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2012 (9) TMI 438 - AT - Income TaxTime limit for initiation of proceedings under Section 158BD - The act nowhere specifically prescribes any time limit or limitation for initiation of proceedings under Section 158BD or for recording of satisfaction before taking action under that provision - Held that - Following the decision in case of CIT, Ludhiana v. Mridula, Prop. M/s Dhruv Fabrics(2010 (7) TMI 664), ITAT does not find any justification in initiation of block assessment proceedings u/s 158BD against the assessee after long gap of completion of the assessment in the case of persons searched u/s 132 or 132A. NO substantial question of law arises in this issue. Decided in favour of assessee.
Issues Involved:
1. Validity of the proceedings initiated under Section 158BD of the Income Tax Act. 2. Legality of the addition of Rs. 5,06,000 on account of unaccounted on-money paid by the assessee for the purchase of a flat. Issue-Wise Detailed Analysis: 1. Validity of the Proceedings Initiated Under Section 158BD: The primary issue raised by the Revenue was the deletion of the addition made by the Assessing Officer (AO) of Rs. 5,06,000 due to the alleged inordinate delay in initiating proceedings under Section 158BD. The Learned Commissioner of Income Tax (Appeals) [CIT(A)] held that the proceedings were invalid as they were initiated five years after the completion of the assessment of the person searched, M/s. Ohm Developers. The Tribunal noted that the search was conducted on 29.10.1999, and the notice under Section 158BD read with Section 158BC was dated 22.01.2007, served on 31.01.2007. The assessee argued that there was no satisfaction note recorded by the AO having jurisdiction over the builder, as required by the Supreme Court in Manish Maheshwari 289 ITR 341 (SC). Additionally, the proceedings were initiated after the completion of the assessment of the person searched, making the proceedings belated and not valid in law, as supported by Khandubhai Vasanji Desai & Ors. Vs. Dy.CIT 236 ITR 73 (Guj.). The CIT(A) disagreed with the view of the Special Bench of the ITAT, Delhi in Manoj Aggarwal, which held that the proceedings initiated under Section 158BD cannot be nullified based on the decision in Manoj Aggarwal. However, the CIT(A) was compelled to take a different view due to the inordinate delay in initiating and completing the proceedings under Section 158BC read with Section 158BD. The CIT(A) emphasized that equity demands that proceedings should not be kept pending indefinitely, and the taxpayer should not be penalized for the authorities' failure to act timely. 2. Legality of the Addition of Rs. 5,06,000: The AO observed from the notings on page-9 of Khatavahi marked as BS-4 that the assessee had paid Rs. 5,06,000 as on-money for the purchase of a flat at Chandan Park. This was corroborated by the statement of Shri Ketan O. Der, a partner of M/s. Ohm Developers, who stated on oath that the Khatavahi BS-4 contained accounts of flat/shop owners of Chandan Park, detailing payments received through cheques and cash (on-money). Despite this, the CIT(A) held that the proceedings were inordinately delayed and therefore invalid, leading to the deletion of the addition of Rs. 5,06,000. The Tribunal, following the decisions of several respected Co-ordinate Benches and the Gujarat High Court in Khandubhai Vasanji Desai & Ors. Vs. Dy.CIT, upheld the CIT(A)'s decision. The Tribunal noted that the belated issuance of notice under Section 158BD was barred by limitation, as established in the case of Vimal Vadilal Shah vs. DCIT and other related cases. Conclusion: The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decision that the proceedings under Section 158BD were invalid due to inordinate delay. Consequently, the addition of Rs. 5,06,000 made by the AO was deleted. The assessee's cross-objection, which supported the CIT(A)'s order, was also dismissed as redundant.
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