1. This is an appeal filed by the assessee against the order of the Assessing Officer passed Under Section 158BD on 28.03.2006.
2. The facts of the case are that a search and seizure operation Under Section 132(1) was carried out in the case of Dr. D.C. Srivastava and Dr. Saroj Srivastava at B-55, Mandir Marg, Mahanagar, Lucknow on 25.09.1996. During the course of search, several valuables and cash was found and seized as detailed by the Assessing Officer in the assessment order. The Assessing Officer initiated proceeding Under Section 15 SBC against the assessee and completed it the block assessment under that Section vide his order dated 25.09.il997 within the limitation of one year. The Assessing Officer computed the. undisclosed income of the assessee in that order at Rs. 52,39,720/-. The assessee filed appeal before I.T.A.T. as provided in the relevant provisions applicable for the searches carried out prior to 01.01.97. Tribunal cancelled the assessment on the ground that no search has taken place against the assessee. The search was taken place against Dr. D.C. Srivastava & Dr.
Saroj Srivastava. No warrant Under Section 132(1) was issued against this assessee. Thereafter, the Assessing Officer being DOT, Range-1, Lucknow recorded a satisfaction note Under Section 158BD on 30.03.2005 and forwarded the same to the Assessing Officer having jurisdiction over the assessee. Accordingly, a notice Under Section 158 BC was issued to the assessee on 30.03.2005 itself. In response thereto proceedings were initiated and finally an assessment order Under Section 158BC read with Section J58 BD of Income Tax Act was passed on 28.03.2006 on a total income of Rs. 52,39,720/-.
3. Asscssee now challenged this before us mainly on the legal ground that Assessing Officer could not have recorded satisfaction and initialed block assessment proceedings after lapse of more than 8 years. The preliminary grounds raised by the assessee are as under: (1) Because the notice captioned as "Under Section 158BD r.w.s.
158BC of the Income-tax Act, 1961" dated 30th March, 2005 is wholly illegal as there is no enabling provision (to issue such notice in Chapter XIV B of the Act) and the block assessment order dated 28th March, 2006 captioned as "Section 158BC r.w.s. I58BD of the Income-tax Act, 1961" passed thereunder is wholly illegal as being without jurisdiction.
(2) Because looking to the overall scheme of the "block assessment" as envisaged in Chapter XIV B of the "Act," proceedings to make Block assessment under Section 158BD, have to be necessarily initiated by issue of notice under Section 158 BC only, which in the present case, pre supposes that the same should have been issued before 30th September, 1997 which was the expiry date of outer time limit, and failure to adhere to such time limit has rendered the Block Assessment order dated 28.3.2006, as null and void.
(3) Because in any case and in view of the finding of fact as had been recorded by the Hon'ble ITAT in the appellant's own case in ITA No. 1357/Alld/97, to the effect that at the initial stage the requirement of Section 158 BD had not been complied with, the learned Assessing Officer could not have reinitiated the said proceedings by recording the 'satisfaction' (so called) vide order sheet entry dated 30th March, 2005 i.e. after the expiry of a period of nearly 8 and 1/2 years as calculated from the date of search and consequently the Block Assessment order dated 28.3.2006 is bad in law.
(4) Because, notwithstanding the above referred grounds, the block assessment order dated 28.3.2006 as has been impugned in the present appeal is bad in law as the notice dated 30th March, 2005 captioned as "Under Section 158 BD r.w.s. 158 BC" is wholly vague in its contents.
(5) Because the block assessment order dated 28th March, 2006 is bad in law as the same has been passed without confronting the appellant with the material and information as has been utilized for the purposes of computation of 'undisclosed income'.
(6) Because on the facts and circumstances of the case, the "approval" said to have been granted by the Ld. CIT(A)-1, Lucknow Under Section 158 BC, does not meet the requirement of law. as the same had been granted mechanically and without application of mind and the impugned block assessment order is void ab initio, inter alia, on this ground as well.
