[CASE NUMBER] IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL [CASE NUMBER] FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE [ENTITY] and HONOURABLE MS JUSTICE [ENTITY] 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the [ACT] or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? [ENTITY] Petitioner(s) Versus [ENTITY] & 1 Respondent(s) Appearance: MR [ENTITY], ADVOCATE for the Petitioner(s) No. 1 MRS [ENTITY], ADVOCATE for the Respondent(s) No. 1 NOTICE SERVED BY DS for the Respondent(s) No. 2 CORAM: HONOURABLE MR.JUSTICE [ENTITY] and HONOURABLE MS JUSTICE [ENTITY] Page 1 of 11 [CASE NUMBER] Date : 05/05/2014 ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE [ENTITY]) Petitioner has challenged notice dated 1.8.2007asatAnnexureBtothepetitionissued byrespondentNo.1,DeputyCommissionerofIncome Tax, under [SECTION] of the [ACT]'the Act' forshort). Thepetitioner has also challenged the reference made by the AssessingOfficer on31.7.07torespondentNo.2 the District Valuation Officer to opine on the valuationofcertainimmovablepropertiesofthe petitioner to ascertain the investment made by thepetitionerinsuchproperties.
The petitioner is a firm engaged in the business of civil construction. The petitioner regularly files its return. Search operations werecarriedoutbytheIncomeTaxDepartmenton 7.3.2006incasesofRajhansgroupofcompanies. Statement of one Shri [ENTITY], Managing Partner of M/s.[ENTITY] was recorded under [SECTION] of the Act. In such statement,headmittedhavingearnedunaccounted incomeofRs.6croresbythesaidgroup.Later on during the search of his locker, he revised the undisclosedincomeofthegrouptoRs.8.25 [CASE NUMBER].Onthebasisofthematerialscollected and the documents found, respondent No.1 issued theimpugnednoticeundersection153CoftheAct inwhichitwasstatedasunder:
"Asearchu/s132oftheI.T.Actwasconducted in the case of Rajhans Group & others on 07/03/2006.WhereasIamsatisfiedthatmoney/ bullion/jewellery/othervaluablearticlesor things and / or books of account / documents seized belongs to you. Therefore, your income ofsixassessmentyearsimmediatelyprecedingthe assessment year relevant to previous year in which the search was conducted i.e. from A.Y. 200001 to A.Y. 200506 is required to be assessed/reassessed in accordance with the provisions of [SECTION] of the Act. You are, therefore, required to furnish return of the company's income u/[SECTION] of the [ACT] sixassessmentyearsinrespectofwhichyouare assessable under the [ACT] returnshouldbefiledintheappropriateform asprescribedinRule12oftheIncomeTaxRules, 1962. Itshouldbedulyverifiedandsignedin accordancewiththeprovisionsofsection140of the said Act and delivered at my office as mentioned above within FIFTEEN DAYS from the serviceofthisnotice."
It is this notice that the petitioner has challengedinhepresentpetition.
At our request, learned counsel for the Revenuehadmadeavailablethesatisfactionnote recorded by respondent No.1 for issuing the impugnednoticeinwhichitisstatedasunder:
[CASE NUMBER] "Asearchandseizureactionundersection132(1) inthecasesofRajhansGroupwascarriedouton 7/3/2006 by the investigation Wing of the Department. During the course of search and seizureoperation,thestatementofShriShivlal [ENTITY], a Managing Partner in M/s.[ENTITY](R.F.)wasrecordedundersection132(4) oftheIncomeTaxAct,1961whereinheadmitted to have earned an unaccounted income of R. 6 croreinhisgroup.Later,duringthecourseof thesearchofhislockerundersection132(1)he reaffirmed the admission of disclosure and revised the unaccounted income of his group concerns at Rs.8.25 crore. Subsequently, the assessee group i.e. Rajhans Group concerns and its individuals vide their letter dated 31/03/2006 addressed to the Asstt. Director of Incometax(Investigation)submittedthebreakup of the disclosure made by him. The relevant extractoftheletterisreproducedbelow:
"In this connection and with reference to the surveyconductedu/s.133AoftheI.T.Act,1961at our all business places of our group project sites and search carried out u/s.132 of the I.T.Act,1961atourresidences,wehavetostate asunder:
During the course of search conducted on dated 7th March, 2006 at our residences and survey conducted on dated 7th March 2006 at our allbusinessplaces,certainloosepapers/dairies andvariousotherpapers/documentswerefound.
Coveringalltheseloosepaper/dairies&various otherpapers/documentstotaldisclosureofRs.825 crore has been made by our group covering the amountreflectedtherein.
The break up of the disclosure statement givenwiththisletterismadebyusonbehalfof allgroupconcernsandindividualsoftheRajhans Group."
[CASE NUMBER] Fromthebreakupofdisclosurefiledbythe assessee it can be seen that the partners had declared an amount of Rs.1,00,00,000/ in the handsofM/s.RajhansBuilders(R.F.). Itcould be seen from the records that the assessee had undertaken six different projects under the bannerofRajhansBuildersrightfromtheperiod 19992000whichendedupintheyear2005/2006. Since the period of construction of different residentialandcommercialpropertiesundertaken by the assessee stretched over a period of 6/7 yearsand,thedisclosure ofunaccountedincome offeredbythemanagers/partnersoftheassessee firmdidnotspecifyaparticularassessmentyear to which such income pertained, and the fact that assessee firm has been carrying out its constructionactivitiesoveraperiodofthelast 5/6years,andthedisclosureofRs.8.25croreof unaccounted income under [SECTION] of the I.T.Actwhichincludestheunaccountedincomeof Rs.1crorewas;admittedlymadebytheassessee to cover all loose papers/diaries and various otherpapersdocuments,andinthelightofthe fact that no action under [SECTION] was takenplaceinthecaseoftheassessee,andalso taking into account the nature of business of constructions which involves the expenses/investmentforalongperiod,andinthe absence of specific year of disclosure, I am satisfiedthatthisisafitcasetoissuenotice u/s.153CoftheI.T.Act."
