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TMI Blog2010 (9) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... seized material and thereafter it was held that the investment has been made by the assessee. On the other hand, the only substantive ground taken by the assessee is to the effect that the ld. CIT(A) erred in not appreciating that the assessment made u/s 153A of the Act was bad in law and void abinitio as no notice was issued u/s 143(2). It is mentioned that he erred in holding that the grant of opportunity to the assessee amounts to compliance of the aforesaid statutory notice even in absence of its issuance. The objection of the assessee is common in respect of all the appeals except for the appeal of assessment year 2006-07. It is also preliminary in nature raising question about the jurisdiction of the AO to make assessment u/s 153A in order to make additions to the income returned by the assessee. Therefore, we shall take up the objection at the outset. 3. It may be appropriate at this stage to mention the facts stated in the assessment order relating to this issue. A search and seizure operation u/s 132(1) of the Act was conducted on 1.9.2005 in the case of Dilbagh Rai group, engaged in the trade of pan masala and gutka. The residence of the assessee and his locker no. 476 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; 3.2 The point stressed by the ld. counsel is that the provisions contained in section 139 are applicable, in so far as may be, to a return furnished u/s 153-A. Therefore, for taking such a return for scrutiny, a notice u/s 153A has to be served on the assessee, which has not been done in this case. 3.3 In the aforesaid connection, our attention has been drawn towards the provision contained in section 158BC(b) (now omitted). It is mentioned that the AO 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, section 144 and section 145 shall, so far as may be, apply. It is her case that this provision contained in section 158BC is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that section 158BC(b) specifically refers to some of the provisions of the Act which require to be followed by the Assessing Officer while completing the block assessments under Chapter XIVB of the Act. This legislation is by incorporation. This section even speaks of sub-sections which are to be followed by the Assessing Officer. Had the intention of the Legislature been to exclude the provisions of Chapter XIV of the Act, the Legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the Assessing Officer, if for any reason, repudiates the return filed by the assessee in response to notice under section 158BC(a), the Assessing Officer must necessarily issue notice under section 143(2) of the Act within the time prescribed in the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied. The case of the Revenue is that the expression so far as may be apply indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression so far as may be apply . In our view, where the Assessing Officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143. Section 158BH provides for application of the other provisions of the Act. It reads: Save as otherwise provided in this Chapter, all the other provisions of this Act shall apply to assessment made under this Chapter. This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes section 142 and sub-sections (2) and (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained in placitum 48 at page 254 of the report is reproduced below: In the light of the analysis of the relevant provisions of law and judicial precedents, we are of the considered view that the return filed pursuant to notice under sec. 148 of the Act must be assumed and treated to be a return filed under section 139 of the Act and the assessment must thereafter be made under section 143 or 144 of the Act after complying with all the mandatory provisions. Accordingly, it is incumbent upon the assessing authority to issue notice under section 143(2) of the Act within the period as stipulated in the proviso thereunder. In this view of the matter, the first question before the Special Bench is answered in the affirmative. 3.6 It is also her case that the provision contained in section 292BB, inserted in the Act by Finance Act, 2008, with effect from 1.4.2008, regarding notice deemed to be valid in certain circumstances is applicable prospectively and not retrospectively as held by the Special Bench of Delhi Tribunal in the case of Kuber Tobacco Products (P) Ltd. Vs. Dy. CIT (2009) 310 ITR (AT) 300. It has been held in this case that the provision cannot be construed to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has laid down that he has right to seek the reasons for issuance of the notice in the case of GKN Driveshaft (India) Ltd. Vs. ITO (2003) 259 ITR 19. Therefore, the AO is bound to furnish the reasons within a reasonable time. Once the reasons are received, the assessee has a right to file objections and the AO is bound to dispose them off by way of a speaking order. Therefore, in absence of compliance of the aforesaid procedure, the notice is liable to be quashed. The purpose of reliance on this decision is not very clear to us as the primary case of the ld. counsel is that no notice has been issued u/s 143(2) before completion of the assessment. Nonetheless, we tend to agree with her that if any statutory requirement is not satisfied, the order of assessment is liable to be struck down. 3.9 We have already summarized the relevant portion of the impugned order, in which it has been held that since two questionnaires have been issued to the assessee before completion of the assessment, the requirement of section 143(2) has been satisfied. In view thereof, the ld. counsel was requested to state as to why these questionnaires should not be taken as notices u/s 143(2). In this connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return within 15 days. Therefore, the time limit for filing the return as per the notice expired on 22.9.2007. The return had not been filed till this date. Therefore, the return is non-est. In column no. 6 of the proforma on page 1 of the assessment order, it is mentioned that the order is passed u/s 153-A of the Act. In view of the fact that no valid return had been filed by the assessee, the order should be taken to have been passed u/s 144 read with section 153-A of the Act. Since the return is non-est and the order had been passed u/s 144 read with section 153A of the Act, there was no requirement of issuing a notice u/s 143(2). 