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TMI Blog2006 (2) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... The issuance of notice, after record of such satisfaction, is another requirement, which entitles the Assessing Officer to assume jurisdiction to assess the undisclosed income of such person. Thus, if necessary satisfaction has not been recorded prior to making of assessment u/s 158BD, such assessment cannot be legally justified. Thus, on this basis the assumption of jurisdiction to assess u/s 158BD is on different footing than the assumption of jurisdiction u/s 158BC. It can, therefore, be concluded that if the Assessing Officer does not record satisfaction prior to the making of assessment u/s 158BD, such assessment has to be quashed, as was done in the case of Amity Hotels (P.) Ltd[ 2004 (10) TMI 27 - DELHI HIGH COURT] . In the case of R.K. Upadhayaya v. Shana Bhai P. Patel [ 1987 (4) TMI 5 - SUPREME COURT] , the Hon'ble Supreme Court, has held that there is a clear distinction between issuance of notice and service of notice. It was observed in that case that service under the new Act is not a condition precedent to the confirmation of jurisdiction on the ITO but it is a condition precedent for making the order of assessment. Thus, the service of a valid and legal notice re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) erred on facts as well as in law in holding that investment of Rs. 1 lakh in Agriculture Land measuring 20 KBM was undisclosed income of the assessee being from unexplained sources. 5. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that the investment of Rs. 43,750 in PUNB Building at Ballabgarh was undisclosed income of the assessee being from unexplained sources. 6. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that advance of Rs. 10,000 paid for purchase of plot No. 438/3 was undisclosed income of the assessee being from unexplained sources. 7. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that the source of payment of Rs. 34,155 towards booking of plot at Gurgaon was undisclosed income of the assessee being from unexplained sources. 8. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that the income from STD Booth and M/s. Spreadcom could not be established and, therefore, the same was nil. 9. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in not considering incomes earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idabad Para 3(v) above. Rs. 3,60,000 (vi) Investment in 6 marla plot at Gurgaon - para 3(vi) above. Rs. 34,155 (vii) Investment in various properties as mentioned in document No. A-I- para 3(vii) above. Rs. 1,13,41,500 Total undisclosed income Rs. 1,20,14,405 4.4 The assessee challenged the assessment order before the ld. CIT(A), before him, several grounds were taken. The assessee also moved application under Rule 46A for admitting evidence. This application was allowed by the ld. CIT(A) after obtaining comments from the Assessing Officer. 4.5 So far as the legal grounds are concerned, the ld. CIT(A) did not find force and rejected the same. The ld. CIT(A) also considered various additions made by the Assessing Officer and gave some relief. He deleted the addition of Rs. 1,13,41,500. 5. Before us, the assessee has challenged the order of ld. CIT(A). 6. Ground Nos. 1 2 challenge the validity of the assessment proceedings. 7. At the time of hearing, the ld. counsel for the assessee, Shri Dinesh Verma raised various legal pleas in support of these grounds, which are as under: (i) That the jurisdiction for making assessment in the case of the assessee was not vested with the then ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority issuing notification under section 158BD was competent to do so nor the officer who passed the assessment order was empowered or authorized to pass the order. 8. The ld. Departmental Representative, on the other hand, justified the jurisdictional authority and competency of these authorities. He further submitted that the plea regarding lack of jurisdiction cannot be raised before the ITAT. 9. We have considered the entire material and rival submissions. 9.1 From the reply of the assessee dated 7-12-2004 available at page 87 of the paper book, it is found that the assessee had contended that the said notice was issued without jurisdiction and was bad in law. On perusal of para 2.1 on page 5 of the assessment order, it is evident that the Assessing Officer has taken note of the objection of the assessee regarding lack of jurisdiction. He has observed as under: 2.1. The reply filed by the assessee on 25-4-2003 has been considered. The contention of the assessee that the proceedings are bad in law and void ab initio being barred by limitation, for non-compliance to mandatory provisions of law and for want of jurisdiction is not correct. Vide letter, dated 20-12-2002, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simply reproduced the reply of the Assessing Officer and as observed in para 5.1, as under: 5.1 The issue has been examined and the stand of the appellant is rejected in view of the fact that the appellant was not an existing assessee and it was only the ACIT, who was the Officer competent to issue a notice under section 158BD of the Income-tax Act. 9.5 On going through the material on record, it is found that the validity of the assessment made by the Assessing Officer cannot be challenged on the ground that the Assessing Officer did not have a valid authority to make the assessment. It is to be pointed out that the assessee was not assessed to tax and he did not file return in earlier years. Hence, question of transfer of jurisdiction did not arise. Secondly, the CIT concerned had territorial jurisdiction over the assessee and thus the assessment so made by him is justified. Otherwise also, the validity of the assessment so made cannot be challenged before us on the ground that the JCIT did not have jurisdiction to assess the assessee. It is an administrative matter and, therefore, if the assessee had any grievance in this regard, he could have approached the departmental authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above, the plea regarding validity of jurisdiction cannot be entertained and, therefore, the ground is rejected. 9.9 The next legal plea taken by the assessee is that the Assessing Officer has not recorded satisfaction for making assessment. The assessee has not taken specific plea by raising specific ground in the appeal before us. Neither the assessee nor the Department has filed the assessment in the case of the person searched. The satisfaction can be recorded in the case of the person searched or even otherwise i.e., separately and thus it is not necessary to record the satisfaction in the assessment order made under section 158BD. In view of the above, we do not find force in this plea of the assessee, which is rejected. 