2015 (4) TMI 82 - AT - Income Tax

Block assessment - Assessment u/s 158BD r.w.s. 158BC - addition on unexplained expenditure u/s 69C - bsence of satisfaction note - Held that - In the present case, it is clear that the satisfaction Note has not been supplied to the assessee, as deduced by the CIT(A). Therefore, following the parity of reasoning laid down by the Hon ble Delhi High Court in the case of Janki Exports International (2004 (3) TMI 21 - DELHI High Court ), we set-aside the impugned orders of the lower authorities and restore the matter back to the file of the Assessing Officer who shall supply the reasons recorded for arriving at the satisfaction for invoking section 158D of the Act to the assessee. On receipt of such reasons, assessee shall be entitled to file objections which shall be disposed-off by the Assessing Officer by way of a speaking order and only thereafter he shall proceed to pass a fresh assessment in accordance with law. - Decided in favour of assessee for statistical purposes

Summary

Issues:
1. Addition of unexplained expenditure u/s 69C of the Income-tax Act.
2. Challenge to block assessment on the grounds of natural justice violation.

Analysis:
1. The primary issue in this case pertains to an addition of &8377; 5,17,956/- made by the Assessing Officer under section 69C of the Income-tax Act. The appellant contested the addition on the grounds of natural justice violation during the block assessment period of 1996-97 to 2002-03. The appellant raised an Additional Ground of Appeal claiming that the principles of natural justice were breached as the satisfaction note prepared by the Assessing Officer was not provided to the assessee, denying a reasonable opportunity to object. The appeal was directed against an order of the Commissioner of Income Tax (Appeals)-III, Pune, which arose from the Assessing Officer's order under section 158BD r.w.s. 158BC of the Act.

2. The appellant contended that the provisions of section 158BD of the Act could only be invoked after recording the mandated satisfaction, which was not provided to the assessee, rendering the assessment legally defective. The Additional Ground of Appeal was challenged by the Departmental Representative on the basis that it was not raised before the lower authorities. However, the Appellate Tribunal admitted the Additional Ground for adjudication considering it a jurisdictional issue.

3. The Appellate Tribunal, after considering the arguments from both parties, found merit in the appellant's plea based on the judgment of the Hon'ble Delhi High Court in a similar case. The Tribunal directed the Assessing Officer to provide the reasons recorded for invoking section 158BD to the assessee, allowing them to file objections which must be disposed of through a speaking order before proceeding with a fresh assessment in accordance with the law.

4. The Tribunal rejected the Departmental Representative's plea that the CIT(A) had already examined the record and was satisfied with the satisfaction recorded, emphasizing the importance of following the legal principles laid down by the Hon'ble Delhi High Court. Consequently, the appeal of the assessee was allowed for statistical purposes without delving into the merits of the impugned addition of &8377; 5,17,956/- made under section 69C of the Act. The matter was remanded back to the Assessing Officer for compliance with the directions given by the Tribunal.

This detailed analysis of the judgment highlights the legal intricacies involved in the case, focusing on the violation of natural justice principles and the subsequent directions provided by the Appellate Tribunal for a fair assessment process.