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TMI Blog2012 (4) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... monstrating the factum of recording of satisfaction within the meaning of Section 158BD r.w. Section 158BC of the Act. In view of the above discussions, the impugned Block Assessment order, which is under challenge, in the C.O. in question, has been passed without jurisdiction. - ITSS No. 13/CHD/2006 & CO 31/CHD/2006 - - - Dated:- 26-4-2012 - H.R. KARWA MEHAR SINGH ,JJ. For The Appellant : Jyoti Kumari For The Respondent : Shri Ved Jain JUDGMENT : The revenue filed appeal against the order passed by the CIT(A) on 12.09.2005 for the block period from 01.04.1996 to 23.05.2002 u/s 250(6) of the Income-tax Act,1961 (in short 'the Act'). However, the assessee has raised in the CO, the preliminary legal ground of non- existence of jurisdiction, in framing the Block Assessment order dated 22.08.2005, whereby undisclosed income was determined at ₹ 8,57,15,730/-. Therefore, we deem it fit, to adjudicate firstly this preliminary issue of lack of jurisdiction raised by the assessee, in the revised CO. 2. The revenue has raised as many as 12 grounds of appeal, which are reproduced hereunder: (i) The Ld. CIT(A) has erred both in law and on facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 Lacs made by estimating the capital gain on Settlement of Properties among family members. 3. The assessee also raised revised grounds of appeal filed vide letter dated 20.05.2009, which are reproduced hereunder : 1. On the facts and circumstances of the case, the order passed by A.O is bad both in the eye of law and on facts and is liable to be quashed as the same has been passed without there being any search warrant in the name of appellant. 2. On the facts and circumstances of the case, the order passed by A.O is bad both in the eye of law and on facts as there was no material found during the search which can be the basis of addition in block assessment. 3. On the facts and circumstances of the case, the order passed by A.O is bad both in the eye of law and on facts as what is disclosed can not be undisclosed and all the facts related to assessment were disclosed in the regular assessment of the assessee. 4. On the facts and circumstances of the case, the order passed by A.O is bad and liable to be quashed as the same has been made on the basis of statements of various persons without giving assessee an opportunity to cross examine the same in clear violati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assumption he has gone ahead with the block assessment on Smt.Mohinder Kaur l ate Shri T aranjeet Singh. 1.6 The assessee has f iled an aff idavit bef ore the Hon'ble Tribunal to the eff ect that there was no search warrant other than the search warrant in the case of Smt. Mohinder Kaur. 1.7 The department has also not been able to produce any search warrant other than the one which has been enclosed with the letter dated 15 t h February,2012. The said search warrant was in the name of Smt Mohinder Kaur, House No. 694, Sector 8, Chandigarh. 1.8 Accordingly there is no search warrant in the name of late Shri Taranjeet Singh and as such the block assessment order f ramed is without jurisdiction and liable to be quashed. 2.1 In this regard rel iance is being pl aced on the judgment of Smt. Nasreen Yusuf Dhanani vs. Assistant Commissioner of Income Tax 24 SOT 31 where it has been held that the Chapter XIV-B of the Act is a special procedure f or making assessment of search cases. These provisions of block assessment come into picture only as a result of search action carried out under Section 132. On reading the provisions of Section 132(1) of the Act, it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be completed only in respect of the person who is subjected to search under Section 132 i.e. partners and not the f irm. In this case the block assessment completed by the Assessing Off icer in the name of the f irm was held to be inval id and quashed. 2.7 Further it is to be noted that Shri Taranjeet Singh has died two years bef ore the date of the search and it is a settled law that there cannot be a search warrant in the name of a dead person. The jurisdictional Punjab Haryana High Court in the came of CIT vs. Rakesh Kumar, Mukeshi Kumar L/H of Late Mohar Singh 13 DTR 209 has held that in such circumstance the block assessment order will be null and void and the same was quashed. In the present case there was no search warrant in the name of late Shri T aranjeet Singh and accordingly the block assessment order passed by the Assessing Off icer is l iable to the quashed. 