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2010 (5) TMI 889 - AT - Income TaxValidity of Block assessment proceedings - Undisclosed income of another person u/s 158BD - period of limitation - satisfaction u/s.158BD has not been recorded by AO of the person searched and notices u/s.158BD has been issued much after the closer of block assessment proceedings u/s.158BC of the person searched - HELD THAT - As held in Saroj Nursing Home 2007 (9) TMI 325 - ITAT LUCKNOW-B that proceedings u/s.158BD can be initiated on the satisfaction of the Assessing Officer having jurisdiction over person searched to tax undisclosed Income-tax pertaining to third person who is not subjected to search and books of accounts and in other documents were handed over to the Assessing Officer having jurisdiction over such third person but proceedings initiated u/s.158BD of the Act after a period of six years cannot be regarded as valid. In the case of Shri Vishnubhai R Barot 2009 (12) TMI 987 - ITAT AHMEDABAD it was held, following the decision of Hon ble Supreme Court in the case of Manish Maheshwari v 2007 (2) TMI 148 - SUPREME COURT and Manoj Agarwal. 2008 (7) TMI 446 - ITAT DELHI-A held that without there being satisfaction recorded prior to completion of assessment of the person searched proceedings so initiated u/s.158BD will not be valid. In that case notice u/s.158BD was issued on 10-06-2004. But searched against Ohm Developers was carried out on 29-10-1999, therefore assessment u/s. 158BD thereof completed after 31-10-2001 could not be held valid. Following these decisions, we hold that the block assessment famed in case of assessee are not legally valid and therefore are quashed for the reason that notices u/s.158BD were issued in these cases long after completion of assessment in the case of person searched i.e. Ohm Developers.
Issues Involved:
1. Validity of satisfaction recorded under Section 158BD. 2. Timeliness of notices issued under Section 158BD. 3. Legality of block assessment proceedings under Section 158BD. 4. Specific additions and deletions of undisclosed income. Issue-wise Detailed Analysis: 1. Validity of Satisfaction Recorded under Section 158BD: The primary issue in all these appeals is whether the satisfaction under Section 158BD was properly recorded by the Assessing Officer (AO) of the person searched. The Tribunal noted that satisfaction was not recorded prior to the issuance of notices under Section 158BD, which is a mandatory condition as per the Supreme Court's decision in Manish Maheshwari v. Asstt. CIT. The Tribunal emphasized that the satisfaction must be recorded in writing by the AO of the person searched and must be done before the finalization of the block assessment of the person searched. 2. Timeliness of Notices Issued under Section 158BD: The Tribunal observed that the notices under Section 158BD were issued much after the closure of block assessment proceedings under Section 158BC of the person searched. For instance, in the case of Ohm Organizers, the search was conducted on 29-10-1999, but the notice under Section 158BD was issued on 04-02-2005. The Tribunal referenced several judgments, including ACIT v. Kisorilal Balbant Rai and Manoj Agarwal v. DCIT, which held that proceedings under Section 158BD initiated after a significant delay from the completion of Section 158BC assessments are invalid. 3. Legality of Block Assessment Proceedings under Section 158BD: The Tribunal concluded that the block assessments under Section 158BD were invalid due to the failure to record satisfaction in a timely manner and the excessive delay in issuing notices. The Tribunal cited multiple cases supporting this view, including Bharat Bhushan Jains v. ACIT and Saroj Nursing Home v. ACIT, which established that proceedings initiated long after the completion of assessments under Section 158BC cannot be sustained. 4. Specific Additions and Deletions of Undisclosed Income: - IT(SS)A No.27/Ahd/2008 (Manoj Hiralal Adhikari): The assessee contested the addition of Rs. 2,14,000 and Rs. 20,776 as unexplained investment. The Tribunal allowed the appeal, quashing the block assessment. - IT(SS)A No.14/Ahd/2008 (Revenue's Appeal - Manoj Hiralal Adhikari): The Revenue's appeal against the deletion of Rs. 6,26,250 was dismissed. - IT(SS)A No.28/Ahd/2008 (Vimal Vadilal Shah): The assessee contested the addition of Rs. 2,81,600 out of Rs. 8,15,000. The Tribunal allowed the appeal, quashing the block assessment. - IT(SS)A No.10/Ahd/2008 (Revenue's Appeal - Vimal Vadilal Shah): The Revenue's appeal against the deletion of Rs. 5,33,400 was dismissed. - IT(SS)A No.12/Ahd/2008 (Revenue's Appeal - Induben B Kayastha) and CO No.91/Ahd/2009 (Assessee's Cross Objection): The Revenue's appeal against the deletion of Rs. 8,35,000 was dismissed, and the assessee's cross-objection was allowed, quashing the block assessment. Conclusion: The Tribunal quashed the block assessments under Section 158BD in all cases due to the invalidity of satisfaction recording and untimely issuance of notices. The appeals by the assessees were allowed, and the appeals by the Revenue were dismissed. The Tribunal's decision was pronounced in open court on 21/05/2010.
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