2008 (1) TMI 908 - AT - Income Tax

Summary

Issues Involved:
1. Validity of block assessment u/s 158BD due to non-compliance with mandatory conditions.
2. Validity of block assessment due to non-service of notice u/s 143(2).
3. Validity of block assessment order passed without prior approval of the Jt. CIT u/s 158BG.

Summary:

Issue 1: Validity of Block Assessment u/s 158BD
The Tribunal examined whether the mandatory conditions precedent for invoking s. 158BD were met. The assessee argued that the AO did not record satisfaction that the undisclosed income belonged to the assessee, as required by s. 158BD. The Tribunal found that the letters from the AO having jurisdiction over the searched persons merely requested the AO having jurisdiction over the assessee to examine the possibilities of issuing a notice under s. 158BD and did not record any satisfaction. Citing the Supreme Court judgment in Manish Maheshwari vs. Asstt. CIT, the Tribunal held that the proceedings under s. 158BD were without jurisdiction as the mandatory satisfaction was not recorded.

Issue 2: Validity of Block Assessment due to Non-Service of Notice u/s 143(2)
The Tribunal found no evidence of a notice issued u/s 143(2) to the assessee. Referring to the Gauhati High Court judgment in Smt. Bandana Gogoi vs. CIT, the Tribunal held that the issue of notice u/s 143(2) is mandatory, and its absence invalidates the block assessment. The Tribunal distinguished this case from the Madras High Court judgment in Areva T&D India Ltd. vs. Asstt. CIT, which dealt with reassessment under s. 148, not s. 158BD.

Issue 3: Validity of Block Assessment Order Passed Without Prior Approval of the Jt. CIT u/s 158BG
The assessee did not dispute the Department's statement that the approval of the Jt. CIT was taken as required by s. 158BG. Therefore, this ground did not survive for consideration.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the block assessment u/s 158BD was invalid due to the lack of recorded satisfaction and non-service of notice u/s 143(2). Consequently, the Department's appeal was dismissed as infructuous.