Gujarat HC dismisses Writ Petition as on Failure to Prove no Satisfaction Note recorded by AO prior to Issuance of Notice u/s 153C of Income Tax Act [Read Order]

The Gujarat High Court dismissed a writ petition as on failure to prove no satisfaction note recorded by the Assessing Officer ( AO ) prior to issuance of notice under Section 153C of the Income Tax Act, 1961.

The challenge is to the notice for the Assessment Year 2014-15 under Section 153C of the Income Tax Act, 1961 as also the order dated 02.12.2023 purporting to be the objection disposal order passed by the respondent No.2. The further challenge is to the notice under Section 142(1). The prayer is to restrain the respondents from enforcing the compliance of the impugned notice under Section 153C dated 09.06.2022 for A.Y.2014-15.

One of the grounds to challenge the initiation of proceedings under Section 153C of the Income Tax Act are that:- the satisfaction note of the searched person as well as the satisfaction note recorded in the case of the petitioner, have not been provided to the petitioner, though specific request was made by the petitioner vide letter. The entire proceedings leading to the issuance of notice under Section 142, therefore, stands vitiated.

The counsel for the assessee submitted that as the satisfaction note admittedly was not provided to the petitioner along with the notice under Section 153C, there was no question of filing of the objection by the petitioner. However, in a mechanical manner, the Assessing Officer had served the copy of the objection disposal order of other persons treating the letter as the objection of the petitioner to the notice under Section 153C of the Income Tax Act.

It was clarified therein that the provisions of Section 153C of the Income Tax Act being pari materia to the provisions of Section 158D of the Income Tax Act, guidelines of the Apex Court shall apply to the proceedings under Section 153C of the Income Tax Act, for the purposes of assessment of income of other than the searched person. It was further stated that even if the Assessing Officer of the searched person and the ‘other person” is one and the same, then also he is required to record his satisfaction note as has been held by the Courts.

A Division Bench of Justices Sunita Agarwal and Aniruddha P Mayee observed that “Having noted the above submissions, we may record that it is not the case of the petitioner herein that no satisfaction note has been recorded independently by the Assessing Officer of the petitioner before proceeding under Section 153C of the Income Tax Act on receipt of the satisfaction note of the Assessing Officer of the searched person. The copy of the satisfaction note though was not provided initially to the petitioner and the Assessing Officer has committed an error in forwarding the objection disposal order dated 02.12.2023 to the petitioner treating the communication dated 19.10.2023 as the communication of objection against the satisfaction note.”

“It is further clarified that while framing the assessment order, the Assessing Officer will not be influenced by any of the observations made by us hereinabove as we have not expressed any opinion on the correctness or otherwise of the submissions made on the merits of the proceedings initiated against the assessee based on the search carried out under Section 132 of the Income Tax Act” the Court concluded.

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