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TMI Blog2012 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ient, vide appellant order dt. 18-9-2002 marked CIT(A)-I/CC.1(4)/07/2002- 2003. (ii) the Appellant firm is the developer of the property for a fixed remuneration at 10% of the cost of project and is neither the owner of the land nor the owner of the super structure built thereon. (iii) the Appellant firm acted as a conduit in passing on the extra cash received from the members of the society, who are the real owners of the property, to the final recipient M/s. Raj Granites as stated by Mr. Bharat J Shah partner of the Appellant firm in his statement on oath. (iv) the alleged amount passed on to M/s. Raj Granite and taxed in their hands is neither the expenditure nor the investment of the Appellant-firm. 2. Without prejudice to what is stated in the aforesaid Ground of Appeal No.1, the learned CIT(A) ought to have restricted the addition to Rs.25,152/- being 10% supervision charges, of the alleged cash payment of Rs.2,51,519/- to which the Appellant firm is entitled to by virtue of the agreement between the society and the Appellate firm as developer. 3. The learned CIT(A) has grossly erred in law and on facts in confirming the following addition: (a) Ambica Timber Mart 52,71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f National Thermal Power (229 ITR 383), it can be raised before the Ho'ble ITAT. '1. The notice issued u/s. 158BD of the Act (enclosed herewith) is vague and devoid of requite satisfaction to be recorded by AO of the searched party and hence the assessment framed being bad in law in view of the various judicial pronouncements by courts of law deserves to be quashed.' 3. Brief facts are that assessee-firm is engaged in construction work and is part of Kansara Group where search action was undertaken on the basis of the documents found and seized at the time of search. A notice u/s. 158BD of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') was issued on 18-10-2000 and return of income was filed on 09-05-2001 declaring undisclosed income of Rs.41,102/- and subsequently undisclosed income was assessed at Rs.1,12,69,955/-. The assessee has raised additional ground of appeal challenging the legality of the notice issued u/s. 158 BD of the Act. 3.1 The contention of the Ld. AR appearing on behalf of assessee is that in view of the law as laid down by the Hon'ble Apex Court rendered in the case of National Thermal Power Corporation v. CIT (1998) 229 ITR 383 (SC) the legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 158BD and hence the decisions relied upon by the appellant are not applicable. The additional grounds, raised by the assessee should be dismissed- 3.1 On law It Is stated that the Hon'ble 1TAT Ahmedabad has given the above decision on the basis of earlier decision of Hon'ble ETAT In the case of ACIT Vs. Shri Koushik R. Shah ITA No. lS5/And/Z006 dated 13.03.2D09.,This decision of the Hon'ble ITAT, Ahmedabad is further based on the decision of Delhi ITAT In the case of Dy. CIT Vs. CS.L Securities Pvt, Ltd. 15 DTK 318 which in turn is based on the decision of Hon'ble Delhi High Court In the case of Delhi Auto Finance Pvt. Ltd. 217 CTR 628 which in turn is based on the decision of Hon'ble Supreme Court in the case of Manish. 3.2.1 It Is humbly submitted that the facts in the case of Manish Maheshwari (Supra) before the Hon'ble Supreme Court were totally different which is clear from the following:- 10, Law in this regard is clear and explicit The only question which arises for our consideration is as to whether the notice dated 6-2-1996 satisfies the requirements of section I58BD of the Act. The said notice does not record any satisfaction on the part of the Assessing Officer Doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer must record his satisfaction about the existence of undisclosed income before proceeding against at person other than the one searched. No such satisfaction has been recorded in the present case On the contrary, the only thing recorded by the Assessing Officer is that information was given that a notice should be issued to the assessee under section 142(1) of the Act. This hardly meets with the first condition precedent given in Maniih Mahcshwan's case (supra}. 17. Insofar as the vagueness of the notice is concerned, we find that in Manish Maheshwari's case {supra}, the notice issued the assessee in that case was more or less similar to the native dated 26-10-1998issued to the assessee in the present case, In the case of Manish Mahheshwari (supra) the additional fact mentioned in 'he notice seal lo the assessee was that a search was conducted in the month November, 1995. Insofar as the present case is concerned, the assessed has not been informed when the search was conducted. 18. Denting with the contention regarding the vagueness of her notice in Manah Mmaheshwari's case (supra), the Supreme Court held as follows: "... The only question which arises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken in Manish Maheshwari's case (supra) and in fact could not press her case very far in the face of the clear law laid down by the Supreme Court. 22. Under the circumstances, we have no option but to answer the substantial question of law in the negative, in favour of the assessee and against the revenue. 