5(i). The assessee has also filed an affidavit dated 01.03.2012, which is reproduced as under : Aff idavit I, Mahendar Kaur w/o Late Shri Taranjit Singh, R/o House No. 694 Sector 8, Chandigarh do hereby solemnly aff irm and decl are as under : 1. That a search was carried out on me by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory conditions for exercise of power to conduct search and seizure u/s 132 existed in the case of assessee Smt. Mohinder Kaur of Lada Liquor Group. Therefore, reasons were recorded and in pursuance to the same, search was conducted in the case of Smt. Mohinder Kaur, who was running business in the name and style of M/s Lada Liquors at the time of search and who was also the L/H of Late Taranjit Singh. Therefore there was no illegality involved in the conduct of search against the assessee. Reliance is placed on the judgment of Hon'ble Supreme Court in the case of ITO Vs Seth Brothers 74 ITR 836 (SC) in which the Apex Court has laid down the scope of Section 132. Further, it may be stated that assessee is challenging the validity of block assessment in the case of Smt. Mohinder Kaur L/H Late Taranjit Singh, thereby she is challenging the validity of search, which is a condition precedent for calling upon the assessee to file returns for block assessment u/s 158 BC. Hon'ble Punjab and Haryana High Court in the case of CIT Vs Paras Rice Mills 313 ITR 182 has held that Tribunal could not go into the validity or otherwise of any administrative decision for conducting searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued in the name of HUF which was not carrying on the business. The business was being done by Partnership C o n c e r n i n wh o s e n a m e no warrant was issued Search was held to be valid as business was actually carried on by HUF in the name of firm. The case of assessee is on a better footing because in this case business was being run by Smt Mohinder Kaur and warrant of authorization has been issued in her name and notices u/s 158BC were issued in the name of Smt. Mohinder Kaur /H of Late Taranjit Singh only to comply with the requirements of Income Tax Act as the assessment prior to the death of Smt. Mohinder Kaur's husband were to be made in her hands as his legal heir. The ratio of the judgment 208 ITR 424(P H) of Hon'ble Punjab Haryana High Court is applicable to the facts of this case. Therefore, non-mentioning of Legal Heir in warrant of authorization which was issued in the name of Smt. Mohinder Kaur is only a technical mistake which is rectifiable as per Section 292B of the Income Tax Act. Notice u/s 158BC is procedural in nature and therefore, defects, if any, in the notice are protected u/s 292 BC. Reliance is placed on the judgment of 203 CTR(Bombay) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mohinder Kaur L/H Late Shri Taranjit Singh, no search warrant has been issued in such status. The issue involved in the present case is not singular or plural, as highlighted by the revenue, by pleading the case of Hon'ble Gujrat High Court in the case of Madhupuri Corporation Vs Prabhat Jha, 256 ITR 498(Gujarat). In this case, the undisclosed income belonging to Late Shri Taranjit Singh was required to be assessed u/s 158BD of the Act after recording due satisfaction. The revenue has failed to follow this procedure for Block Assessment, as expressly contained in provisions of Section 158BC read with 158BD of the Act. The contention made by the revenue that the facts of the present case are covered by the decision of Hon'ble Punjab Haryana High Court, in the case of Jai Bhagwan Om Parkash V Director of Inspection others 208 ITR 424 is misplaced. In this case, warrant was issued in the name of HUF, which was not carrying the business. The business was being carried on by the partnership concern, in whose name, warrant was issued. In this case, search was held to be valid. Needless to say, that no search warrant can be issued in the name of deceased person, being legally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), Chandigarh for kind information, 3. The Joint Director of Income Tax (Inv.), Chandigarh for kind information Sd/- (Sunil Kumar Yadav) Dy. Director of Income Tax (Inv.), II Chandigarh 7. A Warrant of Authorization , dated 22.05.2002 has been issued u/s 132(1) of the Income-tax Act,1961 and Rule 112(1) of the Income Tax Rules, 1962, in the name of Smt.Mohinder Kaur of M/s Lada Liquors Ltd., House NO. 694 Sector 8, Chandigarh, residence of Smt.Mohinder Kaur, by the Director of Income Tax (Invg.) Chandigargh, as is evident from the perusal of the photocopy of Form No.45, filed by the Revenue. The said warrant of authorization was executed, on 23.5.2002, on Smt.Mohinder Kaur, as is evident from her signature appended on its back, in token of having seen the same, as on 23.5.2002. 