IT: Where no documents pertaining to assessee was found/seized in search carried out at premises of third person and Assessing Officer having jurisdiction over third person had also not recorded his satisfaction that assessee had undisclosed income, proceedings under section 158BD initiated against assessee were invalid and liable to be quashed
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[2013] 38 taxmann.com 251 (Jodhpur - Trib.)
IN THE ITAT JODHPUR BENCH
Smt. Kusum Lata Sarda
v.
Deputy Commissioner of Income-tax*
HARI OM MARATHA, JUDICIAL MEMBER
AND N.K. SAINI, ACCOUNTANT MEMBER
AND N.K. SAINI, ACCOUNTANT MEMBER
IT (SS) APPEAL NO. 12 (JODH.) OF 2010
[BLOCK PERIOD 1997-98 TO 2003-04]
[BLOCK PERIOD 1997-98 TO 2003-04]
JUNE 19, 2013
Section 158BD, read with section 158BC, of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income of any other person [Conditions precedent] - Block period 1-4-1996 to 17-7-2002 - Whether where nothing was brought on record to substantiate that during course of search carried out at office premises of third person any books of account or other documents pertaining to assessee were found or seized and Assessing Officer having jurisdiction over case of such third person recorded any satisfaction that assessee had undisclosed-income, notice issued to assessee under section 158BD was not valid and subsequent proceedings were also invalid - Held, yes [Paras 2.9 & 2.11] [In favour of assessee]
FACTS
| ■ | A search and seizure action under section 132 was carried out at the office premises of 'P' wherein the Assessing Officer found that the assessee had made unaccounted investment in certain flats Accordingly, proceedings under section 158BD were initiated against the assessee. | |
| ■ | The assessee carried the matter to the Commissioner (Appeals) and challenged the satisfaction acquired by the Assessing Officer under section 158BD by stating that there being no requisition under section 132A by the Assessing Officer before framing assessment order and that in the notice so issued under section 158BD the block period was not mentioned. | |
| ■ | The Commissioner (Appeals), however, upheld the validity of block assessment proceedings against the assessee. | |
| ■ | On second appeal: |
HELD
| ■ | Nothing is brought on record to substantiate that during the course of search carried out at the office premises of 'P' any books of account or other documents or other assets pertaining to the assessee were found or seized and the Assessing Officer having jurisdiction over the case of 'P' recorded any satisfaction which is mandatory requirement that the assessee had undisclosed income. [Para 2.9] | |
| ■ | The conditions precedent had not been satisfied because the Assessing Officer having jurisdiction over the case of 'P' in whose case the search was conducted, has not recorded his satisfaction that any undisclosed income belonged to the assessee or any books of account/other documents of the assessee seized from 'P' were handed over to the Assessing Officer having jurisdiction over the assessee. Therefore, notice issued to the assessee under section 158BD was not valid and subsequent proceedings were invalid. The assessment order passed by the Assessing Officer is quashed. [Para 2.11] |
CASE REVIEW
Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341/159 Taxman 258 (SC) and CIT v. Raj Pal Bhatia [2011] 333 ITR 315/202 Taxman 140/10 taxmann.com 191 (Delhi) (para 2.11) followed.
CASES REFERRED TO
Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341/159 Taxman 258 (SC) (para 2.6), V.B. Giri v. Asstt. CIT [2009] 126 TTJ (Jodh) 217 (para 2.6), Asstt. CIT v. Fashion Fabrics [2012] 20 taxmann.com 175 (Chd.) (para 2.6) and CIT v. Raj Pal Bhatia [2011] 333 ITR 315/202 Taxman 140/10 taxmann.com 191 (Delhi) (para 2.6).
N.R. Mertia for the Appellant. G.R. Kokani for the Respondent.
