2010 (5) TMI 890 - AT - Income Tax

Block assessment - undisclosed income - proceedings u/s 158BD - search u/s 132 carried out in the business premises of M/s. Ohm Organizers, Surat on 29.10.1999 - books of accounts and documents seized - HELD THAT - We admit the additional ground for adjudication in view of the judgment of the Hon ble Supreme Court in the case of National Thermal Power Corporation Ltd. vs.- CIT 1996 (12) TMI 7 - SUPREME COURT . Admittedly, in this case, search u/s 132 was carried out in the business premises of M/s. Ohm Organizers, Surat on 29.10.1999. Certain books of accounts and documents relating to the assessee were also seized. The AO found that certain investment in purchase of flats/ shops were made by the assessee and payment of on-money was made by him to the builder. Thereafter certain inquiries were carried out from the assessee u/s 133(6) by way of notice issued on u/s. 133(6). Further letters were also issued. However, notice u/s 158BD was issued to the assessee on 04.02.2005. In the impugned order, the ld. CIT(A) upheld the legality of action u/s 158BD. Following the decision in the case of ACIT vs. Vimal Vadilal Shah and vice-versa and others 2010 (5) TMI 889 - ITAT AHMEDABAD , we hold that the block assessment famed in case of the above assessee is not legally valid and therefore is quashed for the reason that notices u/s.158BD was issued in this case long after completion of assessment in the case of person searched i.e. Ohm Developers. Imposing penalty u/s. 158BFA - HELD THAT - In quantum appeal filed by the assessee, the assessment framed by the AO is quashed, therefore penalty levied by the AO u/s 158BFA is also quashed. In the result, both the appeals filed by the assessee are allowed.

Summary

Issues:
1. Validity of action under section 158BD of the Income Tax Act.
2. Legality of block assessment and penalty imposition under section 158BFA of the Income Tax Act.

Issue 1: Validity of action under section 158BD of the Income Tax Act
The appellant challenged the action taken under section 158BD of the Income Tax Act, contending that the notice issued under this section was invalid as it was issued long after the completion of the assessment in the case of the person searched. The appellant relied on a previous decision by ITAT, Ahmedabad, which quashed a block assessment on similar grounds. The appellant argued that the notice under section 158BD against them should also be considered invalid. The Revenue representative did not counter these arguments. The tribunal admitted the additional ground for adjudication based on a Supreme Court judgment and found that the block assessment against the appellant was not legally valid. Consequently, the tribunal quashed the block assessment.

Issue 2: Legality of block assessment and penalty imposition under section 158BFA of the Income Tax Act
In the second appeal, the appellant contested the partial confirmation of the penalty imposed under section 158BFA by the Commissioner of Income Tax (Appeals). The tribunal noted that since the assessment framed by the Assessing Officer was quashed in the first appeal, the penalty levied under section 158BFA was also quashed. Therefore, the tribunal allowed both appeals filed by the appellant, resulting in the quashing of the block assessment and the associated penalty.

The judgment delivered by the Appellate Tribunal ITAT Ahmedabad on 28.05.2010 addressed the issues of the validity of action under section 158BD of the Income Tax Act and the legality of the block assessment and penalty imposition under section 158BFA. The tribunal found in favor of the appellant on both issues, quashing the block assessment and the penalty. The decision was based on legal arguments, precedents, and the procedural aspects of the Income Tax Act.