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2017 (2) TMI 743 - HC - Income TaxInitiation of proceedings u/s 158BD without jurisdiction - Held that - From the record, it seems that the finding arrived at by the CIT (Appeals) was not challenged. Assuming but without admitting, even if the same was challenged, the same was not reversed by the Tribunal in its order. In that view of the matter, in our view, unless the finding of the CIT (Appeals) was held to be bad in law and reversed by the Tribunal in appeal, the consequential order is erroneous and the same could not have been done in appeal preferred by both the sides. The Tribunal has to quash and set aside the conclusion arrived at by the CIT (Appeals) holding that the proceedings under Section 158BD is bad in law which is never reversed by the Tribunal. In that view of the matter, unless the basic finding is held to be valid, the consequential order, in our opinion, is bad in law. Therefore, the issue no.2 is answered in favour of the assessee and against the department. Whether the Tribunal had material and was right in law in holding that the total income assessed in the hands of the society in the block return as well as regular return is to be assessed in the hands of Shri Khan and Shri Vijay at the ratio 51% and 49% respectively, since there was no notice served under section 158 BC, in that view of the matter also the assessee could not have been assessed under section 158BD of the Act. Decided in favour of the assessee and against the department.
Issues Involved:
1. Validity of the notice under Section 158BD of the Income Tax Act. 2. Jurisdiction of the Income Tax Appellate Tribunal in reviewing the CIT (Appeals) findings. 3. Assessment of total income in the hands of individuals versus the society. Detailed Analysis: Issue 1: Validity of the notice under Section 158BD The appellants argued that the notice issued under Section 158BD was invalid and lacked jurisdiction. The CIT (Appeals) had previously held that the initiation of proceedings under Section 158BD was without jurisdiction, and this finding was not challenged by the revenue. The Tribunal's decision to assess income in the hands of individuals without reversing the CIT (Appeals) finding was erroneous. The court cited the case of CIT Vs. G.B.H. Exporters, emphasizing that academic issues need not be decided if they do not alter the case's outcome. The court concluded that the notice under Section 158BD was invalid, favoring the appellants. Issue 2: Jurisdiction of the Income Tax Appellate Tribunal The appellants contended that the Tribunal lacked jurisdiction to challenge the CIT (Appeals) finding regarding the initiation of proceedings under Section 158BD. The court noted that the revenue did not challenge this finding, making the Tribunal's review improper. The court referenced CIT Vs. Anupam Sweets and New Delhi Auto Vs. Joint CIT to illustrate that satisfaction under Section 158BD must be objective and supported by material evidence. The court ruled that the Tribunal's action was without jurisdiction, favoring the appellants. Issue 3: Assessment of total income in the hands of individuals versus the society The appellants argued that the income assessed in the hands of the society could not be reassessed in the hands of individuals without proper notice under Section 158BC. The court noted that the CIT (Appeals) had deleted the addition on merits, and the Tribunal's assessment lacked a valid foundation. The court cited Lalji Haridas Vs. Income Tax Officer, where protective assessments were deemed permissible only to determine the liable party. The court concluded that the Tribunal's assessment was invalid, favoring the appellants. Conclusion: The court ruled in favor of the appellants on all issues, declaring the notice under Section 158BD invalid, the Tribunal's review without jurisdiction, and the assessment of income in the hands of individuals improper. Both appeals were allowed, and the judgment was placed in each file.
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