Based on such satisfaction note and other materials on record, learned counsel for the petitioner vehemently contended that the satisfaction arrived at by the respondent was basedonnoevidence.[SECTION] of the Act, therefore, could not have been issued. He further contended that the satisfactionwas recordedlongafterthesearch [CASE NUMBER] wasoverandthenoticewasissuedthereafter.
Ontheotherhand,learnedcounselMrs.[ENTITY] for the Revenue opposed the petition contending that respondent No.1 after recording his satisfactionthatonthebasisofthedocuments seized during the search carried out against Rajhans Group of Companies, unaccounted income belongedtotheassesseewasunearthed,issued the impugned notice. At this stage, therefore, thecourtwouldnotinterfere.
Weareoftheopinionthatatthisstageno interferenceiscalledfor.[ACT],asiswellknown,pertainstoassessmentof incomeofpersonsotherthanonewhoissubjected to search. [SECTION] provides that where any Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belonged to a person other than the person referred to in [SECTION], then the booksofaccountordocuments orassetsseized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceedagainsteachsuchotherpersonandissue such other person notice andassess or reassess [CASE NUMBER] income of such other person in accordance with the provisions of [SECTION] of the Act. [ENTITY] for block assessment of undisclosed income of persons other than the searched person. In context of [SECTION] of the Act, the Apex Courtinthecaseof CITv. CalcuttaKnitwears, 362ITR673(SC)heldandobservedasunder:
"Intheresult,weholdthatforthepurpose of [SECTION] of the Act a satisfaction noteissinequononandmustbepreparedby the Assessing Officer before he transmits the records to the other Assessing Officer whohasjurisdictionoversuchotherperson. The satisfaction note could be prepared at either of the following states: (a) at the time of or along with the initiation of proceedingsagainstthesearchedpersonunder section158BCoftheAct;(b)alongwiththe assessmentproceedingsundersection158BCof the Act; and (c) immediately after the assessment proceedings are completed under [SECTION] of the Act of the searched person."
Under the circumstances, the petitioner's [ACT] could not have been issued after search operationswereovercannotbeaccepted.
With respect to the validity of the notice itself, at this stage, we are not inclined to [CASE NUMBER] examinethesameinviewofthedecisionsofthe SupremeCourtinthecaseofCITv.VijaybhaiN. Chandrani, 357 ITR 713 (SC) and in the case of [ENTITY], 357ITR357(SC). The decision in the case of [ENTITY] ofvalidityofnoticeundersection153Cofthe ActbeingchallengedbeforetheHighCourt.The HighCourthadquashedthenoticeonreachingto the conclusion that thedocuments seized bythe Assessing Officer under [SECTION] did not belong to the assessee and therefore condition precedentforissuingnoticeundersection153C wasnotfulfilled.Inthiscontext,theSupreme Court held that the assessee could not have invoked the writ jurisdiction without first exhausting the alternative remedies provided under the Act and the High Court ought not to have entertained the writ petition. It was observedasunder:
"14. In our considered view, at the said stage of issuance of the notices under [SECTION], the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In [PRECEDENT], this Court had allowed the assessee therein to withdraw the original Writ Petition filed before the High Court as the said proceedings came to be filed against [CASE NUMBER] the show-cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show cause notice. This Court further observed as follows:
"3 In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue."
15. We are fortified by the decision of this Court in [PRECEDENT], wherein the assessee had approached this Court against the judgment and order of the High Court which had dismissed the Writ Petition filed by the assessee wherein challenge was made to the show cause notice issued by the Assessing Authority on the ground that alternative remedy was available to the assessee. This Court concurred with the findings and conclusions reached by the High Court and dismissed the said appeal with the following observations:
"5. This and the other facts cannot be taken up for consideration by this Court for the first time. In our opinion, the High Court was right in coming to the conclusion that it is appropriate for the appellants to file a reply to the show-cause notice and take whatever defence is open to them."
16. In the present case, the assessee has invoked the Writ jurisdiction of the High Court at the first instance without first exhausting the alternate remedies provided under the Act. In our considered opinion, at the said stage of proceedings, the High Court ought not have entertained the Writ Petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the Assessing Authority, if for any reason it is aggrieved by the said decision, to question the same before the forum provided under the Act."
InthecaseofChhabilDassAgrawal(supra), theSupremeCourthadelaboratelyconsideredthe [CASE NUMBER] advisabilityofentertainingawritpetitionwhen alternative statutory remedies were available. Itwasobservedasunder:
"19. Thus, while it can be said that this Court has recognized some exceptions to the rule of alternative remedy, i.e., where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in [ENTITY] case, Titagarh Paper Mills case and other similar judgments that the High Court will not entertain a petition under [SECTION] of the [ACT] if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."
Underthecircumstances,wearenotinclined to entertain the writ petition in view of the availability of statutory remedies. Since we relegate the petitioners to remedies under the statute,atthisstage,weexpressnoopinionon thevalidityofthereference. Itisclarified thatitwouldbeopenforthepetitionertoraise all contentions with respect tothevalidity of the notice under [SECTION] as well as the referencemadetotheDVObeforetheappropriate forum.
[CASE NUMBER] Withtheaboveobservations,thepetitionis disposedof.Interimreliefisvacated.
([ENTITY], J.) (MS [ENTITY], J.) (vjn)