ORDER
N.K. Saini, Accountant Member - This is an appeal by the assessee against the order dt. 1st Oct., 2010 of the learned CIT(A), Central, Jaipur. Following grounds have been raised in this appeal :
| "1. | The impugned order under s. 250, dt. 1st Oct., 2010 in ITA No. 120/2007-08 made by learned CIT(A), Central, Jaipur is bad in law and bad in facts, thus, learned CIT(A) erred in maintaining the assessment order under s. 158BD dt. 25th July, 2007 passed by Dy. CIT, Circle, Nagaur, as valid in law and on merit of the case. | |
| 2. | That the learned CIT(A) has erred and was unjustified in giving finding that the original documents seized were forwarded/transmitted to the learned AO of appellant as required under s. 158BD of the Act. The finding is wrong on facts. | |
| 3. | That the learned CIT(A) has erred and was unjustified in giving the finding for recording of satisfaction required by s. 158BD of the Act as valid one. | |
| 4. | That the learned CIT(A) has erred and was unjustified in holding and approving finding of learned AO relating to the appearance of the name of the late Shri Ramavtar Sharda, in the statement recorded during the course of search of Shri Narvir Sing Parmar, whereas no name of appellant appeared in the relevant copy of statement provided to the appellant, as was alleged. | |
| 5. | That the learned CIT(A) erred and was unjustified in holding that the proceedings under s. 158BD were valid as the notice issued itself was valid under s. 158BD/158BC. The learned CIT(A) also erred in holding that the block period as was mentioned on the notice under s. 142(1) dt. 12th June, 2007, therefore, it is to be treated as the block period was also mentioned on the notice issued under s. 158BD/158BC of the Act. | |
| 6. | That the learned CIT(A) erred and was unjustified in holding that the notice under s. 158BD was valid in view of s. 292B of the Act. | |
| 7. | That the learned CIT(A) erred in holding that impugned assessment proceedings were not barred by limitation whereas in view of the law and also binding judicial pronouncements the same was barred by limitation. | |
| 8. | That, in the facts and in the circumstances of the case and in view of the material available on record the learned CIT(A) erred in maintaining the addition of Rs. 1,00,000 solely on assumption and presumption and by relying on statement of third party in which there was no mention of appellant's name and on the contrary the statement relied upon had supported the case of the appellant. | |
| 9. | That the learned AO and the CIT(A) ought not to have made the impugned addition of Rs. 1,00,000. The Hon'ble Tribunal may very kindly delete the addition by quashing the order. | |
| 10. | That appellant craves leave to add, alter, amend or delete the grounds hereinabove taken on or before the hearing. | |
| 11. | The appellant, therefore, most respectfully prays that her appeal may kindly be allowed." |
2.1 Vide ground Nos. 1 to 7, the assessee has challenged the validity of block assessment order passed under s. 158BD r/w s. 158BC of the Act.
2.2 The facts of the case in brief are that a search and seizure action under s. 132 of the IT Act, 1961 (hereinafter referred to as 'the Act' in short) was carried out at the office premises of M/s Parmar Builders & Developers, Silvassa at I, Gurudev Complex, Sayali Road, Silvassa. The AO observed that during the course of search, Annex. B-1 page Nos. 1 to 8 was found which contained the name of Shri Ramavatar Sarda to whom unaccounted consideration was paid by the persons against their names. The AO also observed that the assessee had made unaccounted investment in the flats in Gurudev Complex-II, Building H, Silvassa as mentioned in column- as unaccounted consideration and accordingly proceedings under s. 158BD of the Act were initiated and the assessee was required to furnish the return of the block period by 13th June, 2006. But no return of income for the block period was furnished by the assessee, the AO framed the assessment at an income of Rs. 1 lac, considering the same as undisclosed investment in Plot No. H/B-11, Gurudev Complex-II, Silvassa.