8. Ld. 'AR' for the assessee placed reliance, on the decisions, as indicated at S.No. 1 to 5 of the Paper Book, filed by him. Though the list of cases contained in the Paper Book is long, but the assessee specifically relied upon only on the following five case laws : 1. Saroj Nursing Home V ACI T (2005) 98 TTJ (Lucknow)446 2. Smt.Nasreen Yusuf Dhanani V ACIT (2008) 24 SOT 31 (Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin a period of 45 days from the date of receipt of the said notice. Consequently, AO completed the block assessment, on 22.8.2005 u/s 158BC of the Act, at an undisclosed income of ₹ 9,02,13,220/-. The Block Assessment was passed by the AO in the status of 'Individual' as clearly indicated by the AO against Column No. 5 of the first page of the said Block assessment order. 10(i) The same AO issued another notice u/s 158BC of the Act, on 19.08.2002, duly served upon the legal heir of the assessee on 20.08.2002 (as is evident from page 2 of the Block Assessment Order), requiring the assessee to file return for the block period from 1.4.1996 to 23.5.2002 within a period of 45 days from the date of receipt of the notice u/s 158BC of the Act. The block assessment was completed, on 22.08.2005, u/s 158BC of the Income-tax Act,1961, for the block period 1.4.1996 to 23.5.2002, at an undisclosed income of ₹ 8,57,15,730/-, in the status of 'individual', as indicated against column No.5, at page one, of the said block assessment order. In this Block Assessment order, name of the assessee has been recorded by the AO, at page No.1 of the order as Smt.Mohinder Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 is required to be issued for the purpose of proceeding under this Chapter : Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;] (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 11[, section 144 and section 145] shall, so far as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; [(d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B.] 10(v) A perusal of the clear and unambiguous provisions of Section 158BC of the Act clearly reveals that Block Assessment is required to be completed u/s 158BC(c) of the Act, in the case of any person, where any search has been conducted u/s 132 of the Act or books of account, other documents or assets are requisitioned u/s 132A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily to be during the course of block assessment proceedings of searched person; it cannot be af ter conclusion of block assessment in the case of searched person . Hon'ble jurisdictional High Court has clearly held that satisfaction u/s 158BD is to be recorded even before the completion of block assessment of the party searched. b) In another case, jurisdictional High Court, in the case of CI T V Praveen Fabrics (P) Ltd. (2011) 198 Taxman 463 has held that recording of satisf action for taking action against any other person u/s 158BD of the Act has to be between the initiation of proceedings and completion of the block assessment u/s 158BC in the case of the person searched . c) The Hon'ble Supreme Court, in the case of Manish Maheshwari V ACIT and another (2007) 289 ITR 341 (SC) has laid down the clear proposition of law that no jurisdiction u/s 158BD can be conferred upon the AO unless satisfaction, within the meaning of Section 158BD of the Act is recorded and the books of account and other documents, including seized assets are handed over to the AO, having jurisdiction against the company. The relevant part of the decision is reproduced hereunder : Bef ore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 571, CI T V Don Bosco Card Cenetre (2007) 289 ITR 329 (Ker) and by the Madhya Pardesh High Court, in CIT V Smt.Maya Chotrani (2007) 288 ITR 175 (MP). f). Similar view has been held by the Hon'ble jurisdictional High Court, in the case of CI T V Mukta Metal Works (2011) 336 I TR 555. g). In the case of Ved Parkash Sanjay Kumar V ACI T (2001) 76 ITD 107 (CHD), Chandigarh Tribunal held that omission to record satisfaction before issue of notice under Section 158BD of the Act is fatal. Non- recording of such satisfaction is an illegality, and not irregularity, which is fatal to the block assessment proceedings and such illegality cannot be cured by restoring matter to the file of the AO. 