| SooperKanoon Citation | sooperkanoon.com/75850 |
| Court | Income Tax Appellate Tribunal ITAT Delhi |
| Decided On | Sep-07-2007 |
| Judge | P Parashar, D R Shah |
| Reported in | (2007)111TTJ(Delhi)880 |
| Appellant | Assistant Commissioner of Income |
| Respondent | R.P. Singh |
2. Shri M.P. Singh senior Departmental Representative appeared on behalf of the Revenue whereas Shri Rohit Jain, chartered accountant along with Shri Ashutosh Jain, chartered accountant appeared on behalf of the assessee.
3. The learned Counsel for the assessee at the very outset submitted that the assessee has taken legal grounds which challenge the very validity of the block assessment order and therefore these grounds may be disposed of first. After hearing the learned representatives of the parties and on going through the grounds of appeal taken in cross-objections, we consider it proper to decide the grounds taken by the assessee in the cross-objection. These grounds are as under: 1. That the CIT(A) erred on facts and in law in not holding that the order passed by the AO under Section 158BD/143(3) of the IT Act, 1961 ('the Act') was without jurisdiction, bad in law and void ab initio.
1.1. That the CIT(A) erred on facts and in law in holding that the AO assumed valid jurisdiction under Section 158BD of the Act.
1.2. That the CIT(A) erred on facts and in law in not appreciating that since the AO completed the block assessment without serving upon the appellant a proper, legal and valid notice under Section 143(2) of the Act the impugned order was illegal and bad in law.
4. At the time of hearing, the learned Counsel for the assessee raised following two pleas in support of the grounds referred to above: (1) That no satisfaction was recorded by the AO who completed the assessment under Section 158BC prior to transmitting the record of the assessee to the AO concerned and that the satisfaction, if any, was recorded after the issuance of notice under Section 158BD to the assessee.
(2) That notice under Section 143(2) was not issued and served upon the assessee within the prescribed period.
5. So far as the first plea is concerned, the learned Counsel pointed out that from the observations made by the learned CIT(A) in para 3.2.2 it is obvious that reasons recorded by the AO of Bagana group of cases in which group search took place and assessment was finalized under Section 158BC, were not available. According to the learned counsel, the learned CIT(A) has also mentioned that the fact regarding disclosing the income of the assessee was intimated to the AO of the present assessee, namely, Dy. CIT, Circle, Saharanpur, U.P. by Dy. CIT Circle-14(1), New Delhi, vide letter dt. 11th Dec, 2001 whereas notice under Section 158BD was issued on 9th April, 2001. Thus, the reasons have been recorded after the issuance of notice.
6. According to the learned Counsel, the satisfaction should be recorded by the AO of the person searched before passing assessment under Section 158BC. In support of this argument, the learned Counsel placed reliance on the ratio of decisions in the case of Manish Maheshwari v. Asstt. CIT and also on the ratio of decisions in the cases of Amity Hotels (P) Ltd. v. CIT and Ors.
; Nitin P. Shah alias Modi v. Dy. CIT (2005) 194 CTR (Guj) 306 : (2005) 276 FTR 411 (Guj); and order of the Tribunal, Chandigarh Bench rendered in the case of Asstt. CIT v. Kishore Lal Balwant Rai and Ors. IT(SS) A No. 15/Chd/2005, dt. 29th June, 2007.
7. The learned Departmental Representative could not produce any document to show that satisfaction was recorded by the AO who completed the assessment in the case of Bagaria group of cases i.e., the persons searched or by the AO who completed the assessment in the case of the assessee under Section 158BD. We are, therefore, left with no option but to take the facts on this issue as recorded in the order of the learned CIT(A).
8. On going through the order of the learned CIT(A) it is found that he has referred the relevant facts in para 3.2.2 which are as under: 3.2.2 The appellant's objection was confronted to the AO. The AO submitted that though it is not ascertainable from the available records that whether any documents pertaining to Sh. R.P. Singh were seized during the search at Bagaria Group, from the perusal of the assessment order passed under Section 158BD in assessee's case it is learned that Annexs. A-2/14, A-2/17, A-2/47, A-2/48 indicated prima facie concealment of income of Sh. R.P. Singh. When considered with the statement given by Sh. R.P. Singh under Section 133A the seized material in the case of Bagaria Group leads to reason to believe that Sh. R.P. Singh gave bogus, accommodating entries to the various concerns of Bagaria Group. The reasons recorded by the AO of Bagaria Group of cases who finalized the assessment under Section 158BC in this case are not available on record. However, a copy of letter written by the Dy. CIT, Circle-14(l), New Delhi, No. Dy.