2.3 The assessee carried the matter to the learned CIT(A) and challenged the satisfaction acquired by the AO under s. 158BD of the Act by stating that there being no requisition under s. 132A of the Act by the AO before framing assessment order and that in the notice so issued under s. 158BD on 15th July, 2005, the block period was not mentioned and only block period with date as 17th July, 2002 was mentioned which did not quantify the complete block period. It was further stated that notices also did not specify the status of the assessees to whom notices were issued. It was contended that vide letter dt. 17th Aug., 2005, the assessee requested to provide the reasons recorded for issuing the notice and vide subsequent letter dt. 17th May, 2006/30th May, 2006 of AO, the assessee was requested to furnish the return for the block period by 13th June, 2006 but extension was sought. It was stated that another notice under s. 142(1) dt. 12th June, 2007 was issued for the block period and till that date i.e. 12th June, 2007, the assessee was not aware about the proceedings of block period and even from the intervening communication letter dt. 17th May, 2006 it seems that the information was passed on by the Asstt. CIT, Central Circle, Surat to the AO of the assessee and no documents were passed on. Accordingly, no return was filed by the assessee because of the facts of invalidity and action becoming barred by limitation and moreover loose papers page Nos. 20 to 24 revealed that there was no name of the assessee on those papers and factually the assessee had not given any unaccounted money to M/s Parmar Construction.
2.4 The learned CIT(A) after considering the submissions of the assessee observed that notice dt. 15th July, 2005 was issued for the block period requiring the assessee to furnish the return of income and in the said notice, block period with date 17th July, 2002 was mentioned which implied that notice was for the block period ending on 17th July, 2002. He further observed that the assessee did not object to this notice on the ground of non-mention of block period but in reply to it, details of reasons for issue of notice were asked for. According to the learned CIT(A), the assessee was communicated the reasons for issue of such notice under s. 158BD of the Act vide letter dt. 17th May, 2006/30th May, 2006. Therefore, the notice under s. 158BD could not be held to be invalid. The learned CIT(A) held that in view of the provisions under s. 292B of the Act, such notice shall not be deemed to be invalid merely by reasons of the alleged mistake as the notice is in substance and in effect in conformity with or according to the intent and purpose of this Act. The learned CIT(A) pointed out that notice was issued for the block period ending on 17th July, 2002 which was mentioned instead of explicit period of block period from 1st April, 1996 to 17th July, 2002 being mentioned. The learned CIT(A) held that there was no time-limit provided for issuance of notice under s. 158BD of the Act and that the time-limit had been provided for completion of assessment. The learned CIT(A) also held that in assessee's case, the notice under s. 158BD of the Act was issued on 15th July, 2005 and the time-limit for completion of the assessment as prescribed in s. 158BE of the Act was 31st July, 2007 and the order was passed on 25th July, 2007. Therefore, it was not barred by limitation. The learned CIT(A) also rejected the contention of the assessee that books of account or documents were not passed on to the AO, which is the condition of issuance of notice under s. 158BD of the Act by stating that the AO of the assessee had not only received the relevant documents from the AO having jurisdiction over Parmar Builder Group of cases but had even supplied those copies of documents to the assessee vide letter dt. 12th July, 2007.
2.5 Now the assessee is in appeal.
2.6 The learned counsel for the assessee reiterated the submissions mane before the authorities below and further submitted that notice dt. 15th July, 2005 purportedly issued under s. 158BD r/w s. 158BC was not at all a notice under s. 158BD of the Act because the same did not disclose any satisfaction having been recorded on any date or proceedings during which it was so recorded and also did not give any communication of any material on which satisfaction was based and did not say as to whether the said seized material was handed over to the AO of the assessee. Reference was made to page No. 23 of the assessee's paper book which is the copy of notice dt. 15th July, 2005, issued under s. 158BD/158BC of the Act. Reliance was placed on the judgment of Hon'ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341/159 Taxman 258. It was contended that no satisfaction was recorded in the case of the persons searched. Therefore, the notice under s. 158BD of the Act in the case of assessee was invalid. Reliance was placed on the following case laws :.
| (i) | V.B Giri v. Asstt. CIT [2009] 126 TTJ (Jodh.) 217 : | |
| (ii) | Asstt CIT v. Fashion Fabrics [2012] 20 taxmann.com 175 (Chd.) | |
| (iii) | CIT v. Raj Pal Bhatia [2011] 333 ITR 315/202 Taxman 140/10 taxmann.com 191 (Delhi) |
2.7 In his rival submissions, the learned Departmental Representative for the Revenue supported the orders of the authorities below.