11(i) The revenue has failed to adduce evidence, to establish the factum of recording of satisfaction, in the present assessee's case, within the meaning of Section 158BD of the Act and within the contemplation of judicial pronouncements discussed above. Consequently, the AO is not competent to assume jurisdiction and pass Block Assessment order, u/s 158BD read with Section 158BC of the Act. It is pertinent to mention here that the existence of valid jurisdiction, for exercise of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced hereunder, for the purpose of proper appreciation of true ratio laid down therein : a) Saroj Nursing Home V ACIT (ITAT Lucknow Bench) ITA/1357/All/1997 dt. 23.9.2004 Search and seizure--Block assessment--Validity--Search warrants were in the name partners of the assessee-firm and not against the assessee--Chapter XIV-B provides that the assessment is to be completed under s. 158BC only in respect of the person who is subjected to search under s. 132--Separate procedure as provided under the provisions of s.158BD is to be followed in respect of undisclosed income detected in respect of any person other than the searched person during the search operation--The assessment completed by the AO in the case of the assessee under s. 158BC was not in accordance with the provisions of the Act and was invalid--Same quashed b) Smt.Nasreen Yusuf Dhanani V ACIT, ITAT Mumbai, ITSS No.203/Mum/2003 dt. 5.10.2007 Search and seizure--Block assessment--Validity-- Search warrant having been issued in the name of assessee's husband, proceedings under s. 158BC could not have been initiated against the assessee-- If during the search of assessee's husband, some incriminating ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of s. 158BC could be invoked. It is not possible to digest the view canvassed by the Departmental Representative. The provision of s. 158BD is to be applied in a case where there is no search warrant and evidences are found showing undisclosed income in the course of search action conducted in respect of any other person. Conditions specified in s. 158BD has to be followed in order to invoke provision of s. 158BD. The provisions contained in Chapter XIV-B are drastic in nature and it has draconian consequences. If in the course of search of husband, any material incriminating his wife had been found, then the proper course for the AO would have been to issue a notice under s. 158BD. When specific procedures are prescribed for persons who are Searched and for other persons in respect of whom incriminating material is found, the AO cannot abrogate himself to bypass the prescribed procedures and issue notice under s. 158BC on a person who was not subjected to search. In fact, in the instant case of the assessee, it was intimated to the AO vide letter dt. 15th Dec., 1997 that there is no search warrant in her name and hence, the block assessment proceedings initiated under s. 158 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the books of account, other documents or any assets or requisition under s. 132 in the case of any person. According to the AC, since there is reference to the expression 'any person' in s. 158BA(1), Chapter XIV-B applies to any person even where a search has not been conducted on him. The AO has thus misread the provision, The AO gets the power to make an assessment under Chapter XIV-B as a result of search carried out under s. 132. As per the provisions of s. 132(1), the primary target is the person who is in possession of any undisclosed income. In that event, the search party can enter and search any building, place, vessel, vehicle or aircraft where the undisclosed assets or incriminating documents are likely to be found in relation to such person. Thus, to repeat, the primary target under s. 132 is 'a person' in relation to whom 'any place' can be searched by the search party. Once place of a person is searched, it is only in. his respect that the AO derives power from s. 158BA(1) to make an assessment under Chapter XIV-B. It is not that all persons who are found at the place of search are automatically covered by action under s. 132, which is prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises of which persons were required to be searched--There was, thus, no material with the authority to even prima facie come to the conclusion that an entity by the name of JRT, a partnership firm, existed at the point of time when the search proceedings were initiated by issuance of warrant of authorisation--Thus, at no point of time, an entity named JRT, a partnership