2022 (5) TMI 167 - AT - Income Tax

Validity of proceedings u/s 158BD - Time limit for completion of block assessment - In course of search operation conducted by Revenue u/s 132(1) various books of accounts and documents were found and seized by Revenue - HELD THAT - The Notice u/s 158BC of the 1961 Act was issued by the AO of the assessee on 05th May 2000 which was served on the assessee on 08th May 2000. The assessment is to be completed within a period of two years from the end of month in which notice u/s 158BC was served by the AO on the assessee which in the instant case was served by the AO on the assessee on 08th May 2000 thus the assessment for the Block Period ended 23.08.1998 in the instant case is to be completed latest by 31st May 2002 as is provided u/s 158BE - In the instant case the assessment order for the Block Period from 01.04.1988 to 23.08.1998 under the provisions of Section 158BC read with Section 158BD was passed by the AO on 30th May 2002 which is within the aforesaid limitation period of two years from the end of the month in which notice u/s 158BC was served by the AO which in the instant case was served on 08th May 2000. The notice u/s 158BC was issued by AO on 5th May 2000 which was served on 08th May 2000. The time limit for passing assessment for Block Period was two years from the end of month in which notice u/s 158BC was served i.e. 31st May 2002. The Block Period assessment order passed by AO u/s 158BC(c) read with Section 158BD was dated 30th May 2002 which is within limitation period. Thus the contentions of the assessee are devoid of any merit and are hereby rejected. Eligibility of Shri R K Jain who claimed himself to be CIT(A) holding charge of Allahabad passed the appellate order - This appellate order was passed by Shri R K Jain on 28.09.2006 which is covered by order of Hon ble High Court specifying date of vacation of office as CIT(A) Allahabad by said Shri R K Jain and hence this appellate order dated 28.09.2006 is null and void. If the assessee wanted to agitate the order of Hon ble Allahabad High Court it could have approached Hon ble Allahabad High Court or Hon ble Apex Court but to agitate the said issue before tribunal ( being a body lower in hierarchy to Hon ble High Court) once the appellate order dated 28.09.2006 passed by Shri R K Jain is covered by the period declared by Hon ble High Court when he was not holding the charge of CIT(A) Allahabad is clearly a misuse and abuse of process of law and is contemptuous on the part of the assessee. Thus we hold that the ld. CIT(A) rightly proceeded to pass impugned appellate order dated 16th February 2017. Thus there is no merit in the arguments of the assessee which stand rejected. We order accordingly. Validity of Second appellate order u/s 250(6) - We have observed that ld. CIT(A) dismissed the appeal of the assessee on the merits of the additions made by the AO in limine without discussing the issues on merits which were raised by the assessee in its appeal filed before ld. CIT(A). The reference is drawn to provision of Section 250(6) of the Act whereby it is incumbent upon ld. CIT(A) to decide the appeal on merits after recording his reason for the decision arrived on the issues raised by the assessee in its appeal but the appellate order in the instant case was passed by ld. CIT(A in limine without discussing the issues on merits wherein he merely confirmed the additions without giving his own reasons for decision by passing a non-speaking and non-reasoned order on merits of each of the additions made by the AO . Thus the appellate order passed by ld. CIT(A) on the merits of additions made to the income of the assessee by AO, which is a non-speaking and unreasoned order is clearly not sustainable in the eyes of law. Based on facts and circumstances of the case and in the interest of justice and fairness to both the parties the matter can go back to the file of ld. CIT(A) limited to fresh adjudication of all the issues on merits of additions made by the AO so raised by the assessee in its appeal filed before ld. CIT(A) on merits in accordance with law. So far as issues raised by assessee on legal grounds as adjudicated by us in this order shall remain final and binding on both the parties per our decision in this order.Thus keeping in view the entire facts and circumstances of the case as discussed above and in fairness to both the parties with a view to grant justice we are inclined to set aside and remand the matter back to the file of ld. CIT(A) limited to adjudication of issues concerning additions to income made by the AO to be adjudicated on merits and in accordance with law. Appeal partly allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of the satisfaction note for initiating proceedings under Section 158BD.
2. Validity of the block period assessment without a search warrant under Section 132(1).
3. Validity of the notice issued under Section 158BC without mentioning Section 158BD.
4. Requirement of issuing a notice under Section 143(2) within the limitation period.
5. Time limit for completing the block period assessment.
6. Validity of the second appellate order passed by the CIT(A) after the first appellate order was quashed.
7. Nature of the appellate order passed by the CIT(A) on the merits of the additions.