2.8 We have considered the submissions of both the parties and carefully gone through the materials available on record. In the present case, it appears that while issuing the notice under s. 158BD of the Act, copy of which is placed at page No. 23 of the assessee's paper book, the AO had not mentioned the block period and also had not mentioned whether the said notice was under s. 158BD or 158BC of the Act because both the sections are printed on the said notice. In the present case, it is also not brought on record as to whether any satisfaction was recorded by the AO who framed the assessment under s. 158BC of the Act in the hands of the person searched. On a similar issue, the Hon'ble Delhi High Court in the case of Raj Pal Bhatia (supra) held as under :
"Before invoking the provisions of s. 158BD of the IT Act, 1961, the AO of the person searched under s. 132(1) must satisfy himself that some undisclosed income belongs to a person other than the persons with respect to whom search was made under s. 132(1) of the Act. Such satisfaction must be based on material found in the course of search. In the absence of any such satisfaction (which is to be recorded in writing) the concerned AO does not get any jurisdiction to assess that other person by invoking s. 158BD of the Act. Further, the satisfaction of the AO has to be in respect of the following aspects :
| (i) | there should be 'undisclosed income' within the meaning of s. 158B(b) referable to the assets or books/documents found seized/requisitioned; | |
| (ii) | there should be a finding by the AO that there was undisclosed income in such assets or books of account or documents of the searched person; and | |
| (iii) | that such undisclosed income belonged to the person other than the one searched." |
2.9 In the present case also, nothing is brought on record to substantiate that during the course of search carried out at the office premises of M/s Parmar Builders & Developers, Silvassa, any books of account or other documents or other assets pertaining to the assessee were found or seized and the AO having jurisdiction over the case of M/s Parmar Builders & Developers recorded any satisfaction which is mandatory requirement that the assessee had undisclosed income. Therefore, the proceedings under s. 158BD of the Act were not valid.
2.10 Similarly, the Hon'ble Supreme Court in the case of Manish Maheshwari (supra) has held as under :
"Before the provisions of s. 158BD of the IT Act, 1961 are invoked against a person other than the person whose premises have been searched under s. 132 or documents and other assets have been requisitioned under s. 132A, the conditions precedent have to be satisfied."
It has been further held that :
"Where the premises of a director of a company and his wife were searched under s. 132 of the IT Act, 1961 and a block assessment had to be done in relation to the company, the AO had to (i) record his satisfaction that any other undisclosed income belonged to the company, and (ii) handover the books of account and other documents and assets 1 seized to the AO having jurisdiction against the company."
2.11 In the present case also, the conditions precedent had not been satisfied because the AO having jurisdiction over the case of M/s Parmar Builders & Developers, Silvassa in whose case the search was conducted, (sic-has not) recorded his satisfaction that any undisclosed income belonged to the assessee or any books of account/other documents of the assessee seized from M/s Parmar Builders & Developers, Silvassa were handed over to the AO having jurisdiction over the assessee. Therefore, in view of above discussions and the ratio laid down in the aforesaid referred to judicial pronouncements, we are of the view that notice issued to the assessee under s. 158BD of the Act was not valid and subsequent proceedings were invalid. We therefore, quash the assessment order passed by the AO.
2.12 Since we have quashed the assessment order passed by the AO, therefore, other grounds raised by the assessee become of academic interest and no findings are required to be given on our part.
3. In the result, the appeal filed by the assessee is allowed.
Regards
Prarthana Jalan
__._,_.___
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