2022 (8) TMI 1233 - KARNATAKA HIGH COURT

Assessment u/s 153C - acceptance of diaries/loose sheets by the respondent - Whether Revenue no opportunity was provided to the petitioner as required under Section 127 of the Act inter alia the petitioner being “searched person” and not “Other person” as required under Section 153C? - HELD THAT:- It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, the action taken by the respondent- Revenue against the petitioner based on the material contained in the diaries/loose sheets are contrary to the law declared by the Hon'ble Apex Court. In that view of the matter, impugned notices issued under Section 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ petitions, as the same are void and illegal. In this connection, it is relevant to deduce the law declared by the Hon'ble Apex Court in the case of ICICI BANK LIMITED AND ANOTHER v. MUNICIPAL CORPORATION OF GREATER BOMBAY AND OTHERS [2005 (8) TMI 666 - SUPREME COURT] wherein it is held that, “The ratio and effect of the judgment is required to be ascertained with reference to the question of law as decided by the Court. The ratio of the judgment or the principle upon which the question before the Court is decided is alone binding as a precedent. The decision of the Supreme Court upon a question of law is considered to be a binding precedent and this must be ascertained and determined by analysing all the material facts and issues involved in the case.”

That apart, no opportunity was provided to the petitioner as required under Section 127 of the Act inter alia the petitioner being “searched person” and not “Other person” as required under Section 153C of the Act and in this regard, I find force in the submission made by the learned Senior Counsel appearing for the petitioners and accordingly, though the learned Additional Solicitor General for the respondent-Revenue urged about the existence of alternative remedy, I do not find acceptable ground to disallow these petitions as it is trite law that this court is having jurisdiction to entertain writ petition, if the impugned orders are passed in derogation of principles of natural justice and the action taken by the respondent-Revenue is contrary to the law declared by the Hon'ble Apex Court.

It is well settled principle in law that administrative or judicial orders must be supported by reasons. It is the duty of the respondent-Revenue being an instrumentality of state under Article 12 of the Constitution of India to give reasons for its conclusion. Recording of reason is the hallmark of a valid Order, while exercising administrative action or judicial review to disclose reasons and recording reasons, has always been insisted upon as one of the fundamentals of sound administration of justice delivery system, to make known that there have been proper and due application of mind by the authorities, which is an essential requisite of principles of natural justice. Reasons introduces clarity in Order and absence of such reasons would render the decision making process null and void. Reasons substitute subjectivity by objectivity and therefore, the recording of reasons is the principle of natural justice and it ensures transparency and fairness in decision making.

On careful consideration of the grounds urged in the said writ petition and having regard to the conclusion arrived at that the impugned notices are without jurisdiction, the impugned notices are liable to be set aside which are arising out of wrong interpretation of Section 153C of the Act, and the entire case be remanded to the competent authority/ respondent-Revenue for fresh consideration and to pass appropriate orders in accordance with law, after affording reasonable opportunity to the petitioners in these writ petitions

As already concluded that the initiation of proceedings by the respondent-Revenue based on the diaries/loose sheets against the petitioners herein is without jurisdiction and contrary to the law declared by the Hon’ble Apex Court and same cannot be touched upon while conducting de novo enquiry afresh.

Thus since the impugned notices are issued under Section 153C of the Act, are contrary to the judgment of the Hon'ble Apex Court, the writ petitions filed under Article 226 of the Constitution of India, in the instant case, are maintainable.

Thus proceedings initiated under Section 153C of the Act culminating in issuance of Notice are quashed and further proceedings thereof are quashed by remanding the matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above.