4. The Learned Authorised Representative for the assessee submitted that firstly, notice Under Section 158 BD should have been issued within reasonable time of completion of block assessment proceedings in the case of the persons searched. The persons searched were Dr. D.C.Srivastava and Dr. Saroj Srivastava. The present assessee was not subjected to search. In fact, according to Learned Authorised Representative no assessment Under Section 158BC has been made in the case of Dr. D.C. Srivastava and Dr. Saroj Srivastava which means that the Assessing Officer of those two assessees, who were subjected to search, was satisfied that undisclosed as a result of search belong to the present assessee. As a consequence thereof, the proceeding Under Section 158BD should have been initiated just thereafter. In the present case proceeding Under Section 158BD have been initialed after a lapse of more than 8 years from the date of search. Therefore, due to latches, assessment should be cancelled. He relied on the decision of I.T.A.T., "C" Bench, Delhi in the case of B.L. Leather (P) Ltd. v. DCIT in IT(SS) A. No. 13/Del/99, decided on 28.12.2004 for the proposition that proceeding Under Section 158BD should have been initiated within a reasonable time by the Assessing Officer and for this purpose Assessing Officer who has completed the proceeding Under Section 158 BC of the persons searched should be satisfied during the course of block assessment proceedings of the persons searched. He then referred to the decision of I.T.A.T., Hyderabad Bench in the case of P. Mahendra Reddy v. ACIT [2005] 2 SOT 696 (HYd.) for the proposition that if there is delay in initialing Under Section 158BD proceeding then such assessment is not valid. In that case there was a delay of more than 4 years after the search proceedings. The Learned Authorised Representative for the assessee further submitted that it is the same Assessing Officer whose satisfaction was necessary before proceeding Under Section 158 BD is initiated by the officer having jurisdiction over the person not searched and in respect of whom the Assessing Officer having jurisdiction over the person search was satisfied that undisclosed income belong to him (person not searched). The Learned Authorised Representative relied on the decision of Hon'ble Allahabad High Court in the case of Sriram Jaiswal v. Union of India for the proposition that where approval was given after the period of limitation then the same will not be valid.
5. Against this Ld. Departmental Representative submitted that the question of latches will depend from case to case and there cannot be an uniform rule in all the case. The Court has to consider the explanation of the delay and if it is reasonable or there is satisfactory explanation, proceedings should not be cancelled. In the present case, the Assessing Officer had completed the proceedings Under Section 158 BC within the limitation but on account of block assessment order having been cancelled by the Tribunal, fresh assessment proceedings have to be initiated by recording proper satisfaction.
There is no delay in initiating proceedings. The Tribunal has passed order on 23^rd September, 2004 and the Assessing Officer has initiated proceedings on 30^th March, 2005 which is within, 6 months. It cannot be said to be inordinate delay. He further submitted that proceedings Under Section 158BD are akin to proceeding Under Section 147 and reassessment proceedings can be undertaken with the time available. He relied on the decision of Hon'ble Gujarat High Court in the case of Khandubhai Vasanji Desai v. DCIT for the proposition that limitation should be considered on reasonable basis. He then referred to the decision of Hon'ble Delhi High Court in the case of Janki Exports International v. Union of India for the proposition that proceeding Under Section 158 BD are similar to the proceeding Under Section 147. He then relied on the decision of Hon'ble Allahabad High Court in the case of Sukhlal Ice & Cold Storage Co. v.ITO for the proposition that second proceedings can be initiated if first proceedings are found invalid. He then referred to the decision of Allahabad High Court in the case of Dharam Pal Singh Rao v. ITO [2004] 271 ITR 223 (Allb.) for the proposition that if the Assessing Officer issues subsequent notice after properly obtaining sanction of the ACIT as required under the law then such notice will not be invalid if it is within the period of limitation. Thereafter Ld.
Departmental Representative referred to the decision of Hon'ble Supreme Court in the case of Shri Vallabh Glass Works Ltd. v. Union of India for the proposition that the Courts have discretion to condone the delay. In brief, the Ld. Departmental Representative summarized the argument submitting that the doctrine of latches is a judicial principle and should be exercised with discretion. The reasonability of explanation should be seen. And if explanation is satisfactory, the delay should be condoned as the Department has given proper explanation as to why notice Under Section 158 BD was issued on 30.03.2005. In view of the above, the proceeding Under Section 158BC/158BD should be held valid.
6. We have considered the rival submissions and perused the material on record. The Learned Authorised Representative has raised the issue that for initiating proceeding Under Section 158BD, it is the same Assessing Officer who should have been satisfied, who has completed block assessment proceedings in the case of the person searched. According to him, it is his satisfaction which is relevant. In the present case, satisfaction has been written after a lapse of almost 8 years by a different officer.
