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2021 (7) TMI 372 - AT - Income TaxValidity of 158BD proceedings - date on which jurisdiction u/s 158BD was assumed - HELD THAT - We find from the letter from the AO of the searched person to AO of the assessee dated 26th August, 1997, it was requested to take over the books of account for the purpose of section 158BD. We find, the AO of the searched person, vide letter dated 26th February, 1998 to the ACIT, Inv. Wing, Faridabad, had handed over the books of accounts pertaining to the assessee which otherwise shows that prior to 04.09.1997, i.e., the date on which jurisdiction u/s 158BD was assumed, the books of account were not handed over to the assessee. We find in the case of Manish Maheshwari vs. ACIT Anr. 2007 (2) TMI 148 - SUPREME COURT has observed that before the provisions of section 158BD of the IT Act, 1961 are invoked against a person other than the person whose premises have been searched u/s 132 or documents and other assets have been requisitioned u/s 132A, the conditions precedent have to be satisfied. One of the conditions is that the books of account or other documents or assets seized or requisitioned have to be handed over to the AO having jurisdiction on such other person and, thereafter only the AO has to proceed u/s 158BD against such person. Similar view has been taken in various other decisions relied on by the ld. Counsel. Since the AO in the instant case has taken recourse to section 158BD before receipt of the seized material, therefore, the 158BD jurisdictional conditions cannot be said to have been met. Therefore, the entire proceedings u/s 158BD/143(3) are vitiated and, therefore, such 158BD proceedings which are not in accordance with the law are quashed. - Appeal filed by the assessee is allowed.
Issues Involved:
1. Jurisdiction under Section 158BD. 2. Validity of notice under Section 158BD. 3. Issuance of notice under Section 143(2). 4. Jurisdiction of the Assessing Officer (AO). 5. Timeliness of notice under Section 158BD. 6. Merits of the additions made by the AO. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 158BD: The appeal concerns the validity of the jurisdiction assumed by the AO under Section 158BD of the IT Act, 1961. The assessee challenged the jurisdiction on the grounds that the jurisdictional conditions were not fulfilled. The Tribunal found that the seized materials were not handed over to the AO before assuming jurisdiction under Section 158BD. The Tribunal cited the Supreme Court's decision in Manish Maheshwari vs. ACIT, which mandates that the books of account or other documents must be handed over to the AO having jurisdiction over the person before proceeding under Section 158BD. Since this condition was not met, the jurisdiction assumed by the AO was invalid. 2. Validity of Notice under Section 158BD: The assessee argued that the notice issued under Section 158BD did not indicate any material or basis for its issuance, nor did it indicate the person in whose case the search was conducted. The Tribunal agreed with the assessee, noting that the notice was vague and did not meet the legal requirements. The Tribunal referenced the decision in Subhash Chandra Bhaniramka vs. ACIT, which supports the necessity for clear satisfaction and material basis in the notice. 3. Issuance of Notice under Section 143(2): The assessee contended that the notice under Section 143(2) was not issued after the filing of the return of income on 14.09.1998. The notice was issued on 13.02.1998, which was before the return was filed. The Tribunal found that this procedural lapse rendered the assessment proceedings invalid. The Tribunal cited the Supreme Court's decision in ACIT vs. Hotel Blue Moon, which emphasizes the necessity of issuing a notice under Section 143(2) within the stipulated time frame. 4. Jurisdiction of the Assessing Officer (AO): The assessee argued that the ACIT, Company Circle, Delhi, who issued the notice under Section 158BD, did not have jurisdiction over the assessee. The Tribunal found that the jurisdiction was indeed with the AO in Faridabad, as evidenced by the return of income filed in Ward 1, Faridabad, and the subsequent transfer of jurisdiction to the ACIT, Inv. Circle, Faridabad. The Tribunal concluded that the ACIT, Delhi, did not have jurisdiction to issue the notice under Section 158BD. 5. Timeliness of Notice under Section 158BD: The assessee argued that if the notice under Section 158BD was served on 03.09.1998, it was beyond the permissible time frame from the conclusion of the assessment of the searched person. The Tribunal agreed, noting that the assessment of Manu Finlease Ltd. was passed in August 1997, and the notice issued more than a year later was barred by limitation. The Tribunal referenced the decision in CIT vs. Bharat Bhushan Jain, which supports the timely issuance of notices under Section 158BD. 6. Merits of the Additions Made by the AO: Although the Tribunal primarily focused on the legal grounds, it briefly addressed the merits of the case. The assessee had provided explanations for the various additions made by the AO, but these were disregarded. Given that the Tribunal quashed the proceedings on legal grounds, it did not adjudicate the merits of the additions, deeming them academic in nature. Conclusion: The Tribunal quashed the assessment proceedings under Section 158BD/143(3) due to the failure to meet jurisdictional conditions, invalid notice issuance, and procedural lapses. Consequently, the appeal filed by the assessee was allowed. The decision was pronounced in the open court on 08.07.2021.
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