4 On the other hand [he Hon'ble Kerala High Court has also followed the decision of Supreme In the case of Manlsh Maheshwari (supra) in the case of Panchajanyam Management Agencies (supra) wherein the Hon'ble Kerals High Court has stated as under:- "Second appeals were fifed bath by the assessee-Firm as well as by the department before the Tribunal. During hearing of the appeals before the Tribunal, assessee-Firm filed petition to raise additional ground questioning the validity of assessment mainly relying on the decision of the Supreme Court in MANAISH MAHESHWARI's case reported in 289 ITR 341 and contended that assessment against the respondent-Firm is invalid because the assessing officer has not recorded his satisfaction under Section I58BD of the Act. The Tribunal accepted the assessee-Firm's contention and declared the assessment made under Section J58BD read with Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision authorising the department to assess any person other than the searched assessee or assessee against whom documents and records tire called for under Section 132A, still assessment in such case has to be completed strictly in accordance with the procedure provided under Section 158BC as stated above, In our view, in the first place, there is no mention in Section 158BD that the assessing officer before transferring the file to another officer having jurisdiction to assessee the pe4rson other than the assessee preceded under Section 132 or 132A has to record his satisfaction in writing. It is pertinent to note that wherever assessing officers are required to record their satisfaction before issuance of notice, statute prescribes the same. A situation of that nature is covered by Section 148(2) which requires the officer to record reasons for reopening an assessment before issuing notice. Not only there is no such requirement in Section 158BD but what we notice is that the satisfaction referred to therein is only about undisclosed income of a person other than the assessee searched under Section 1132 or investigated under Section 132A and the satisfaction is only for the p8ur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst assessment on merits which the Tribunal has not done. We therefore answer the questions raised in favour of the revenue and against the assessee and consequently allow the appeals, set aside the order of the Tribunal and restore the appeals to the file of the Tribunal for decision on merits after hearing both sides 3.5. In the case of Mukta Metal Works (supra) the Hon'ble Punjab & Haryana High Court has stated that an office note appended with the order u/s. 158BC will clearly show the satisfaction required u/s. 158BD. The Hon'ble High Court stated as under:- 8. We have given due consideration to the rival submissions. We are of the view that the questions raised have to be answered in favour of the revenue and the matter remanded to the Tribunal for fresh decision. 9. We have already reproduced the office note dated 21.5.2001, which by itself clearly indicates that there are entries which may show undisclosed income of persons other than searched persons who were identifiable from the diary. Accordingly, due cognizance was being taken thereof for initiating proceedings for block assessment in those cases. The same meets the requirement for proceeding under Section 158BD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Special Bench has held that recording of satisfaction is mandatory and imperative before assumption of jurisdiction under section 158BD. 2.16 The Hon'ble Apex court in the case of Manish Maheshwari (supra) held that the proceedings under section 1568BD is not valid. While holding so, the Hon'ble Apex court has taken into consideration that the notice does not record any satisfaction on the part of the Assessing Officer. Documents and other assets recovered during the search had not been handed over to the Assessing Officer. The Hon'ble Apex court observed that no proceedings under section 158BC have been initiated. There was a patent non-application of mind. The Hon'ble Apex court in that case has referred to the decision of the Gujarat High Court in the case of Khandubhai Vasanji Desai v. Dy. CIT (1999) 236 ITR 73. The following para has been mentioned by the Hon'ble Apex court:- "This provision indicates that where the Assessing Officer who is seized of the mater and has jurisdiction over the person other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said date, it is not possible to invoke section 158B at all.' 2.27 From the above discussion, it is clear that the assessee admitted at the time of search that he is having unaccounted income from the transportation of unaccounted production of liquor. In a letter addressed to the revenue, he admitted such income and sated that he will declare such income. While making assessment in the case of M/s. H.E. Distilleries Pvt. Ltd. under section 158BC, the person managing the affairs of M/s. H.E. Distilleries Pvt. Ltd. Admitted that transportation is done by the assessee. Thus, it is clear that the assessee was in receipt of an amount which consists of income liable to tax though such income was no declared in the return of income filed after the search. A device was adopted to show the income under section 44AE of the Income-tax Act. Such device cannot be accepted in view of the decision of Hon'ble Apex court in the case of McDowell & Co. Ltd. v. CTO(1985) 154 ITR 148. 2.28 Considering the facts on record and the position of law as discussed above, we feel that requisite satisfaction has been recorded by the Assessing Officer who was having jurisdiction over the person, who was raid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.3-1 to 4 above the additional ground raised by the assesse should be dismissed. 6. Without prejudice to the above if the additional ground is admitted then the same has to be referred for adjudication to a Special Bench because two Benches of the Hon'ble ITAT viz. ITAT, Ahmedabad in the case of Shri Kaushik R Shah (supra) and Infotech Solutions (supra) and the decision of Hon'ble ITAT, Bangalore in the case of Subhan Javeed (supra) have given contradictory decisions on the same issue." Ld. DR pointed out that vide letter dated 22-03-2011, the assessee-firm was supplied with the satisfaction no of the DCIT(CC) 1(4), Ahmedabad, the notice is also issued by the same DCIT(CC)1(4), Ahmedabad u/s. 158BD of the Act. 4. We have heard the rival submissions perused the materials available on record and judgments cited by Ld. AR of the assessee. We find that additional ground as raised by the assessee against the validity of notice issued u/s. 158BD of the Act, and same goes to very root of the initiation and legality of proceedings. After considering all the aspects of the matter, it would subserve the interest of natural justice, if this additional ground is remitted back to the file o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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