10. The last plea taken by the assessee for challenging the validity of the assessment order is that under section 158BC/158BD a notice is to be issued by the Assessing Officer requiring the assessee to file return after 15 days. According to learned counsel for the assessee if the assessee is provided a period of less than 15 days, then such notice is not a valid notice and assessment made pursuant to such notice cannot be legally sustained. In support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period. 10.2.1 In view of the above provisions contained under section 158BC(a), the notice is to be served upon the assessee, requiring him to furnish the return within such time not being less than 15 days. The provision is unambiguous and clear. The intention of the Legislature in using the words not less than 15 days , is clear. The rule of literal construction has to be followed for ascertaining the plain meaning of the terms used. There being no ambiguity in the language adopted, no other construction except that a clear notice of more than 15 days is to be given, is possible. 10.3 The contention of the learned DR that if a notice does not provide a period of clear 15 days, that is merely an irregularity, which is curable is not acceptable in view of specific: provision of law referred to above which casts a specific obligation upon the Assessing Officer. When the law requires a particular act to be done in a particular manner and within a particular time, then no addition, subtraction or modification of such requirement is permissible. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain the requirements which may be included in a notice under section 15(3). The notice under section 15(3) requires an assessee to furnish a return. The requisition does not stop there, it proceeds further, and, indeed, must proceed further. It requires the assessee to furnish a return within a certain period. It appears to us that unless the period for furnishing the return is specified in the notice, it is an incomplete notice. The very object of the Act, which is a fiscal statute, indicates that the assessment should be completed within a definite period and, therefore, it is necessary that the assessee should be required to file a return within a specified period. An assessee who fails without reasonable cause or excuse to furnish a return in due time is liable to penalty under section 37. The enactment of section 37 testifies to the intention of the Legislature that the return is required to be filed within a definite period, and accordingly a duty is cast upon the assessing authority to specify such period in the notice calling for the return. The notice must not merely require an assessee to furnish a return. It must require an assessee to furnish a return within a specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish the return of income (within thirty days of the receipt of the notice), as against the required period of 'not less being less than 30 days', was a valid notice. The assessee had challenged the validity of the notice in that case, but the Tribunal upheld the plea of the assessee though the assessee had filed return. It was observed that the fact that the assessee submitted return later on or that it was accepted for the purpose of making the assessment, does not cure the defect that initially lay in the notice. The observations of the then Chief Justice Sif Leonard Stone, in this regard are as under: I agree with that statement in the judgment of the Tribunal, computation of periods of time has given rise to a great many cases, both in this country and in England. Time can be infinitely divided. There is no fraction of second, which is so short in duration that it cannot be divided into something smaller, in my judgment expressions 'within thirty days' and 'not less than thirty days' are two quite different things. 'Within thirty days' is within two points of time one at which the period begins and the other at which it expires. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess than 15 days, was not an issue before that Bench and, therefore, the same was not considered. In that case, defect in the notice as pointed out, was that the notice was served upon one lawyer Shri R.K. Dhawan who was assessee's advocate and who was appearing on behalf of the assessee. The plea of the Department was that under a bona fide belief, the Assessing Officer handed over the notice to Shri Dhawan and even the assessee had filed return in compliance to such notice. On these facts, it was held that the defect in the notice, if any, was curable under section 292B. Thus, the issue which is involved in this appeal, was not directly involved before the Special Bench. 10.13 The Delhi Bench B of the ITAT in the case of N.K. Parwanda v. Dy. CIT vide order dated16th January, 2004rendered in IT(SS) Appeal No. 129 (Delhi) of 2003 has considered the issue relating to requirement of issuance and service of notice under section 158BC. In that case, the plea of the assessee was that the notice was sent at the old address of the assessee and, therefore, it was not served. On enquiry, it was found that the notice was sent through registered post on the old address of the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt cannot be legally justified. Thus, on this basis the assumption of jurisdiction to assess under section 158BD is on different footing than the assumption of jurisdiction under section 158BC. It can, therefore, be concluded that if the Assessing Officer does not record satisfaction prior to the making of assessment under section 158BD, such assessment has to be quashed, as was done in the case of Amity Hotels (P.) Ltd. 10.18 In the case of Sakun International v. Jt. CIT [2005] 94 ITD 138 (Delhi) also, since no satisfaction was recorded by the Assessing Officer, before issuing notice, the proceedings initiated under section 158BD were quashed. The Bench has observed as under: As per provisions of section 158BD, for assessing the undisclosed income of any other person, i.e. other than the person with respect to whom search was made under section 132, the Assessing Officer must be satisfied that the undisclosed income belongs to such person, i.e., the person other than the searched person. Thus, the Assessing Officer cannot proceed against 'such other person', without having required satisfaction. The requirement of proceedings against 'any other person' under sectio ..... 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