Detailed Analysis:

1. Validity of the Satisfaction Note for Initiating Proceedings Under Section 158BD:
The Tribunal examined whether the satisfaction note was recorded by the AO of the searched persons before initiating proceedings under Section 158BD. Despite the satisfaction note not being traceable after 21 years, the Tribunal relied on the assessment order and an order passed under Section 158BE, both of which mentioned the recording of the satisfaction note on 26.04.2000. The Tribunal held that the satisfaction note was indeed recorded, citing the principles of preponderance of probabilities and the provisions of Sections 11, 16, and 35 of the Indian Evidence Act, 1872.

2. Validity of the Block Period Assessment Without a Search Warrant Under Section 132(1):
The Tribunal held that the provisions of Section 158BD allow for the assessment of undisclosed income even if the person was not directly searched under Section 132(1). Since the AO of the searched persons recorded satisfaction that the undisclosed income belonged to the assessee, the proceedings under Chapter XIV-B were validly initiated against the assessee.

3. Validity of the Notice Issued Under Section 158BC Without Mentioning Section 158BD:
The Tribunal found that Section 158BD is a substantive provision that mandates the application of Chapter XIV-B provisions, including the issuance of a notice under Section 158BC. The absence of a mention of Section 158BD in the notice did not vitiate the proceedings, as the assessee was fully aware of the proceedings and participated in them. The Tribunal also referred to the provisions of Section 292B of the Act, which cure procedural defects.

4. Requirement of Issuing a Notice Under Section 143(2) Within the Limitation Period:
The Tribunal held that since the assessee did not file the return of income within the time prescribed under Section 158BC, the return filed on 03.08.2000 was non-est/invalid. Consequently, there was no requirement for the AO to issue a notice under Section 143(2). The AO had duly issued a notice under Section 142(1), and the assessment proceedings complied with the principles of natural justice.

5. Time Limit for Completing the Block Period Assessment:
The Tribunal noted that the notice under Section 158BC was served on the assessee on 08.05.2000, and the assessment order was passed on 30.05.2002, within the two-year limitation period provided under Section 158BE. Therefore, the block period assessment was completed within the statutory time limit.

6. Validity of the Second Appellate Order Passed by the CIT(A) After the First Appellate Order Was Quashed:
The Tribunal referred to the judgment of the Hon'ble Allahabad High Court, which held that Shri R.K. Jain ceased to hold the office of CIT(A), Allahabad, on 25.09.2006. Since the first appellate order was passed by Shri R.K. Jain on 28.09.2006, it was null and void. Therefore, the second appellate order dated 16.02.2017, passed by the CIT(A), was valid.

7. Nature of the Appellate Order Passed by the CIT(A) on the Merits of the Additions:
The Tribunal observed that the CIT(A) dismissed the appeal on merits without discussing the issues raised by the assessee, thereby passing a non-speaking and unreasoned order. The Tribunal set aside the appellate order and remanded the matter back to the CIT(A) for fresh adjudication on the merits of the additions, directing the CIT(A) to pass a reasoned and speaking order.

Conclusion:
The Tribunal partly allowed the appeals for statistical purposes, remanding the matter back to the CIT(A) for fresh adjudication on the merits of the additions made by the AO. The legal issues raised by the assessee were adjudicated and decided by the Tribunal, which held that the proceedings under Chapter XIV-B were validly initiated and completed within the statutory time limit. The Tribunal directed the CIT(A) to pass a reasoned and speaking order on the merits of the additions.