2009 (9) TMI 998 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 51,37,565/- on account of receipt of commission.
2. Sustaining addition of Rs. 3,38,145/- out of the total addition of Rs. 54,75,710/-.
3. Validity of notice issued u/s 158BD of the Income Tax Act, 1961.

Summary:

Issue 1: Deletion of Addition of Rs. 51,37,565/- on Account of Receipt of Commission
The Revenue contended that the CIT(A) erred in law and on facts by directing the deletion of Rs. 51,37,565/- on account of receipt of commission. The Revenue prayed for the order of the CIT(A) to be set aside and the order of the Assessing Officer (AO) to be restored.

Issue 2: Sustaining Addition of Rs. 3,38,145/- out of the Total Addition of Rs. 54,75,710/-
The assessee argued that the CIT(A) erred in law and facts by sustaining the addition of Rs. 3,38,145/- out of the total addition of Rs. 54,75,710/- made by the AO. The assessee contended that the entire addition was based on presumption and assumption, which is not permissible in block assessment. The assessee cited various judicial authorities to support the claim that no addition can be made in block assessment on assumption and presumption. The assessee requested the deletion of the sustained addition of Rs. 3,38,145/-.

Issue 3: Validity of Notice Issued u/s 158BD of the Income Tax Act, 1961
The assessee raised an additional ground challenging the validity of the notice issued u/s 158BD of the Act, arguing that it did not state the requisite satisfaction and was vague. The Tribunal admitted the additional ground, citing the decision of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Vs CIT (1998) 229 ITR 383 (SC), which allows the Tribunal to consider questions of law arising from facts on record in the assessment proceedings.

The Tribunal found that the notice issued u/s 158BD did not record any satisfaction on the part of the AO, showing non-application of mind. The Tribunal referred to the decision of the ITAT Delhi Bench in the case of Dy. CIT Vs. C. S. L. Securities (P) Ltd. (2008) 15 DTR (Del) (Tribunal) 318, which quashed the assessment order passed u/s 158BD due to similar deficiencies in the notice. The Tribunal held that the notice dated 10-11-2003 issued u/s 158BD was not valid as it did not meet the legal requirements, and quashed the assessment order.

Conclusion:
The Tribunal allowed the assessee's appeal, quashing the assessment order due to the invalidity of the notice issued u/s 158BD. Consequently, the grounds raised by the assessee on merits were not decided. The Revenue's appeal was dismissed as infructuous. The order was pronounced in the open court on 18-09-2009.