, BASAVESHWARANAGAR, BANGALORE-560 079. REP. BY ITS KARTHA, SRI.S.S. DHONDUSA … PETITIONER (BY SRI. M.V. SHESHACHALA, SENIOR ADVOCATE FOR 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. Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

- 5 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 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 DATED 26.09.22 BEARING NO. ITBA/PNL/F/270A/2022-23/1045978033(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE THIRD RESPONDENT AND ETC. IN W.P. NO.10699/2023 BETWEEN: 1. SRI. SULEGAI NARAYANASA SHIVASHANKAR (HUF) S/O LATE S.D.NARAYANASA AGED 78 YEARS, R/AT NO.11, 1ST FLOOR, 1ST CROSS, 2ND STAGE, KIRLOSKAR COLONY, BASAVESHWARANAGAR, BANGALORE - 560 079 REP. BY ITS KARTHA SRI. SULEGAI NARAYANASA SHIVASHANKAR … PETITIONER (BY SRI. M.V.SHESHACHALA, SENIOR ADVOCATE FOR SRI ARAVIND V. CHAVAN, ADVOCATE) Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

- 6 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 AND: 1. INCOME TAX OFFICER WARD -7(2)(1) BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BANGALORE - 560 095 2. PRL. COMMISSIONER OF INCOME TAX-7 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/2022-23/1045977497(1) ANNEXURE-H2 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R3 AND ETC.

THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

- 7 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 ORDER W.P.Nos. 10559/2023, 10594/2023, 10674/2023 and 10699/2023 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. M. V. Sheshachala, learned Senior 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 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 Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

- 8 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 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 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). Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

- 9 -

NC: 2023:KHC:19562 WP No. 10559 of 2023 C/W WP No.10594/2023, 10674/2023, 10699/2023 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 VP Page Nos.1 to 9 are re-typed and replaced vide Court order dated 06.07.2023.

More judgments on Section 270A

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

Recent GST High Court judgments

Search GST case law →