3.12 In the rejoinder, the ld. counsel submitted that none of the lower authorities has given a finding that the return is invalid. Therefore, the argument in this regard is a leap in the dark. It is further submitted by her that the assessment has been made on the basis of material found in the course of search. But a valid assessment in such a situation can be made, which leads to increase in the total income, only after issuance and service of a notice u/s 143(2). 4. We find that the ld. CIT(A) has given a categorical finding that the requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that assessment was completed under the summary assessment scheme as notified by the board. (Om Trading v Second ITO 188 ITR 641; Dadamchand v CIT 222 ITR 433). The only case in which the AO has to take the previous approval of the deputy commissioner for issuing a notice under this sub-section is where he has made an assessment under sub-s (1) which has been accepted by the assessee. The approval from the deputy commissioner is mandatory and cannot be presumed to have been granted. (CIT v Ladharam 245 ITR 340). Where the AO has reason to believe that the return is false, incorrect or incomplete, he cannot purport to compute the income under the proviso to s 145(1) or under s 145(2) without issuing a notice under this sub-section. (Kesaridas v CIT 2 ITC 213; Rampratap vs CIT 3 ITC 362). The meaning of this sub-section is that when a return is made the AO shall not reject it and take some other basis as the basis of assessment without giving the assessee an opportunity to appear before him and give any evidence which he may desire to give. (Harmukhrai v CIT 3 ITC 198, 206, per Rankin CJ.) The choice as to whether the assessee should attend the AO s office or whether h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est in respect of this mistake. Moreover, the difference is only that of fifteen days and the account books, such as were furnished, were in respect of the correct year ending Shait Sudi 15, Sambat 1989. The proceedings in connection with which the notice was issued relating to the year ending Shait Sudi 15, Sambat 1989 and these were the only proceedings pending at that time and the assessee knew perfectly well what account books he was required to produce. We are, therefore, of the opinion that this irregularity does not in any way vitiate the notice. The other irregularity is a more serious irregularity, and it is that the words or to produce, or to cause to be there produced any evidence on which such person may rely in support of the return were scored out. The contention on behalf of the assessee is that out of the alternatives provided in Sec. 23(2) if it is for him and not for the Department to choose the alternative. There are three alternatives provided by Sec. 23(2) 1. to attend at the Income-tax Officer s office. 2. to produce any evidence on which the assessee may rely, and 3. to cause to be there produced any evidence on which the assessee may rely. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From every point of view we are of the opinion that the law intended to give the options to the assessee and not to the Department. It was contended by Mr. Varma on behalf of the Department that if the law were interpreted in the way in which we feel inclined to interpret it, the position would become unworkable. He said that if the option were with the assessee, then under certain circumstances there could be no default in compliance with a notice under Sec. 23(2) and the Income-tax Officer could never proceed to pass a best judgment assessment. The illustration that he gave was that the assessee who admittedly keeps no accounts and whose calling do not necessarily involve the keeping of accounts might on a notice issued under Sec. 23(2) decide to attend at the Income-tax Officer's office and not to produce any evidence with the result that even though the Income-tax Officer may not be satisfied with the explanation of the assessee the Income-tax Officer would not be able to say that there was non-compliance with the notice and would have to proceed under Sec. 23(2), and in that case he would be compelled to accept the return filed by the assessee. There is really no substanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is some controversy as to whether a general notice would suffice or it had to be a specific notice. The generally accepted position of the law is that a general notice calling upon the assessee to appear or to produce evidence or cause the evidence to be produced is sufficient. However, in the case of Nirmal v Secretary of State, 2 ITC 20, it has been held that the notice should ordinarily specify the point on which the assessee has to produce the evidence although a dissenting judgment was written by Greaves J. Thus, what can be said is that a specific notice stands on better footings than a general notice. Therefore, the position of law in this regard is that if the assessee has been given an opportunity to do any of the three alternatives, as the conjunction used is or , and the date and place of compliance are mentioned, it will be a valid notice u/s 143(2). Although the issue was decided against the revenue in the case of Rajmani Devi, but that was on account of the fact that the assessee was precluded from exercising two of the alternatives. It also appears that the position of law under the 1922 Act was somewhat different as the conjunction and was used between second a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, 63 ITR 232, in which the defendant revenue was not only allowed to raise the additional plea but the AO was also directed to find facts regarding the claim of depreciation. As the facts regarding the date of notice and filing of the return are on record, therefore, the argument of the ld. DR is not a leap in the dark but a plea based on facts. Therefore, he is entitled to take such a plea. However, we need not go into the merits of this issue for the reason that we have already held that requirements of section 143(2) have been met in this case. 5.3 Before parting, we may mention here that our conclusion regarding compliance of the provision contained in section 143(2) can be arrived independent of the references to the commentary and the decision in the case of Rajmani Devi on plain reading of the provision. 5.4 The result of aforesaid discussion is that this ground arising in various years, taken up by the assessee, is dismissed. 6. In regard to the two grounds taken by the revenue in its appeal, it is mentioned in the impugned order that during the course of search at the residence of the assessee, a document was found regarding plot no. 251, Nangli Sakhruwati, Najaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax return and investment in the property was shown at ₹ 58,000/-. This is in consonance with the registered deed signed before the Sub-Registrar. There will always be a difference between purchase consideration and determination of the value of a property on a certain date. