9911796707
TMI Blog2014 (7) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... ; In the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in quashing the block Assessment completed under section 158BC read with section 158BD of Income Tax, 1961 whereas neither objection was raised against legal validity of proceedings before the AO nor any remedy was sought at any, other level; The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." The facts available on record as per the assessment order show that search & seizure operation was conducted on the residence of the assessee on 08.05.2003 in connection with the search in Vatika Group of companies. For ready-reference we extract the opening para of the assessment order hereunder:- "Search & Seizure operations were conducted at the residence of the assessee on 8/5/2003 in connection with the search in Vatika Group of Companies. A satisfaction note was recorded by the Assessing Officer having jurisdiction over the Vatika Group of Cases. Accordingly a notice u/s 158BD was issued on 31/05/2005 and the assessee filed its return of income u/s 158BD on 20/10/2005 declaring NIL undisclosed income. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not be denied that assessee was a person who had been searched on 08.05.2003. That in doing so he has failed to appreciate the assessment has been framed by him by invoking the provisions of Sec. 158BD of the I.T. Act, 1961 and not that the proceedings have been initiated against the assessee by invoking the provisions of Section 158BC of the Income Tax Act, 1961. That the ld. DCIT has further erred in failing to appreciate that under the provisions of section 158BD of the Income Tax Act, 1961 a note of satisfaction was required to be recorded in the case of the person who had been searched on the basis of which the AO having jurisdiction over the assessee was required to be satisfied that books of accounts, other documents or assets seized represented undisclosed income of then person against whom the proceedings have been initiated by him. In the absence of any such satisfaction having been recorded in the case of person searched no valid proceedings could have been initiated against the assessee. That the ld. Deputy Commissioner of Income Tax has failed to appreciate that no such documents or evidence were either found or seized from the person searched and as such no asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of assessee and, no satisfaction note was recorded by the Assessing Officer in the case of Vatika Group of companies. Therefore, according to the assessee, no note of satisfaction was recorded by the AO having jurisdiction over the assessee who has been searched although in the assessment order it is stated that, a satisfaction note was recorded by the AO having jurisdiction over the Vatika group of companies. The assessee has stated that, the AO has in the first para of the order of assessment framed u/s 158BD has noted that, "a satisfaction note was recorded by the AO having jurisdiction over the Vatika Group of Cases". Again in second para of the order, it is stated that a copy of satisfaction note was duly provided to the assessee and the assessee filed its letter dated 10.05.2006. The appellant has disputed the observation made by the AO in the first para of the order of assessment that a satisfaction note was recorded by the AO having jurisdiction over the Vatika Group of cases. It is contended that during the course of hearing, the assessee filed a reply dated 14th May, 2007 wherein assessee specifically raised this issue before the completion of assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al premises of Sh. Anupam Nagalia. The assessee has therefore, objected to the observations of the AO that a note of satisfaction was recorded in the case of Vatika Group of companies. In fact, there cannot be any occasion to record any note of satisfaction for the papers seized during search on the assessee not pertaining to Vatika Group of Companies. Secondly, the assessee is aggrieved on the assessment made by the AO under the provisions of section 158BD since according to the assessee, the AO has no jurisdiction for assessment u/s 158BD which jurisdiction was wrongly assumed by the AO instead of application of provisions of section 158BC in order to circumvent non issue of notice u/s 158BC. In this connection without prejudice and in the alternative the assessee submitted that the assessment has been framed u/s 158BD whereas it should have been completed under the provisions of section 158BC and thus, the assessment made is barred by limitation and the provisions of section 158BD are not attracted in the case of the assessee. The appellant has submitted as under: "The facts in this connection are that: Assessee is an Individual. He is a director in some of the Vatika Group o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58BD of the Act can be said to have been taken for collateral purpose i.e., to circumvent the non-issue of notice u/s 158BC of the Act. It is submitted that, the assumption of jurisdiction