Factual Correlation of Seized Material Must Be Done by Authorities, Court Cannot Step into AO’s Role: Bombay HC [Read Order]
Bombay HC ruled that factual correlation of seized documents must be done by tax authorities and not by the Court while exercising writ jurisdiction under Article 226.
seized - material - Taxscan
seized - material - Taxscan
In a recent ruling, the Bombay High Court held that factual correlation of seized documents must be carried out by the statutory authorities, and that the Court cannot be converted into performing the role of the Assessing Officer while exercising writ jurisdiction under Article 226 of the Constitution of India.
DNH Spinners Private Limited, the petitioner, filed a series of writ petitions challenging notices issued under Section 153Cof the Income Tax Act, 1961 for multiple assessment years ranging from 2010-11 to 2020-21.
The notices were based on material allegedly seized during a search conducted in October 2019 on the Alankit group. On the basis of that material, the Deputy Commissioner of Income Tax, Delhi, communicated to the Mumbai office that incriminating documents relating to the petitioner were found. Pursuant to this, notices under Section 153C were issued in February 2024.
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The petitioner’s counsel argued that the notices were time-barred as the satisfaction note was recorded long after the search, that no incriminating material existed against the petitioner, and that the entire proceedings were without jurisdiction. They also argued that the communication of the satisfaction note was irregular and that the initiation of proceedings was a misuse of power.
The department’s counsel argued that incriminating material linking the petitioner to accommodation entries was seized and that the issues raised by the petitioner involved mixed questions of law and fact.
They argued that such disputed questions could not be decided in writ proceedings and that the petitioner had an alternative remedy by way of assessment and subsequent appeal under the Act.
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The Division Bench comprising Justice M.S. Sonak and Justice Jitendra Jain observed that whether there existed incriminating material for a given assessment year was a matter of factual correlation which required examination by the Assessing Officer.
The court explained that such disputed factual issues could not be decided in writ jurisdiction. It pointed out that if the Court were to examine the seized documents and determine their relevance, it would amount to taking over the statutory role of the Assessing Officer, which is impermissible.
The court held that the writ petitions could not be entertained at this stage and refused to quash the notices under Section 153C. The petitions were dismissed with liberty to the petitioner to raise all objections, including those relating to limitation and the validity of the satisfaction note before the Assessing Officer and in appeal thereafter.
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