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2015 (2) TMI 293 - HC - Income TaxProcedure for block assessment - proceedings under sections 158BC and 158BD - reasonable period of time in issuing notice - Held that - In light of the position of law declared in Commissioner of Income Tax v. V.K. Narang HUF, 2015 (1) TMI 566 - DELHI HIGH COURT this Court finds that the delay of 5 months in the issuing of notice by the A.O. in the present appeals cannot be unreasonable. Accordingly, the impugned orders of the ITAT is set aside on this aspect. The satisfaction note is held to be validly issued and within a reasonable time. In the light of the above observations of the Supreme Court in Calcutta Knitwears 2014 (4) TMI 33 - SUPREME COURT , particularly the contextual facts discussed (i.e. completion of the searched party s assessment on 31-03-2005, satisfaction note under Section 158BD issued on 15-07-2005 and notice issued on 10-02-2006) it cannot be said that the delay in issuing the notice (although the satisfaction note was recorded within reasonable time) was fatal to the block assessment against the present assesse. Decided against assessee.
Issues Involved:
1. Whether the notice under Section 158BD of the Income Tax Act, 1961 was issued within a reasonable period. 2. Validity of the satisfaction note recorded by the Assessing Officer. 3. Merits of the additions made by the Assessing Officer. Issue-wise Detailed Analysis: 1. Reasonableness of the Notice Issuance under Section 158BD: The core issue was whether the ITAT was correct in holding that a notice must be issued by the Assessing Officer ("A.O.") within a reasonable period in relation to assessment proceedings under sections 158BC and 158BD of the Act. The search on M/s Friends Portfolio Pvt. Ltd. and its director led to the discovery of bogus accommodation entries involving the respondents. The satisfaction note was recorded on 13.02.2003, and notices were issued on 10.07.2003 and 18.07.2003 respectively. The ITAT held that the notice was issued belatedly, relying on the Gujarat High Court judgment in Khandubhai Vasanji Desai & Others v. DCIT, which suggested a reasonable period of 60 days for issuing a notice. However, the Supreme Court in CIT vs. Calcutta Knitwears clarified that the satisfaction note could be prepared at various stages and did not impose a rigid time frame for issuing notices. The Delhi High Court found that a delay of five months in issuing the notice was not unreasonable. 2. Validity of the Satisfaction Note: The satisfaction note recorded on 13.02.2003 was a point of contention. The ITAT had quashed the assessment on the grounds that the satisfaction note was belatedly recorded. However, the Supreme Court in Calcutta Knitwears emphasized that the satisfaction note is sine qua non for initiating proceedings under Section 158BD and can be prepared at different stages of the assessment process. The Delhi High Court upheld that the satisfaction note in this case was validly issued within a reasonable period, aligning with the Supreme Court's interpretation. 3. Merits of the Additions Made by the Assessing Officer: The ITAT had not addressed the merits of the Revenue's contentions regarding the additions made by the A.O. due to the focus on the delay in issuing the notice. The Delhi High Court noted that the ITAT's orders dated 04.04.2008 and 17.04.2009 did not consider the substantive grounds of the Revenue's appeal. Consequently, the High Court remitted the cases back to the ITAT to decide on the merits of the additions made by the A.O. and the correctness of the CIT(A)'s order. The ITAT was directed to expedite the proceedings considering the long pendency of the cases. Conclusion: The Delhi High Court set aside the ITAT's orders on the aspect of delay in issuing the notice under Section 158BD, holding that the satisfaction note was validly issued within a reasonable time. The cases were remitted to the ITAT for a detailed examination of the merits of the Revenue's contentions regarding the additions made by the A.O. The appeals were partly allowed, ensuring that the rights and contentions of the parties were not prejudiced.
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