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2024 Supreme(Kar) 16
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
K. SOMASHEKAR, RAJESH RAI K., JJ.
THE DEPUTY COMMISSIONER OF INCOME TAX, BENGALURU – Appellant
Versus
SUNIL KUMAR SHARMA S/O SHRI D.P. SHARMA – Respondent
Writ Appeal Nos. 830, 831, 832, 833, 834 of 2022
Decided On : 22-01-2024
Advocate Appeared:
For the Appellants : BALBIR SINGH, Y.V. RAVIRAJ.
For the Respondents: KIRAN S. JAVALI, SREEHARI KUTSA, A. MAHESH CHOWDHARY.
Loose sheets and diaries cannot serve as valid evidence under the Income Tax Act; jurisdictional transfers must adhere to prescribed legal standards.
Headnote:(A) Income Tax Act, 1961 - Sections 127 and 153C - Search and seizure - Assessees challenged notices issued for assessment based on diaries and loose sheets found during search - Court ruled that such documents lack evidentiary value and quashed notices - Revenue failed to satisfy legal formalities for valid jurisdictional transfer, making actions void. (Paras 6, 8, 15, 27, 50)
(B) Principles of Judicial Review - Need for proper legal process - Court emphasized the importance of fair play and the necessity for the Revenue to comply with jurisdictional transfer requisites. (Paras 44, 56)
Facts of the case:
Appellant, Deputy Commissioner of Income Tax, challenged a Single Judge's ruling that quashed notices issued against the Assessees based on vague diary entries found during unrelated search operations.
Findings of Court:
Court confirmed that notices and assessment proceedings were invalid, requiring new considerations compliant with legal standards.
Issues: Main issues included the evidentiary value of loose sheets and adherence to jurisdictional procedures under the IT Act.
Ratio Decidendi: The court established the necessity for compliance with legal norms concerning the use of evidence and proper procedural law before exercising jurisdiction under the Income Tax Act.
Result: Appeals rejected; orders of the Single Judge confirmed.
| Table of Content |
|---|
| 1. introduction of facts and context regarding income tax search and assessment procedures. (Para 1 , 4 , 6 , 33) |
| 2. court's observations on evidentiary standards and procedural adherence in tax assessments. (Para 7 , 10 , 14 , 16) |
| 3. arguments surrounding the validity of assessments based on loose sheets and the processes followed. (Para 8 , 11 , 18 , 20) |
| 4. ratio decidendi regarding procedural propriety in tax assessment notices. (Para 12 , 25 , 40) |
JUDGMENT :
K. SOMASHEKAR, J.
1. These appeals have been preferred by the Deputy Commissioner of Income Tax, Circle 1(4) (for short ‘Revenue’), challenging the common order dated 12.08.2022 passed by a learned Single Judge of this Court in W.P. No. 9937/2022 and connected matters. All these appeals are directed against one Shri Sunil Kumar Sharma who is the respondent in W.A. Nos. 830/2022, 831/2022, 832/2022 and 833/2022 and one Shri Kandaswamy Rajendran who is the respondent in W.A. No. 834/2022. The respondents shall hereinafter be referred to as ‘the assessee’ for brevity.
2. Since all these appeals which have been preferred by the Revenue arise out of a common order dated 12.08.2022 rendered by a learned Single Judge in W.P. No. 9937/2022 and connected petitions, they are heard together and are disposed of by this common order.
3. Heard the arguments advanced by the then learned Addl. Solicitor General Shri Balbir Singh as well as the present learned counsel Sri Y.V. Raviraj who is on record for appellants in WA. Nos. 830/2022, 831/2022, 832/2022, 833/2022 and 834/2022. We have also heard the arguments advanced by the learned Senior counsel Sri Kiran S Javali for the respondent in W.A. Nos. 830/2022, 831/2022, 832/2022 and 833/2022. Further, we have heard the arguments of the learned counsel Sri A. Mahesh Chowdary for the respondent in W.A. No. 834/2022 and have perused the materials on record including the impugned order.
4. The factual matrix of the cases as revealed from the pleadings, are as under:
It transpires that the Appellants/Revenue, had conducted search action under Section 132(1) of the Income Tax Act, 1961 (for short hereinafter referred to as ‘the Act’) on 02nd August, 2017 at the premises of the Sri D.K. Shivakumar and similar search also took place at premises of one Sri K. Rajendran/Assessee at New Delhi. It is the case of the Appellants/Revenue that, during the search at the premises of the Assessee, certain diaries and entries relating to the affairs of the Respondent/Sri Sunil Kumar and Sri D.K. Shivakumar were recovered and statements of both the Respondent and that of Sri K. Rajendran, came to be recorded. It is further stated in the writ petitions that the Appellant/Revenue claims that the case of the Respondent was centralized to the jurisdiction of Appellant/revenue as per Order dated 07th March, 2018 under Section 127 of the Act. Respondents herein further contended that the Appellant/Revenue has neither issued any notice nor informed regarding centralization of their case to the jurisdiction of Appellant/Revenue and it is further contended in the writ appeals that Appellant/Revenue ought to have provided an opportunity to the Respondents as required under Section 127 of the Act.
5. After the transfer of jurisdiction under Section 127 of the IT Act, the Assessing Officer, after due compliance of the conditions contemplated, issued notice dated 21.08.2019 under Section 153C of the IT Act requesting the assessee to file return of income and in compliance of the said notice, the assessee filed his return of income as on 05.09.2019. On 06.09.2019, the Assessing Officer issued notice to the assessee under Section 143(2) of the IT Act. After granting sufficient opportunity of hearing to the assessee and after considering the incriminating material and other material gathered post search investigation, the Assessing Officer concluded the assessment by its order dated 31.12.2019. The assessee challenged the said order by preferring an appeal as on 30.0