CIT/Circle-14(l)/01-02/Misc/278 dt. 11th Dec, 2001 is available on record in which the Dy. CIT has intimated Dy. CIT, Circle-2, Saharanpur (UP) regarding the assessee's undisclosed income.
9. From the above portion of the order of learned first appellate authority it is clear that even before him the Department could not produce the satisfaction recorded by the AO in the case of person searched. From the said order it is also clear that intimation regarding undisclosed income of the assessee was given to the AO of the present assessee after the issuance of notice. Thus, on facts the argument of the learned Counsel for the assessee have remained uncontroverted.
10. So far as the legal position is concerned, in the case of Manish Maheshwari (supra), the Hon'ble Supreme Court has held that satisfaction is a pre-requisite condition for completing the assessment under Section 158BD.Amity Hotels (P) Ltd. v. CIT and Ors. (supra), after examining the provisions contained under Sections 158BD and 158BC, has observed as under: The satisfaction is required to be preceded by the investigation and not that the investigation is required to be preceded by the satisfaction. On behalf of the Revenue, our attention was drawn to a decision of the Division Bench of the Gujarat High Court in the case of Rushil Industries Ltd. v. Harsh Prakash (2001) 166 CTR (Guj) 300 : (2001) 251 FTR 608 (Guj), wherein it is pointed out that satisfaction is not required to be recorded. However, it is in a different context and the Court has clearly indicated so....
Thus, it is very clear that satisfaction is required and it cannot be said that proceedings can be initiated without such satisfaction.
Although, this satisfaction may be on the basis of the material which is seized not from the notice, but from the other assessee and against a person in respect of whom action was taken under Section 132 or 132A of the Act.
12. To the same effect is the decision of Hon'ble Gujarat High Court in the case of Nitin P. Shah alias Modi v. Dy. CIT (supra). The Hon'ble High Court has observed as under: That the AO of the LTS group was required to record a satisfaction that undisclosed income which came to light on examination of the books of account or other documents or the seized assets belonged to the assessee and after recording such satisfaction handover such books of account, etc., as may be relevant to the AO having jurisdiction over the assessee. The CIT(A) categorically found that on a perusal of the record no such intimation/information had travelled from the AO of the LTS group to the AO of the assessee. No search was conducted in the case of the assessee nor had any books of account or other documents been requisitioned under Section 132A and hence there was no question of invoking Section 158BA of the Act. Further, on the facts, in the second round of assessment proceedings the AO could not have referred to the provisions of Section 158BD in the absence of the statutory conditions being fulfilled. Thus, the provisions of Section 158BD were not applicable in this case.
13. The Chandigarh Bench of the Tribunal has considered this issue in para 26 of its order in the case of Kishore Lai Balwant Rai (supra).
The concluding part of this para is as under: Therefore, logically speaking, the point of time whereby the AO, after having examined the entire material and evidence for the purpose of making an assessment in the case of person searched, shall be in a position to satisfy himself as to whether any undisclosed income belongs to a person other than the person being assessed. Thus the date of finalization of assessment under Section 158BC of the person put to search is a relevant point of time to deduce the period of limitation available with the AO to arrive at the satisfaction contemplated under Section 158BD.14. The learned Departmental Representative has not been able to cite any authority, contrary to the decisions referred to above. Hence, following the ratio of the decisions in the above-referred cases and on the facts and circumstances of this case we hold that the assessment order passed in the instant cases without making compliance of the pre-requisite condition i.e., recording of satisfaction, cannot be legally justified. Hence on this basis itself the assessment is liable to be quashed. We, accordingly, quash the assessment order.
15. The second plea taken by the learned Counsel for the assessee is that in the instant case the return was filed by the assessee on 14th May, 2001 and a notice under Section 143(2) was issued on 1st April, 2003. He culled out these facts from the assessment order itself. The learned Departmental Representative could not dispute these facts.
According to learned counsel, the notice under Section 143(2) should have been issued within one year from the end of the month in which the return was filed. In support of this argument, the learned Counsel has placed reliance on the decision of Delhi Bench of the Tribunal dt. 21st March, 2007 in the case of Smt. Tulika Mishra v. Jt. CIT and wee versa rendered in IT(SS)A No. 81/Del/2003 & another reported in 2007-TIOL-253-ITAT-Del. The learned Counsel also placed reliance on the ratio of decision of Hon'ble Gauhati High Court in the case of Smt.
Bandana Gogoi v. CIT and Anr. .
16. The learned Departmental Representative has only placed reliance on the order of the learned CIT(A). He pointed out that CIT(A) has considered the plea raised by the assessee and has followed the order of Special Bench of the Tribunal in the case of Nawal Kishore & Sons Jewellers v. Dy. CIT (2003) 81 TTJ (Lucknow) (SB) 362 : (2003) 87 TTD 407 (Lucknow) (SB).