by invoking the provisions of section 158BD of the Act, is without jurisdiction, as no valid notice could have been issued beyond a period of two years from the end of the month in which search took place at assessee's premises. It is further submitted that the legislature has provided a period of two years to an AO to complete assessment u/s 158BC where search has taken place. It is however, submitted that when an action is taken, then it should not be because of any remissness on the part of the AO to initiate the proceedings. In the instant case, the ld. AO on the same facts had taken up the proceedings in the case of the assessee and, had completed the same after period of 2 years as prescribed and, as such, if, he did not choose to initiate proceedings under the correct provisions of the Act where he was within his jurisdiction, it is clear case of remissness on the part of the AO. It cannot be validly said that the ld. AO on the same facts takes up the assessment of all assesses where sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment made is barred by limitation. Without prejudice, the assessee, further submits that in then instant case search was conducted on Vatika Group of Companies on 08.05.2003 and in the cases of Vatika Group assessments were made by 31.05.2005, whereas in assessee's case proceedings were initiated by the AO on 31.05.2005, though without jurisdiction and improperly, yet inspite of, the assessee had furnished his reply on 10.05.2006. However, the AO again proceeded when assessment was going to be barred by limitation as had stated when according to assessee it had already become barred by limitation by long lapse of time, which according to assessee should have been completed on 31.05.2005 as there was a seizure made form the assessee on 08.05.2003. It is contended by the assessee that the entire purpose for making the assessment is to burden the assessee, with the tax liability and without affording to the assessee a fair and proper opportunity, when assessment had already become barred by limitation. The assessee is unable to comprehend any reason as to why proceedings which had been initiated on 31st May, 2005 and in respect of which the assessee had filed his reply on 10.05.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment are liable to be rejected." (Emphasis provided in the present proceedings) The record further shows that the Remand Report forwarded by the AO was confronted to the assessee by the CIT(A) and comments of the assessee were invited thereon. It is further seen that the assessee vide letter dated 23.03.2009 forwarded the following submissions (these are extracted from pages 12 & 13 of the impugned order):- "The assessee in comments on the remand report on 23.12.2009 submitted as under: "It is submitted that the assessment as had been framed on 21.05.2007 is barred by limitation, whereas it had to be framed by 31.05.2005, since the search u/s 132(1) of the Income Tax Act, 1961 had been completed on 08.05.2003, when the documents on the basis of which an undisclosed income has been computed were found and seized from the residential premises of the assessee. It is an admitted fact that, the search had been conducted on the assessee u/s 132(1) of the Income Tax Act, 1961 on 08.05.2003, and as such as is provided u/s 158BE of the Income Tax Act, 1961 the assessment had to be framed within the period of two years from the end of the month, in which the last of the warrant of autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or himself not to participate in the proceedings despite the fact that, (the same has became barred by limitation) since the assessee had to comply with the notice issued and had not option not to do so, it and as such it could not be stated that merely because assessee had participated in the assessment proceedings he is not entitled to contend that assessment made was barred by limitation and the purported notice u/s 158BD of the Act was no notice in the eyes of law. In such circumstances it is submitted the objection raised by the ld. AO by his letter dated 26.08.2009 is misdirected, misconceived and thus, deserves to be rejected as is entirely untenable. It is thus prayed that, it be held that an assessment made is barred by limitation. In respect of the other issues and grounds of appeal detailed submissions have already been made and in respect of which there have been no counter submissions made by the ld. AO". Considering the same the CIT(A) allowed the appeal of the assessee holding that the proceedings initiated u/s 158BD were not legal. He further went on to examine and hold that the same were time barred u/s 158BC. These detailed findings are found discussed in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ka Land Base Pvt. Ltd., Anil Bhalla, Gaurav Bhalla.Gautam Bhalla. No search warrant was issued in the name of Shri Anupam Naglia (Copy of Search Warrant & Panchnama is enclosed for ready reference). The basic statutory precondition for invoking provision contained in section 158BD of the Act is the satisfaction recorded by the AO of the searched person and that such satisfaction should be recorded in writing on the basis of material found as a result of search on the searched person. Applying these to the facts of the instant case it should be seen that basis adopted for initiation of proceeding u/s 158BD of the Act in the case of appellant is that there has been a search conducted on the premises of Vatika Group of Companies and as a result of the material found during the search satisfaction was recorded by the AO having jurisdiction over the Vatika Group of Companies. iii. ..... It is admitted that each of the aforesaid papers have been found as a result of search on the appellant and not from the premises of Vatika Group of Companies i.e. searched person. This observation made by the CIT(A) is factually incorrect because the seized papers relied upon the AO for initiating p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Panchnama. Search warrant was issued in the name of Vatika Land Base Pvt. Ltd. at the residence of Anupam Naglia i.e. EG-3118,Garden Estate, Gurgaon. No search warrant was issued in the name of appellant Sh. Anupam Naglia. It is settled Law that section u/s 132(1) is person specific and not premises specific.{Smt. Nasreen Yusuf Dhanani Vs ACIT-(2009) 118 ITD 133(MUM)} The books of accounts/documents were seized from the searched persons. M/s Vatika Land Base Pvt. Ltd., Anil Bhalla, Gaurav Bhalla and Gautam Bhalla. AO has having jurisdiction with Vatika group of companies recorded satisfaction as required u/s 158BD of the Act and on the basis of this satisfaction, notice was issued u/s 158BD to the appellant. Reliance is placed on the following case: Vinod Goel (Page 30) 107 TTJ 1853. Sanjay Kumar Modi (Page 3) 150 Taxman 175 Ved PRakash, Sanjay Kumar 76 LTD 107 (Page 28(2) ACIT vs 17 SOT 380 (12) Jaxan Bai 94 Taxman 24 (page 28) In view of the fact of the case and the legal position, it is clear that the CIT(A)'s order is based on incorrect facts and it should therefore be set aside." On behalf of the assessee in support of the impugned order attention was invited t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct at an undisclosed income of ₹ 45,89,68,830/-. No notice u/s 158BC of the Act was however issued in the name of the assessee-respondent. 31.05.2005: That a notice u/s 158BD of the Act was however issued to the assessee-respondent and thereafter, the assessee sought for the copy of satisfaction note and copy of seized documents vide replies dated 13.06.2005 and 29.06.2005 (kindly see pages 15 and 16 to 18 of the paper book). Thereafter, the purported satisfaction note was provided to the after a delay of almost seven months on 27.01.2006 (kindly see page 38 of the paper book). 21.05.2007: The AO framed an assessment at an undisclosed income of ₹ 1,89,53,900/-. The assessee-respondent being aggrieved against the aforesaid order of assessment; preferred an appeal before ld. CIT(A) on various grounds including (kindly see pages 306 to 318 of the paper book). Alleged satisfaction note so recorded is not by the AO of the searched person; hence assessment framed is illegal and void-ab-initio. Satisfaction note was not recorded prior to the culmination of proceedings in the case of searched person. The assessment has been framed u/s 158BD of the Act, whereas, it should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings was infact raised before the AO by the assessee vide letter dated 14.05.2007. In support of the same, our attention was invited to page 60 to 72 of the Paper Book filed (Specific para 16 at page 72). In this background it was his submission that the contention of the AO in his Remand Report dated 20.08.2009 copy of which is placed at pages 348-349 of the Paper Book regarding applicability of provisions of section 292BB of the Act is factually incorrect and contrary to material available on record. It was contended that where admittedly the only grievance posed by the Revenue is that no such ground was raised before the AO which factually is incorrect on facts then accordingly on the basis of this finding itself the sole ground raised by the Revenue deserves to be dismissed and the departmental appeal be accordingly dismissed. Since arguments de hors the grounds were advanced it was contended by the Ld. AR that he would also address the issues raised in the arguments advanced by the Ld. CIT DR. It was contended that according to the Ld. DR no search was conducted on the assessee and proceedings were validly initiated u/s 158BD it was again reiterated that this grievance is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice u/s 158BD was issued on 31.05.2005 and in pursuance to the said notice assessment was completed u/s 158BD of the Act on 21.05.2007. In the facts of the present case it was his submission that in respect of undisclosed income if any the assessment should have been completed u/s 158BC till 31.05.2005 as per the provision of section 158BE(1)(b) of the Act and accordingly since notice u/s 158BC had not been issued recourse to the provisions of Section 158BD was taken for the collateral purposes i.e. to circumvent the non-issuance of notice u/s 158BC. It would be appropriate to extract from the submissions dated 15.05.2014 filed so as to emphasize in assessee's own words the arguments advanced addressing the "mistake" of the AO:- "6.3.3………………………………………………………….. The short-submission here of the assessee-respondent is that having searched the premises of the assessee, the AO could not take recourse to the provisions of section 158BD of the Act. It is a case of an inaction on the part of AO to have not adhered to statutory prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings u/s 158BD of the Act (see pages 15 and 16 to 18 of the paper book). The ld. AO never acceded to the request of the assessee till 27.01.2006 (see page 38 of the paper book), when the purported/alleged note of satisfaction was provided to the appellant. Thus, it is evident that a note of satisfaction was provided to the assessee-respondent on 27.01.2006 i.e. nearly after 7 months of the request made by the assessee and thus, it is submitted that no valid proceedings were initiated against the assessee and since, there had been a failure on the part of AO to frame assessment u/s 158BC of the Act, a notice u/s 158BD of the Act was issued as an afterthought and that too by predating a satisfaction note recorded by dating the same as 31.05.2005. Thus, the proceedings so initiated u/s 158BD of the Act (without recording of proper satisfaction note) is without satisfying the statutory preconditions as envisaged under the Act and had been rightly quashed by ld. CIT(A) and in support of the aforesaid submission, the assessee-respondent would seek to place its reliance on the judgment of Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT reported in 289 ITR 341. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made available to her however it was her stand that her stand is fully addressed by the submissions already on record. Ld. AR briefly summarizing the 8 paged submissions invited specific attention to para 3.1 to 3.2.3 as under:- "The argument of ld. CIT DR that no search was conducted on assessee- respondent, as no search warrant was prepared in the name of assessee is fallacious and contrary to material available on record, as it is an admitted fact that the search party, searched and entered the residence of assessee-respondent as the assessee was a director in M/s Vatika Landbase P. Ltd. and it is also an admitted fact that documents on the basis of which proceedings u/s 158BD of the Act had been initiated were also seized from the said premises of assessee. Thus, the submission of the assessee-respondent is that once the search party entered the premises of the assessee and seized documents therefrom, than proceedings should have been initiated u/s 158BC of the Act on the assessee-respondent instead of section 158BD of the Act. That in order to support the above said submission the assessee-respondent seeks to place its reliance on the order of Hon'ble ITAT Mumbai in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arized below: S.No. Annexure Pages Amount (in Rs.) Page of Findings of the AO Explanation/submission of assessee-respondent 1 A-11 33 18,23,628/ - 4 Pg 329 to 334 of the paper book. 2 A-11 38 13,84,400/ - 4 Pg 334 to 335 of the paper book. 3 A-11 34 2,15,000/- 5 Pg 335 to 337 of the paper book. 4 A-1 17 2,25,000/- 6 Pg 337 to 339 of the paper book 5 A-2 1 1,05,000/- 8 Pg 339 to 334 of the paper book 6 A-2 2/5 (upper portion) 6,91,150/- 9 Pg 339 to 344 of the paper book 7 A-2 3/7 20,57,000/ - 9 Pg 339 to 344 of the paper book 8 A-2 5/11 21,55,342/- 9 Pg 339 to 344 of the paper book 9 A-2 6/13 7,28,375/- 10 Pg 339 to 344 of the paper book 10 A-2 8/17 5,15,000/- 11 Pg 339 to 344 of the paper book 11 A-2 10/25 21,44,657/ - 11 Pg 339 to 344 of the paper book 12 A-2 11/27 1,16,000/- 11-12 Pg 339 to 344 of the paper book 13 A-2 30/33 4,34,350/- 12 Pg 339 to 344 of the paper book 14 A-2 21/93 63,60,000/ 12 Pg 339 to 344 of the paper book That on appraisal of the aforesaid submissions, it would become clear that the documents seized does not depict undisclosed income of the assessee and thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158BD of the Act could not be invoked and, the revenue can at the best initiate proceedings against the assessee-respondent u/s 147 of the Act. It is further, submitted that, there is a conceptual difference between two classes of case, one where as a result of search conducted, the books of accounts and other documents have been found from the person searched but are found belonging to person other than the person searched, and secondly, a case where as a result of search conducted on the person searched, the books of accounts and other documents have though been found but not from the person searched (but are found from the person against whom the proceedings are being initiated u/s 158BD of the Act). It is submitted that in the latter class of cases, provisions of section 158BD of the Act are inapplicable. Thus, all what the assessee has submitted is that, even assuming there was no search on the assessee then too, since the documents have been seized from the assessee-respondent and not from the person who had been searched, action u/s 158BD of the Act was wrongly initiated and hence the assessment made is without jurisdiction and has rightly been quashed by ld. CIT(A)." We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or seeking permission to modify or alter any ground raised be granted by resorting to Ground No-3 raised before us by the Revenue. In the above background where the submissions advanced are available on record in writing considering Ground No-1 raised as being a general non-specific ground and Ground No-3 not having been invoked as such prima facie requires no adjudication, we proceed to address Ground No-2 raised before us. On consideration of the facts available on record and the submissions of the parties qua Ground No-2, we find that the grievance posed by the Revenue is factually not correct. A perusal of paper book page 15 which is a letter dated 11.06.2005 addressed by the assessee to the ACIT, Circle-20 (received as per the stamp of the said office on 13.06.2005) shows that the assessee let alone during the assessment proceedings even at the notice stage has not kept the department in dark about its intentions, grievance and awareness of the legal position. A perusal of the said letter shows that the assessee specifically requests the said authority for the documents taken into consideration for the issuance of notice and the "satisfaction note" required as per law to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 13th June, 2005 to provide me:- A note of satisfaction which is required to be recorded in writing by you as has been held by the Hon'ble Delhi High Court in the case of Amity Hotels reported as 272 ITR 75 as also Copies of all such documents on the basis of which you are satisfied that there is an undisclosed income which belongs to me (Emphasis supplied). After having waited for about 15 days of the above referred letter dated 11.06.2005, I personally contacted you in your office on 27.06.2005 when you verbally expressed your reluctance to serve the satisfaction note at this stage, and directed me to take the photocopies of such documents as I wish out of the seized records (Emphasis Supplied). With great respect, it is most respectfully submitted that the proceedings have been initiated on the basis of satisfaction of the assessing officer having jurisdiction over the person who has been searched. Further, such satisfaction has been reached on the basis of evidence found as a result of seized evidence on such third person. It is thus evident that I have to examine such evidence and prepare my reply accordingly. It is thus respectfully submitted that in the instant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch an assessee. It is apparent that the search under section 132(1) of the Income-Tax Act had been made on Vatika Group of Companies on 08.5.2003 and orders of assessment have also been made on them by 31.05.2005 and in such circumstances it is not understood, how can a valid notice be issued after culmination of proceedings in the case of above named assessee. The assessee seeks to bring to your kind notice the judgement of the Delhi High Court in the case of Bishan Chand Mukesh Kumar - vs- U.O.l. reported as 135 Taxman 154(Delhi) wherein on a Writ Petition filed, the department had conceded before the High Court that it would furnish the copy of satisfaction note and hence the Writ Petition was dismissed as withdrawn. Sir, it is because of non furnishing of evidence assessee is not able to furnish the return and as such delay in filing the return is not attributable to assessee. It is submitted that in case you propose to pass an adverse order, no interest be charged on such undisclosed income assessed." (Emphasis provided by the Bench) The above read alongwith letter dated 14.05.2007 taken into consideration by the CIT(A) and confronted to the AO shows that not only before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide me with a copy of 'reasons under section 158BC read with section 158D in the case of Anupam Nagalia which is recorded by the ACIT, Central Circle-20, New Delhi'. It is the submission of the assessee that, this note of reasons has been recorded by the ACIT, Central Circle-20, New Delhi is not in the case of "Vatika group of companies" but in the case of the assessee & that too, probably after culminating the proceedings in these cases; whereas, it is most respectfully submitted, that a note of satisfaction, is required to be recorded by the assessing officer who held jurisdiction over that assessee, and in the case of the instant assessee i.e. me. From the perusal of the "reasons" which have been furnished by you, it is apparent that such a note of reasons as has been recorded by the ACIT, Central Circle- 20, New Delhi, is in my case and as such it is submitted that there has been no valid assumption of jurisdiction at the time of initiation of proceedings by you as there has been no note of satisfaction recorded by the assessing officer as is contemplated in law. Copy of reasons which has been supplied to me reads as under:- Reasons u/s 158 BC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other grievance of the AO included in Ground No-2 raised it has seen that challenge is posed to the impugned order on the ground that the assessee "has not sought any remedy at any other level", on consideration of the said ground we are constrained to observe that for the AO to submit by way of raising of such a ground unfortunately demonstrates the strange belief that an assessee challenging the validity of the proceedings must necessarily invoke the extra-ordinary Writ jurisdiction of the Hon'ble High Court compulsorily and such a stand is mandated in all cases. The grievance exhibits a shocking lack of legal understanding as the AO cannot absolve himself from dealing with the objections of the assessee on the validity of the proceedings and cannot be aggrieved by an assessee who on facts has availed of the Statutory right of appeal vested in him by the Statute, namely the Income Tax Act, 1961. Further the AO is no one to suggest that the assessee ought to have invoked the extra ordinary Writ jurisdiction. Infact it would not be out of place to point out that there are umpteen instances to show that the Hon'ble High Court may refuse to entertain the Writ Petition and consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellip;…………………………….. b) …………………………………………………………………………... c) …………………………………………………………………………... The assessee complied with the notices and filed written submissions though raised objections relating to merits of the satisfaction note as not commensurate with the legal requirements of section 158BD of the Income Tax Act, 1961. During the course of block assessment proceedings, the assessee did not raise the issue of block assessment u/s 158BC but objected to the initiation of proceedings u/s 158BD on merits of satisfaction note. Therefore, in view of provisions of section 292BB of Income Tax Act, 1961, the assessee is precluded from taking any objection in the block assessment proceedings." (Emphasis provided in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the law, the departmental appeal accordingly is dismissed. Since before us the Ld. CIT DR dehors the ground raised has advanced various arguments assailing the impugned order which has been copiously addressed by the Ld. AR we propose to set out the specific reasoning of the Ld. CIT (A) in quashing the proceedings. The reasoning of the CIT(A) is reproduced hereunder:- "I have gone through the facts of the circumstances of the issue as well as judicial pronouncements relied upon by the appellant. Section 158BD of the Act provides as under:- "Where the Assessing Officer is satisfied that any undisclosed income belongs to any 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, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly. " On plain reading of the aforesaid statutory provisions contained in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he requirements of section 158BD of the Act. The said notice does not record any satisfaction on the part of the Assessing Office, Documents and other assets recovered during search had not been handed over to the Assessing Officer having jurisdiction in the matter. A large number of decisions of various High Courts have been cited at the Bar. We would, at the outset, refer to a decision of the Gujarat High Court in Khandubhai Vasantji Desai v. Deputy CIT [1999] 236 ITR 73. Therein, it was clearly held (page 85) "This provision indicates that where the Assessing Officer who is seized of the matter 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, he shall proceed against such other person as per the provisions of Chapter XIV - B which would mean that on such satisfaction being reached that any undisclosed income belongs to such other person, he must proceed to serve a notice to such other person as per the provisions of section 158BC of the Act. If the Assessing Officer who is seized of the matter against the raided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression 'satisfied' in section 158BD cannot be read in isolation and it has to be understood in the context in which the said term appears in the said section. It will be seen that section l58BD starts with the expression "where the Assessing Officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made ..... ". It is significant that the term 'satisfied' is not used in a vacuum but alongwith the words 'that any undisclosed income belongs to other than the person with respect to whom search was made .... " and the words in the context are 'undisclosed income' and 'belongs to' which clearly indicate that at that point of time when satisfaction is recorded by the Assessing Officer the undisclosed income is to be identified. Further, the said expression does not stop there. It further uses the expression "belongs to any person, other than the person with respect to whom search was made" which indicates that the undisclosed income identified by the Assessing Officer is found to be belonging to the other person. It would thus mean that at the stage of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Anupam Nagalia Warrant was issued in the name of Vatika Group of Companies to search residence of Sh. Anupam Nagalia on 8.5.2003, who was Director of some of the companies of Vatika Group and also a Chartered Accountant. Scrutiny of seized documents reveals that assessee had unaccounted income under the following heads:- Remuneration-Annexure A-11, pages 33, 34, 37 and 38 reveals receipt of unaccounted remuneration by SH. Anupam Nagalia. Profit in Danisco Deal-Annexure A-1 reveals receipt of unaccounted profit from business deal with M/s Danisco Ingredients (India) Pvt. Ltd. Investment in assets-Annexure A-1, page 65 reveals unaccounted investment in land at Rajpur Road, Dehradun amounting to ₹ 55 lacs at Village-Bhondsi (Haryana) amounting to ₹ 18 lacs and immovable properties comprising loans and advances, investment in shares and deposits, jewellery etc. amounting to ₹ 48 lacs. Unaccounted loan-Annexure A-2 page 1, 2, 3, 5, 6, 8, 10, 13, 15 and 21 reveals transactions on account of loans not disclosed for the purpose of income tax. In view of the facts stated above and material available in the form of seized documents, I am satisfied that Sh. Anupam N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Shri Praveen Mittal. In terms of the decision in the case of Manish Maheshwari (supra), the AO of Shri.S.K.Jain had to record his satisfaction that undisclosed income in respect of transactions with the assessee was that of the assessee and handover the relevant part of the seized material to the A.O. having jurisdiction over the matter, namely, the second mentioned A.O. It appears to us that such note and material were transmitted to the first mentioned A.O. who issued a notice under section 158BC read with 158BD to the assessee. However, nothing was found in the case of Shri Praveen Mittal whose A.O. recorded the satisfaction note on the basis of submissions made in his case before him. As nothing was seized from him, noting was transmitted by the A.O. of Shri Praveen Mittal to the second mentioned A.O. who happens to be the same officer. Thus, in view of the decision in the case of Manish Maheshwari(supra), it is held that pre-conditions required to be satisfied before assuming jurisdiction under section 158BD in the case of the assessee were not satisfied. Learned DR has not been able to show or refer to any material which was seized in the case of Shri Praveen Mittal so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to the appellant. Infact, even the instant proceedings cannot be taken as proceedings under section 158BC of the Act since firstly, initiation of proceedings was undisputedly under section 158BD of the Act and moreover, limitation for framing assessment under section 158BC of the Act expired on 31.5.2005 which is the date on which, notice under section 158BD of the Act was issued to the appellant. The order of assessment in dated 21.05.2007, which is then clearly barred by limitation. In light of the above, I hold that, the proceedings initiated under section 158BD of the Act were not legal, valid and are therefore quashed." On a consideration of the same in the light of the arguments advanced by the parties before the Bench we find ourselves unable to come to a contrary finding and are of the view that the reliance placed by the assessee on the judgement of the Apex Court in the case of Parshuram Pottery Works Ltd. vs. ITO reported in 106 ITR 1 (SC) is not out of place. Inaction on the part of the AO for not adhering to the statutory provisions as envisaged u/s 158BC of the Act cannot be overlooked and solely to buy time the provisions and procedures under the statute cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily relied upon by the Ld. CIT DR. A perusal of the same would show that the subject matter of the addition therein was the contents of the locker in the joint name of the husband and wife, wherein the husband's name was appearing first and substantive additions had been made in the hands of the husband who was the searched person and only protective addition had been made in the hands of the wife and section 158BC had been invoked without following the mandatory procedures. On these peculiar facts it was held that the proceedings were to be quashed as satisfaction was found to be not recorded as laid by the Apex Court in Manish Maheshwari's case by the Apex Court. A perusal of the decisions rendered by Courts and Tribunals on this point clearly brings out the consistent thread which binds them that is the recording of the satisfaction is the sine qua non for assuming jurisdiction u/s 158BD. The satisfaction so recorded must necessarily be by the AO of the searched person and although the Statute does not prescribe any specific time limit to do so and there were decisions in the public domain of the Hon'ble High Courts and Tribunals that the satisfaction note could only be prepare ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
