Assessment Order and Notice Issued u/s 153 C of Income Tax Act without Jurisdiction: Kerala HC Directs to File Appeal before ITAT [Read Order]

The Kerala High Court directed the assessee to file an appeal before the Kerala Value Added Tax Appellate Tribunal (KVATAT) as the assessment order and notice issued under section 153 C of the Income Tax Act,1961 without jurisdiction.

M/s. South Coast Spices Exports Pvt. Ltd, the petitioner challenged the notices under Section 153C of the Income Tax Act 1961 (‘IT Act’) for the Assessment Years 2015-16 to 2020 – 21 and the Assessment Orders whereby the petitioner’s total income has been assessed as Rs.92,87,317/-.

The petitioner has approached the Court against the Assessment Orders because the proceedings in issuing the notices under Section 153C of the IT Act for the Assessment Years 2015-16 to 2020-21 require them to file the return of income for the concerned years based on the provisions of Section 153C of the IT Act and that the Assessment Orders for the said Assessment Years in are without jurisdiction and against law.  Therefore, the petitioner has not approached the Appellate Authority and approached the Court invoking the writ jurisdiction.

It was submitted that the Assessing Officer is required to record satisfaction notes before issuing notice under Section 153C of the IT Act to a person other than the searched person.  Notice issued under Section 153C has not mentioned/specified the satisfaction note recorded by the 2nd respondent of the searched person.  It is also submitted that the satisfaction notes supplied to the petitioner in pursuance of the e-mail sent by the petitioner do not bear the DIN number, and therefore, the whole proceedings are without jurisdiction and illegal. 

The petitioner had filed its return of income voluntarily for the Assessment Years up to 2021-22.  In respect of Assessment Year 2021-22, a net loss of Rs.6,54,555/- was claimed.  A search operation under Section 132 of the IT Act was carried out on 23.03.2021 at the business premises as well as the residential premises of Civil Contractor - Sri K N Madhusoodanan Nair, his Company – M/s Mavanal Granites Pvt Ltd and connected entities (Mavanal Group). 

During the search, certain incriminating documents showing the unaccounted income of Sri K N Madhusoodanan and his concerns about the diversion of business funds to evade taxation were noticed.  It was further noticed that by diverting the funds, they had been expending unaccounted payments for investment in landed properties.  Based on evidence gathered during the search, the assessments under Section 153A of the IT Act were completed in the case of Sri K N Madhusoodanan, his concerns and connected persons.

In the course of the search under Section 132 of the IT Act, a document with the title of ‘Palakkad Land’ was seized from the residence of Sri K R Unnikrishnan, Accountant at M/s Mavanal Granites Pvt Ltd. 

Several other incriminating documents were discovered showing that huge cash transactions were entered into by the petitioner with Sri K N Madhusoodanan, which were not reflected in the books of accounts.  The Assessment Orders were therefore finalised after following the procedure under Section 153C of the IT Act.

The satisfaction notes recorded by the Assessing Authority would suggest that the Assessing Authority has examined the documents and recorded satisfaction for issuing notices under Section 153C of the IT Act.   The petitioner has demanded the satisfaction note, and the letter issued by the Assistant Commissioner of Income Tax whereby the satisfaction notes have been provided to the petitioner on his demand, would disclose that the letter bears the DIN number. 

The satisfaction note need not bear the DIN number, and this Court does not find any substance in the submission of the learned Counsel for the petitioner that since the satisfaction notes do not bear the DIN number, whole proceedings are invalid.

Justice Dinesh Kumar Singh observed that “the satisfaction note is a document prepared by the Assessing Authority which is kept in the file, and unless an assessee demands the satisfaction note, it is not required to be provided to the assessee.  Therefore, there is no requirement to have a DIN number in the satisfaction note recorded by the Assessing Authority.”

Further observed that it cannot be said that the impugned notices and assessment orders are without jurisdiction as submitted by the Counsel for the petitioner. The court dismissed the petitioner.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates