SRI. THASIL BABU vs. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(2)

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WP/14832/2024HC KarnatakaKAHC01024662202412 July 2024Bench: S SUNIL DUTT YADAV6 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that it was not in dispute that only portions of the statements were furnished to the petitioner, which was evident from the assessment order. The Court found that the petitioner's request for 'complete statements recorded' was specific and that a full opportunity should be given to the petitioner by making available the complete statements relied upon during the assessment proceedings. Regarding seized material, the Court stated it was open for the petitioner to make a request during assessment proceedings, and if any seized material was being used against the petitioner, it should be shared. Consequently, the assessment order dated 24.03.2024 was set aside, and the matter was relegated back to the Assessing Officer to reconsider after providing an opportunity and making available the relevant statements. The petitioner was also held entitled to cross-examine persons whose statements were relied upon by the revenue. All contentions were kept open.

What were the facts?

The petitioner, Sri. Thasil Babu, challenged an assessment order dated 24.03.2024 passed by the Deputy Commissioner of Income Tax (Respondent No. 1) under Section 147 of the Income Tax Act, 1961, for Assessment Year 2016-17. The petitioner also sought to set aside consequential notices, including a demand notice, a penalty show cause notice, a notice under Section 148, a show cause notice under Section 148A(b), and the order under Section 148A(d). The petitioner's grievance was that the Assessing Officer relied on seized material and statements of certain persons, but the entirety of these statements and seized material were not provided, which prejudiced the petitioner's ability to present a complete defense. The petitioner had specifically requested the full statements and seized material in their reply to a show cause notice.

What were the issues?

1. Whether the Assessing Officer erred in passing the assessment order under Section 147 of the Income Tax Act, 1961, without providing the petitioner with the entirety of the seized material and statements relied upon, thereby violating principles of natural justice? Assessee's Contention: The petitioner argued that the Assessing Officer relied on seized material and statements of third parties. The petitioner's specific request for the complete statements and seized material was not fully accepted, with only portions being provided. This lack of full disclosure prejudiced the petitioner's ability to make a complete rebuttal and raise effective defenses. Reliance was placed on paragraph 33 of the petitioner's preliminary reply to the show cause notice. Revenue's Contention: The revenue contended that portions of the statements relevant to the case had already been furnished to the petitioner.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148A(b),Section 148A(d)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:26931 WP No. 14832 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF JULY, 2024 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 14832 OF 2024 (T-IT) BETWEEN: SRI. THASIL BABU, S/O SRI. K.N. THASIL NAIDU, AGED ABOUT 43 YEARS, RESIDING AT NO. 23 (9/1), 13TH MAIN ROAD, NEAR MEENAKSHI HOSPITAL, SRINAGAR, BENGALURU SOUTH, BANASHANKARI, BENGALURU - 560 050. PAN: AJKPB8303L. …PETITIONER (BY SRI. VENKATESH G., ADVOCATE) AND: 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), C.R.BUILDING, QUEENS ROAD, BENGALURU - 560 001, KARNATAKA. 2. THE DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION), C.R.BUILDING, NO.1, QUEENS ROAD, BENGALURU - 560 001, KARNATAKA. …RESPONDENTS (BY SRI. M. DILIP, ADVOCATE) Digitally signed by YAMUNA K L Location: High Court of Karnataka

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NC: 2024:KHC:26931 WP No. 14832 of 2024

THIS WP IS FILED UNDER ARTICLES 226 AD 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ASSESSMENT ORDER PASSED BY THE RESPONDENT NO.1 UNDER SECTION 147 OF THE ACT DATED 24.03.2024 BEARING DIN NO. ITBA/AST/S/147/2023-24/1063304942(1) FOR THE ASSESSMENT YEAR 2016-17 BY THE RESPONDENT NO.1 HEREIN MARKED AS ANNEXURE-A1 AND ETC.,

THIS PETITION, COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has challenged the assessment order dated 24.03.2024 passed by respondent No.1 under Section 147 of the Income Tax Act, 1961 (for short 'the Act') at Annexure-'A1'. The petitioner has also sought for setting aside of the notice of demand at Annexure-'A3', show cause notice for penalty at Annexure-'A4', notice under Section 148 of the Act at Annexure-'B3', show cause notice under Section 148A(b) of the Act at Annexure-'B1' and the order under Section 148A(d) of the Act at Annexure-'B2'.

2.

The case of the petitioner is that during the assessment proceedings, the respondent has relied on certain seized material and statements of certain persons

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NC: 2024:KHC:26931 WP No. 14832 of 2024 and on the basis of such seized material and statements made, the Assessing Officer has proceeded to pass an order. It is submitted that the specific request of the petitioner for furnishing the entirety of the statements made as also the seized material, has not been accepted in its entirety and only the portions of statements were made available which has prejudiced the petitioner. Reliance is placed on paragraph No.33 of the preliminary reply made out by the petitioner to the show cause notice dated 05.09.2023.

3.

It is submitted that the matter is required to be relegated to the Assessing Officer with appropriate direction to the Assessing Officer to make available the statements which are relied upon by the department as well as to share the seized material.

4.

Learned counsel Sri. M. Dilip, appearing for the revenue would submit that portions of the statements as is relevant have already been made out to the petitioner.

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NC: 2024:KHC:26931 WP No. 14832 of 2024

5.

The reply to the show cause notice dated 05.09.2023 made on 18.12.2023 at paragraph No.33 is as below: "33. As your good selves will have noticed, I have sought complete seized materials relied upon by the department in this communication. Furthermore, I have also sought for complete statements recorded from various persons which are relied upon by the department in this communication. It is humbly submitted that providing bits and pieces of information will not meet the ends of justice. It is also not in accordance with law as already elaborated herein earlier. I have also sought for the opportunity of cross examining all the persons whose statements are relied upon by the department. In this view of the matter, I have not been able to make complete rebuttal of the entire allegations against me and raise complete and effective defenses and I am only making this preliminary submission. I am requesting your good selves to kindly provide all and complete seized material and statements and also the supporting evidences and also opportunity of cross examination of the parties which would enable me to present my defenses effectively."

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NC: 2024:KHC:26931 WP No. 14832 of 2024

6.

After hearing the matter for sometime, it is not in dispute that only portions of the statements were furnished to the petitioner as is evident from the assessment order. The request was specifically to provide "complete statements recorded". It would be appropriate for a full opportunity to be given to the petitioner that complete statements recorded which are relied upon during the assessment proceedings being made over to the petitioner. 7. Insofar as the seized material, it is open for the petitioner to make a request during the assessment proceedings and the same may be considered appropriately. Keeping in mind that, if any material that is seized, is being used in the assessment proceedings against the petitioner, needless to state, same is to be shared with the petitioner. 8. Accordingly, the order dated 24.03.2024 at Annexure-'A1' is set aside and the matter is relegated back to the Assessing Officer to reconsider the matter

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NC: 2024:KHC:26931 WP No. 14832 of 2024 after providing an opportunity and making available the statements of such persons which are sought to be relied upon and would constitute an adverse statements as regards the petitioner. 9. Insofar as seized material is concerned, petitioner to make out an application which may be considered appropriately in light of the observations made. All contentions are kept open. Consequently, Annexures-'A2' to 'A4' are set aside. 10. Needless to state that the petitioner is entitled for cross examination of the persons whose statements are relied upon and made use of by the revenue in the assessment proceedings. 11. Accordingly, petition is disposed off. Sd/- JUDGE MCR

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