Vaibhav Global Limited Vs ACIT (Rajasthan High Court)
The Rajasthan High Court, in Vaibhav Global Limited Vs ACIT, declined to interfere with proceedings initiated under Section 153C of the Income Tax Act, 1961, following the discovery of material during a search concerning another person. The matter arose in the context of the earlier Division Bench decision in Shyam Sunder Khandelwal & Ors. Vs Assistant Commissioner of Income Tax & Ors., reported in 2024 (4) TMI 196, decided on 19.03.2024. In that decision, the High Court had quashed notices issued under Section 148 and the related orders but expressly permitted the Revenue to proceed against the petitioners in accordance with law. The subsequent initiation of proceedings under Section 153C was challenged before the High Court, raising questions about the legality of the notice and the Revenue’s reliance on the liberty granted in the earlier judgment.
The judgment reproduced the Court’s order in the related matter of Dinesh Kumar Khatoria Vs The Assistant Commissioner of Income Tax, involving a notice dated 04.02.2025 under Section 153C for Assessment Year 2011-12. In that matter, the petitioner contended that the notice did not specify an amount and that his name had not appeared in the search proceedings. However, the satisfaction note referred to information received through a pen drive and entries relating to cash loans allegedly advanced by Dinesh Kumar Khatoria. The material had emerged during proceedings concerning Ramesh Chand Maheshwari. The Court observed that earlier Section 148 proceedings had been quashed with liberty to the tax authorities to proceed in accordance with law. In those circumstances, it declined to interfere with the Section 153C notice concerning alleged undisclosed cash loans of Rs.3,55,00,000. The petitioner was permitted to raise all available objections and defences before the authorities, who were required to pass an appropriate speaking order.
Applying the reasoning of the related proceedings, the High Court observed that the Revenue had initiated Section 153C proceedings on the basis of material allegedly revealing undisclosed income during the search of another person and a satisfaction note supporting initiation of those proceedings. It also noted that the earlier Division Bench judgment had been challenged before the Supreme Court, while the Revenue had acted upon the liberty granted in that judgment. The Court found no justification for exercising writ jurisdiction to interfere at the notice stage. Accordingly, the civil writ petition was dismissed, with all grounds expressly left open for the petitioner to raise before the competent tax authorities. All pending applications were also disposed of. The ruling did not determine the alleged undisclosed income on merits; it allowed the statutory proceedings to continue subject to the assessee’s available defences.
Cases Discussed
- Shyam Sunder Khandelwal & Ors. Vs Assistant Commissioner of Income Tax & Ors., 2024 (4) TMI 196 (Rajasthan High Court, Division Bench); D.B. Civil Writ Petition No. 18363/2019; decided on 19.03.2024 — Considered for its direction quashing Section 148 notices while granting the Revenue liberty to proceed in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
This matter is related to Dinesh Kumar Khatoria Vs. The Assistant Commissioner Of Income Tax in compliance of which this Court has passed the following order:-
“1.The challenge in this petition is to the notice issued to the petitioner under Section 153C of the Income Tax Act, 1961 (for short, “IT Act) dated 04.02.2025 with regard to Assessment Year 2011-2012.
2. Learned counsel for the petitioner submits that in the notice impugned, neither amount has been mentioned nor in the search conducted name of the petitioner has been mentioned, however, from the perusal of the satisfaction note for initiating proceedings under Section 153C with reference to the petitioner for the year 2011-2012, as conveyed to the petitioner, it is apparent that Dinesh Kumar Khatoria’s documents were received in pen drive. Entries pertaining to Dinesh Kumar Khatoria, who paid cash loans to various persons, were found during the search proceedings relating to Ramesh Chand Maheshwari under Section 131 of the IT Act. We also noticed that the petitioner had earlier preferred the writ petition Nos.4490/2022 and 4635/2022 before this Court challenging the notice issued to him under Section 148 of the IT Act and this Court quashed the proceedings under Section 148 of the IT Act vide order dated 19.03.2024, with liberty to the Authorities to proceed against the writ petitioner in accordance with law. Since, this Court had granted permission to the respondent-Tax Authorities to proceed, the challenge on the ground of limitation would also not arise as the order was passed by this Court granting liberty to the authorities to proceed.
3. In view thereto, the notice issued to the petitioner with regard to undisclosed cash loans of an amount of Rs.3,55,00,000/-, which remains undisclosed, has to be answered by the petitioner to the Authorities. We, therefore, do not find any reasons to interfere with the notice issued to the petitioner under Section 153C. The petitioner is free to take up all the necessary arguments and defense available to him before the Authorities, who would be required to pass an appropriate speaking order.
4. With the said observations, the writ petition is dismissed accordingly.
5. Pending application(s), if any, also stands disposed of.”
2. The notice of the petitioner is the consequence of the judgment passed by Division Bench of this Court in Shyam Sunder Khandelwal & Ors. Vs. Assistant Commissioner of Income Tax & Ors.: reported in 2024 (4) TMI 196 (D.B. Civil Writ Petition No. 18363/2019) decided on 19.03.2024, where Division Bench held as under:-
“40. In view of above discussion the notices issued under Section 148 and the impugned orders are quashed. However, the respondents shall be at liberty to proceed against the petitioners in accordance with law.”
3. It is noticed that the said judgment was assailed before the Hon’ble Supreme Court and in the meanwhile taking cue from the observations made by Division Bench, the Revenue has initiated proceedings underrSection 153Cof the Income Tax Act, 1961 (hereinafter referred to as the ‘Act of 1961) against the petitioner. Since we find that so far as in the earlier writ petitions observations were accepted by the assessee, the notice issued to the petitioner for undisclosed income, as revealed while conducting search of another person, and there being a satisfaction note which has been made a basis for initiating proceedings under Section 153C of the Act of 1961, we are not inclined in any manner to interfere with the action, as taken by the Revenue.
4. With the aforesaid observations, the present civil writ petition is dismissed. However, all the grounds are open for the petitioner to be taken up before the authorities.
5. All pending application(s), if any, stand disposed of.