17. We have carefully considered the entire material on record and the rival submissions. As pointed out above the facts regarding date of filing of return and date of issuance of notice remained uncontroverted. Before the learned CIT(A) the assessee raised the ground which has been argued before us. However, the learned CIT(A) rejected the plea of the assessee by observing as under: 3.4.2. I have considered the arguments of the appellant. The appellant's plea that the limitation period under Section 143(2) shall be applicable to a block assessment cannot be accepted because the block assessment procedure is in itself a complete code and the applicability of provisions of Sections 143, 144 or 145 to the block assessment are only helping provisions. Once the AO assumed valid jurisdiction under Section 158BC no other provision can invalidate the proceedings because otherwise the purpose of enacting independent block assessment provisions shall be defeated. Hon'ble Special Bench of the Delhi (sic-Lucknow) Tribunal in the case of Nawal Kishoie & Sons Jewellers v. Dy. CIT (2003) 81 TTJ (Lucknow) (SB) 362 : (2003) 87 ITD 407 (Lucknow) (SB) has held that the time limit for issuance of notice under Section 143(2) is not applicable in the case of block assessment made pursuant to search operation.
The decisions relied upon by the appellant does not pertain to block period (search and seizure assessment), hence the same are distinguishable and not relevant to the case of the appellant. In view of the jurisdictional Tribunal's decision the arguments of the appellant are without any merit and the same are dismissed.
18. It may be pointed out that the learned Departmental Representative has not cited any authority of any High Court for controverting the argument of the learned Counsel for the assessee. Thus, before us the only authority directly on the point is that of Hon'ble Gauhati High Court in the case of Smt. Bandana Gogol v. CIT and Anr. (supra), which has been followed by the Delhi Bench of the Tribunal in the case of Smt. Tulika Mishia (supra).
19. In the case of Smt. Bandana Gogol (supra), the Hon'ble Gauhati High Court has observed as under: Clause (b) of Section 158BC of the IT Act, 1961, provides that the provisions of Section 142 as well as Sub-sections (2) and (3) of Section 143 shall apply even in the case of a block assessment so far as may be. There is no dispute that in the case of assessment under Chapter XIV, a notice under Section 143(2) is mandatory where the AO proceeds to make an inquiry as provided in Section 142.
Similarly, the provision of Section 143(2) will be mandatorily applicable in the case of block assessment also where the AO in repudiation of the return filed under Section 158BC(a) proceeds to make an inquiry in the proceedings under Chapter XIV-B. Once the power of inquiry under Section 142 is invoked, AO has no option but to follow the provisions of Section 143(2). The words 'so far as may be', will thus become mandatory where the AO proceeds to make an inquiry in repudiation of the return filed in response to a notice issued under Section 158BC. The circular issued by the CBDT provides that a notice under Sub-section (2) of Sub-section 143 can be served on the assessee during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished, whichever is later. The circular further provides that the AO must serve notice under Sub-section (2) on the assessee within this period if a case is picked up for scrutiny. It is further clarified that if a notice is not served under Section 143(2), the assessee can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return. The clarification given by the Board has a binding effect on the Department.
Hence in the case of block assessment under Chapter XIV-B, where the AO does not proceed to make assessment and determine the tax payable on the basis of the return filed in response to a notice under Section 158BC(a), he has to follow the provisions of Sub-section (2) of Section 143. The requirement of a notice under Sub-section (2) of Section 143 cannot be dispensed with in a case where the AO proceeds to make an inquiry for the purpose of assessment, and determination of taxes payable after issuing notice under Section 142(1) as well.
20. In view of the above authority, the Tribunal Delhi Bench in the case of Smt. Tulika Mishra (supra) (to which both of us were parties), has quashed the assessment order on the ground that the notice under Section 143(2) was not served upon the assessee within the prescribed period. On this ground we have held the assessment order to be null and void in that case. Hence following the same decision, we declare the assessment order as null and void in this case also because notice under Section 143(2) was not served upon the assessee within the prescribed period. Hence on this ground also the assessment order is liable to be quashed. The same is accordingly quashed.
21. In view of the above, the legal grounds taken in the cross-objection stand allowed.
22. Since we have quashed the assessment order by allowing legal grounds raised by the assessee, we are not required to consider other grounds raised in the cross-objection.
24. In the appeal of the Revenue, the assessee (sic) has challenged the finding of the learned CIT(A) in reducing the addition of Rs. 62,48,212 to Rs. 10,14,566 made by the AO.25. As we have quashed the assessment order by allowing the cross-objection, as referred to above, the ground of appeal of the Revenue has become infructuous and therefore the ground taken therein does not require to be disposed of.
26. In the result, appeal of the Revenue stands dismissed and the cross-objection of the assessee is allowed.