7. We are of the considered view that this submission is based on narrow interpretation of the words used in Section 158BD. The requirements of Section 158BD are that- (ii) undisclosed income belongs to a person other than the person searched. In this regard, it would be relevant to quote the provisions of Section 158 BD as under: Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section I32A, then the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed [under Section 158BCJ against such other person and the provisions of this Chapter shall apply accordingly.
The legislature has used the article 'the' before the word 'Assessing Officer'. It shows that it has to be the Assessing Officer of the person searched. A narrow view would be that it should be the same person and not the officer having the same jurisdiction. In our considered view, the interpretation of the words "the Assessing Officer is satisfied" in Section 158BD, that it should be the satisfaction of the same person who completed 158 BC proceeding against the person searched is a narrow interpretation. An Assessing Officer can always be changed through transfer by the competent authority and the jurisdiction can also be changed. It is also possible that satisfaction as required Under Section 158BD is recorded after some gap of time because of some administrative problem or otherwise or because of the injunction of the Court. During the meantime, the officer may be changed by way of transfer. Therefore, to infer that it should be the same person to record satisfaction for enabling other officer having jurisdiction over the person in whose case the undisclosed income is to be assessed and who is not subjected to search is a very narrow view of the provision and is not acceptable. It is also legally not tenable as the provision does not indicate that the satisfaction should be of the same person occupying the office and who has initiated proceedings Under Section 158BC against the person searched. Therefore, in our view it has to be the Assessing Officer having jurisdiction over the person searched who has to record the satisfaction that undisclosed income pertained to a third person who is not subjected to search and the books of account and other documents have to be handed over to the Assessing Officer having jurisdiction over that other person.
Accordingly, this argument of the Learned Authorised Representative is rejected.
8. The next argument of the Learned Authorised Representative is that the proceeding Under Section 158BD should have been initiated within the reasonable time. In fact, no time limit is provided for initiating 158BD proceeding. Accordingly, we agree with the Learned Authorised Representative that such proceeding is to be initiated within a reasonable time limit of completion of 158BC proceeding of the persons searched. I.T.A.T., Hyderabad in P. Mahendra Reddy's case (supra) considered this issue and referring to the decisions of Hon'ble Supreme Court in the case of Parshuram Pottery Works Co. Ltd. v. ITO , State of Gujarat v. Patel Raghav Natha & Khandubhai Vasanji Desai v. DCIT held that if a notice is unduly delayed then proceedings will not be valid. We also uphold the contention of the Learned Authorised Representative that proceedings Under Section 158 BD are akin to proceedings Under Section 147. This is supported by the decision of Hon'ble Delhi High Court in Janki Lxports International (supra). If no limitation is provided in the statute for initiating proceeding Under Section 158 BD then one has to take a clue from similar proceedings in the Income Tax Act. The provisions of Section 147 are held to be similar to the provisions of Section 158 BD as both deal with the undisclosed income. Section 147 deals with escaped income whereas 158BD deals with undisclosed income arising as a result of search. Therefore, limitation for initiating proceedings should not be beyond what is provided for the action Under Section 147.
We agree with the Learned Authorised Representative that when extent of block period was modified from 10 years to 6 years the limitation for reopening of assessment Under Section 147 was also reduced from 10 years to 6 years. The legislature thus intended to assess the undisclosed income within the period of 6 years. Hon'ble Tribunal in P.Mahendra Reddy's case (supra)'s case has held that initiating of 158 BD proceeding after 4 years is an inordinate delay. The comparable provisions of Section 147 also make us believe that initiation of proceeding Under Section 158 BD beyond the period of 6 years cannot be held as valid. Even then that period of delay has to be explained by the Assessing Officer with cogent reasons. It is for the Court to treat the explanation satisfactory depending upon the facts and circumstances of that case. In the present case, the notice Under Section 158BD was issued after 8 years of the search. The explanation of the Assessing Officer that assessment in the case of the assessee was already done Under Section 158 BC and on the assessment having been cancelled by the Tribunal, fresh satisfaction and proceeding Under Section 158 BD were initiated, can be held to be satisfactory, but if the delay is beyond reasonable period which is considered to be 6 years, being at par with the provisions of Sections 147/148/149, then inspite of the explanation being satisfactory, assessment cannot be held to be valid. We, therefore, cancel assessment Under Section 158 BD on account of inordinate delay and the delay which is beyond the period of 6 years as provided under the parallel provisions of Sections 147/148/149.
9. As a result, we cancel the assessment. As a result, the appeal of the assessee is allowed.