2013 (3) TMI 749 - AT - Income Tax

Summary

Issues involved: Appeal against the order of the CIT(A)-III, Kochi for the block period 1997-98 to 2002-03 and period covering 01-04-2002 to 18-12-2002, including appeal against rectification order u/s 154.

Issue 1: Jurisdiction of notice u/s 158BD

The taxpayer argued that the notice u/s 158BD issued by the Dy. CIT was void ab initio due to lack of jurisdiction. The representative contended that the delay of one year and three months in issuing the notice u/s 158BD after completion of assessments in the case of searched persons was unreasonable and arbitrary.

Judgment: The Tribunal referred to the Kerala High Court case of CIT vs Bimbis Creams & Bakes, where it was held that the assessing officer must act swiftly after completing assessments on searched persons. The Tribunal found the delay in issuing the notice u/s 158BD unreasonable and arbitrary, quashing the consequential order passed by the assessing officer.

Issue 2: Time limit for notice u/s 158BD

The Revenue argued that there is no specific time limit prescribed in the Income-tax Act for issuing notice u/s 158BD. The assessments of search persons were completed before issuing the notice u/s 158BD, which, according to the Revenue, was done within a reasonable period.

Judgment: The Tribunal, citing its previous decision in A.C.I.T. vs Cicy P Thomas, emphasized the need for the assessing officer to issue the notice within a reasonable period, even though no specific time limit is mentioned in the Act. The Tribunal held that issuing the notice after two years from the completion of assessment against the searched person is barred by limitation.

Issue 3: Validity of assessment order

The Tribunal considered the arguments from both sides regarding the validity of the assessment order based on the timing of issuing the notice u/s 158BD. The taxpayer's representative contended that the delay rendered the assessment proceedings arbitrary.

Judgment: Relying on the decisions of the Kerala High Court and the Gujarat High Court, the Tribunal concluded that the delay of one year and three months in issuing the notice u/s 158BD was unreasonable and arbitrary. Consequently, the Tribunal quashed the consequential order passed by the assessing officer.

In conclusion, the Tribunal allowed the taxpayer's appeal in IT(SS)A No.01/Coch/2011 while dismissing the appeals of the revenue in IT(SS)A. No.02 & 03/Coch/2011 based on the findings related to the jurisdiction and timing of issuing the notice u/s 158BD.