The Madras High Court refused to quash the Income Tax Notices Against Karti Chidambaram, his wife, Srinidhi Chidambaram for alleged non-disclosure of Rs 6.38 crores.
The petitioner, Karti P.Chidambaram filed his return of income for the Assessment Year 2014-15, disclosing fully and truly his income including the “capital gains” arising out of a sale of land in the Financial Year 2013- 14. The capital gains could be assessed only in AY 2014-15 by virtue of Section 45 of the Income Tax Act, 1961. The return was taken up for scrutiny assessment under Section 143 of the Act and the Assessing Officer completed the assessment under Section 143(3). Accordingly, the return of income was accepted in toto by the Assessing Officer, including the disclosed capital gains.
The Senior counsel for petitioner, Mr.AR.L.Sundaresan representing the petitioner contended that in the case of the petitioner in the above writ petitions, Smt.Srinidhi Karti Chidambaram, wife of Karti Palaniappan Chidambaram also submitted her return of income on 28.08.2015 for the AY 2015-16. The sale transaction occurred during the Financial Year 2014-15. The scrutiny proceedings were undertaken and the final assessment order under Section 143(3) of the Act was passed on 29.12.2017. The re-opening of assessment proceedings was initiated under Section 147 of the Act and Notice under Section 148 of the Act was issued on 20.08.2018 for the AY 2015-16. It is contended that the Assessing Officer has “reason to believe” that the income of the petitioner chargeable to tax for the AY 2015-16 has escaped assessment within the meaning of Section 147 of the Act. Pursuant to the 148 Notice dated 20.08.2018, the reasons were furnished.
The reasons furnished would reveal that “information in the possession of the “AO” reveals that the assessee had received ‘on money’ payment in cash over and above the registered value, which was not disclosed in the “ROI” filed or during the course of 143(3) proceedings. It is a failure on the part of the assessee in not disclosing fully and truly all material facts, which has a bearing on the taxable income of the assessee. Hence, it is a fit case for reopening under Section 148 of the Act”.
The Senior counsel for the petitioner relied on the “Satisfaction note” and contended that the “Satisfaction note” refers to the same materials, which was in possession of the Assessing Officer at the time of re-opening of assessment under Section 148 of the Act. The amount stated in the “Satisfaction note” resulted in issuance of the impugned Show Cause Notice under Section 153C reveals that the materials for initiation of 147 proceedings and issuance of 153C impugned Show Cause Notice are one and the same. In view of all these reasons, the impugned Show Cause Notices are liable to be set aside.
The single Judge Bench of Justice S.N. Subramanian held that there was no legal malice or procedural irregularity in issuing the show-cause notice under Section 153C (dealing with assessment or reassessment of income after search and seizure under Section 132 or a requisition under Section 132A) of the Income Tax Act.
“The authority competent must be allowed to scrutinize the searched and impounded materials and provide an opportunity to the assessee to defend their case. Such an adjudicatory process alone would provide justice to the parties to the lis and therefore, this Court is not inclined to interfere at the stage of ‘show cause notice’ as far as the present writ petitions are concerned,” the Court said.
“No writ against a Show Cause Notice needs to be entertained by the High Court. However, a writ may be entertained, if the Show Cause Notice was issued without jurisdiction or on malafide grounds. Even in case of raising a malafide against any authority, such an authority must be impleaded as party respondent in the writ proceedings in his personal capacity. In the present case, the petitioner has raised the point of no jurisdiction and the ground of legal malice. As far as the jurisdiction is concerned, this Court is of an opinion that the lack of jurisdiction was not established by the petitioners. The application and implications of Section 153C of the Act was questioned. In view of the elaborate discussions regarding the facts and circumstances with reference to the provisions made in the aforementioned paragraphs, this Court is of an opinion that no malafide or lack of jurisdiction is identifiable nor established and thus, the point raised in this regard stands rejected,” the court in the order said.
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