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2014 (2) TMI 521 - HC - Income TaxTime-barred notice issued u/s 158BD of the Act Search u/s 132 of the Act conducted - Held that - CIT(A) was of the view that the communication dated 14.7.2003 by the AO holding jurisdiction over Major Aggarwal cannot be constructed to be the satisfaction as required by the provisions of Sec. 158BD - the notice u/s 158BD was issued on 14.6.2005 which is approximately 34 months after the framing of the assessment of Shri Manoj Aggarwal which was made on 29.8.2002 thus, it cannot be said that the notice was issued within reasonable time - The interpretation of section 158BD not only furthers the intention of the Parliament, but also sub-serves the larger public interest in that it places reasonable fetters upon the jurisdiction of the concerned AO who might otherwise be left with uncontrolled discretion in such matters - Section 158BE expressly states that the satisfaction is to be recorded by the AO with respect to the need to issue notice to the third party before he hands-over possession of books and assets seized or requisitioned, to the AO of such third party there was no substantial question of law arises Decided against Revenue.
Issues:
1. Validity of notice issued under Section 158BD to the assessee. 2. Time limitation for completion of block assessment of third parties under Section 158BE. 3. Interpretation of jurisdiction of Assessing Officer (AO) in cases involving third parties. 4. Applicability of Section 158BE(1) and Section 158BE(2) in block assessments. Issue 1: Validity of notice issued under Section 158BD to the assessee The case involved the validity of a notice issued under Section 158BD to the assessee, a third party not subject to search and seizure under Section 132. The CIT (Appeals) held that the notice was issued beyond a reasonable period of time, violating the provisions of Section 158BD. The Tribunal upheld this decision, emphasizing that the satisfaction required for issuing the notice should have been recorded during the assessment proceedings of the searched person. The Court agreed with this interpretation, stating that the notice must be issued within the two-year period specified under Section 158BE(1) to avoid uncontrolled discretion of the Assessing Officer. Issue 2: Time limitation for completion of block assessment of third parties under Section 158BE The Revenue argued that the impugned order imposed a period of limitation on the Assessing Officer, contrary to the provisions of Section 158BE. They contended that the limitation period starts from the issuance of notice and ends two years from the end of the month of service of such notice, which in this case extended beyond the actual completion of assessment in 2007. However, the Court rejected this argument, emphasizing that the satisfaction and notice issuance for third parties should align with the assessment proceedings of the searched person to prevent unfettered discretion. Issue 3: Interpretation of jurisdiction of Assessing Officer in cases involving third parties The Court analyzed the jurisdiction of the Assessing Officer in cases involving third parties, highlighting the need for the AO dealing with third-party assessments to record satisfaction based on materials from the searched person's assessment proceedings. This approach ensures that the jurisdiction and time limitations for third-party assessments are defined within the two-year period specified under Section 158BE(1), preventing arbitrary actions and safeguarding public interest. Issue 4: Applicability of Section 158BE(1) and Section 158BE(2) in block assessments The Court clarified that the interpretation of Section 158BE should align with the intention of the legislature to place reasonable constraints on the Assessing Officer's jurisdiction over third-party assessments. By requiring the satisfaction and notice issuance within the two-year period, the Court upheld the Tribunal's decision, emphasizing the importance of following procedural requirements to prevent abuse of discretion. Consequently, the Court dismissed the appeal, finding no substantial question of law for consideration.
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