firm, was ever subjected to search proceedings under s. 132, and JRT not being a person searched, notice under s. 158BC served on JRT was invalid--Document unearthed during the course of earlier survey, being a draft document of proposed sale of JRT is of no avail as it is neither signed by the sellers nor purchasers--In the said document, the vendors, who are the six assessees are described as co-owners--Action of authority in issuing impugned notice under s. 158BC cannot, therefore, be sustained f) CIT V Rakesh Kumar Mukesh Kumar, L/H of Late Mohar Singh 219 CTR 494 (P H) Search and seizure--Block assessment--Validity vis-a-vis search warrant in the name of a dead person--Search warrant being issued in the name of a dead person and Panchnama also prepared in the name of dead person, the search and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh). The warrant of authorization and consequent panchnama, are matter of record. The revenue was afforded ample, reasonable and proper opportunities, to support its case, by adducing photo copy of search warrant, issued in the name of Smt.Mohinder Kaur, L/H of Late Shri Taranjit Singh and documentary evidence demonstrating the factum of satisfaction recorded, by the AO of the search party, within the meaning of Section 158BD of the Act. The revenue has failed to file any evidence to establish the factum of recording of such satisfaction, within the meaning of Section 158BD of the Act. However, a photo copy of the warrant of authorization, issued in the name of Smt.Mohinder Kaur as indicated earlier, was filed which led to completion of two Block Assessment orders u/s 158BC of the above, as referred to above. 13. A bare perusal of the provisions of Section 158BC and 158BD of the Act and other relevant provisions contained in Chapter XIV-B of the Act reveals that in the absence of any search operation, the provisions of chapter XIV-B, cannot be invoked. Therefore, a search operation u/s 132(1) or requisition of books of account or assets u/s 132A of the Act, is statutorily a pre- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C on 27.7.1999, was issued in accordance with the requirements of Section 158BD of the Act. However, in the present case, revenue has failed to adduce evidence demonstrating recording of satisfaction u/s 158BD of the Act. Therefore, the facts of the present case are distinguishable. 15(i) Ld. 'DR', further, placed reliance on decision in the case of Digvijay Chemicals Ltd. V Asstt. CIT 248 ITR 381. In this case, the issue involved was, whether there is any requirement to afford opportunity of hearing to a party before recording satisfaction u/s 158BD of the Act. In the present case, revenue has failed to adduce any evidence of the factum of recording of satisfaction u/s 158BD of the Act. Therefore, case law relied upon by the revenue is not applicable to the facts of the present case. 15(ii). Ld. 'DR', further, placed reliance on the decision in the case of Jai Bhagwan Om Parkash V Director of Inspection others 208 I TR 424 (P H). In this case the Hon'ble jurisdictional High Court has adjudicated the issue of validity of search. However, in the present case, the validity of the search has not been challenged by the assessee. The assessee, by way of CO, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Authorization u/s 132(1) of the Act was issued, in the name of Smt.Mohinder Kaur, L/H of Late Shri Taranjit Singh W/o Shri Taranjit Singh, block assessment cannot be framed u/s 158BC of the Act in such status. Hence, the impugned block assessment order is bad in law and without jurisdiction. 3. Further, the Revenue has also failed to adduce any evidence demonstrating the factum of recording of satisfaction within the meaning of Section 158BD r.w. Section 158BC of the Act. 4. In view of the above discussions, the impugned Block Assessment order, which is under challenge, in the C.O. in question, has been passed without jurisdiction. 18. Having regard to the above detailed legal and factual discussions, including the case laws and relevant provisions of the Act, the C.O. of the assessee is allowed and consequently, the impugned Block Assessment order is set aside, and held as bad in law, being without jurisdiction. 19. In view of the above findings, on the legal issue of non-existence of jurisdiction, as contended in the impugned C.O., we don't consider it, fit to adjudicate the appeal of the Revenue, on merit, and, hence, the same is dismissed. 20. In the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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