Facts of the Case

The petitioner, M/s Rohit Farms (P) Ltd., filed a writ petition before the Delhi High Court challenging the action of the Income Tax Department in initiating proceedings under Section 158BD of the Income-tax Act, 1961.

Pursuant to a notice issued under Section 158BD, the petitioner had already filed its return of income for the block period from 1 April 1989 to 23 June 1999. However, despite repeated requests, the Revenue authorities had not disclosed the reasons recorded by the Assessing Officer for invoking the provisions of Section 158BD against the petitioner.

Aggrieved by the non-disclosure of the reasons forming the basis of the proceedings, the petitioner approached the High Court seeking appropriate relief.

Issues Involved

  1. Whether the assessee is entitled to obtain the reasons recorded by the Assessing Officer for initiating proceedings under Section 158BD of the Income-tax Act.
  2. Whether the Revenue can continue block assessment proceedings without furnishing such reasons to the assessee.
  3. Whether the assessee should be granted an opportunity to file objections after receipt of the recorded reasons.

Petitioner’s Arguments

The petitioner contended that:

  • A notice had been issued under Section 158BD and the return for the block period had already been filed.
  • Despite specific demands, the Revenue authorities failed to disclose the reasons recorded for invoking Section 158BD.
  • Without knowing the basis of the proceedings, the petitioner was unable to effectively challenge the assumption of jurisdiction by the Assessing Officer.
  • Principles of natural justice required the Department to furnish the recorded reasons before proceeding further with the assessment.

Respondent’s Arguments

The Revenue, represented by the Senior Standing Counsel, fairly stated before the Court that:

  • The reasons recorded by the Assessing Officer for initiating action under Section 158BD would be supplied to the petitioner within one week.
  • Upon furnishing such reasons, the petitioner would have the opportunity to raise objections, if any, before the Assessing Officer.

Court Order / Findings

The Delhi High Court accepted the statement made on behalf of the Revenue.

The Court held that:

  • Since the Revenue had undertaken to furnish the recorded reasons within one week, no further directions were required in the writ petition.
  • Upon disclosure of the reasons, the petitioner would be at liberty to file objections against the initiation of proceedings.
  • If objections were filed, the Assessing Officer would be required to consider and dispose of such objections before proceeding further with the block assessment proceedings.

Accordingly, the writ petition was disposed of in these terms.

Important Clarification

The judgment reinforces the principle that:

  • An assessee against whom proceedings are initiated under Section 158BD is entitled to know the reasons recorded for assumption of jurisdiction.
  • The Revenue must furnish the recorded reasons when demanded by the assessee.
  • The assessee must be given a meaningful opportunity to raise objections against such jurisdictional action.
  • The Assessing Officer should consider and dispose of the objections before proceeding further with the assessment.

Sections Involved

  • Section 158BD, Income-tax Act, 1961 – Assessment of undisclosed income of any other person pursuant to search proceedings.
  • Article 226 of the Constitution of India – Writ jurisdiction of the High Court.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2003:DHC:6237-DB/DKJ14052003CW18282003_143832.pdf

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