SRI. S S SATHYAMURTHY (HUF) vs. ASSISTANT COMMISSIONER OF INCOME TAX

PDF · subscribers
WP/10632/2023HC KarnatakaKAHC01024185202313 July 2023Bench: S SUNIL DUTT YADAV4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court acknowledged that there had been a 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 Assessing 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 Penalty Order and the Assessment Order 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 issue of jurisdiction under Section 153C was to be reconsidered by the Authority in light of the Supreme Court's ruling.

What were the facts?

The petitioner, Sri. S S Sathyamurthy (HUF), filed a writ petition challenging a Penalty Order dated 26.09.2022 and an Assessment Order dated 18.03.2022, both pertaining to Assessment Year 2017-18. The petitioner contended that the penalty order under Section 270A and the assessment order under Section 143(3) read with Section 153C were passed without affording mandatory hearing as required by Sections 274(1) and 143(3) respectively. Furthermore, the petitioner argued that the Assessing Authority lacked jurisdiction to invoke Section 153C of the Income Tax Act, 1961, as there was no recovery of incriminatory material, and reassessment under Sections 147-148 should have been pursued. The revenue was represented by the Assistant Commissioner of Income Tax and the Principal Commissioner of Income Tax.

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? 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 not affording the opportunity of hearing as provided under Section 143(3) of the Act? 3. Whether the Assessing Authority had the jurisdiction to invoke Section 153C of the Income Tax Act, 1961, in the absence of recovery of incriminatory material? Assessee's Contentions: The petitioner argued that both the penalty and assessment orders were passed without providing a mandatory hearing, violating Sections 274(1) and 143(3) of the Act. The petitioner also contended that the Assessing Authority lacked jurisdiction to invoke Section 153C, as there was no recovery of incriminatory material, and reassessment under Sections 147-148 was the appropriate recourse. Reliance was placed on the judgment in Principal Commissioner of Income Tax v. 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

- 1 -

NC: 2023:KHC:24398 WP No. 10632 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 10632 OF 2023 (T-IT) BETWEEN: 1. SRI. S S SATHYAMURTHY (HUF) S/O S.N. SHIVASHANKAR, AGED 55 YEARS, R/AT NO.11, 1ST CROSS, 2ND STAGE, NEAR SHANKARMUTT, BASAVESHWARANAGAR, BENGALORE-560 079. REP. BY ITS KARTHA SRI.S.S. SATHYAMURTHY … PETITIONER (BY SRI. ARAVIND V CHAVAN., ADVOCATE) AND: 1. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(1), C.R.BUILDING, 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 DATED 26.09.2022 BEARING NO.ITBA/PNL/F/270A/2022-23/1045977950(1) ANNEXURE-H2 Digitally signed by VIDYA G R Location: High Court of Karnataka

- 2 -

NC: 2023:KHC:24398 WP No. 10632 of 2023 FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R3 AND QUASH THE ASSESSMENT ORDER DATED 18.03.2022 BEARING NO. ITBA/AST/M/153C/2021-22/1041017600(1) ANNEXURE-C FOR THE ASSESSMENT YEAR 2017-18 PASSED BY THE R3 AND ETC.

THIS WRIT PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER

Sri M. Dilip, learned counsel accepts notice for the respondents.

2.

The petitioner has challenged the Penalty Order at Annexure-H2 dated 26.09.2022 for the Assessment Year 2017-2018 and has also sought for setting aside of the Assessment Order at Annexure-C dated 18.03.2022.

3.

It is the contention of learned counsel for the petitioner that the impugned order 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,

- 3 -

NC: 2023:KHC:24398 WP No. 10632 of 2023 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 v. 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

- 4 -

NC: 2023:KHC:24398 WP No. 10632 of 2023 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 Writ Petition 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.

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 →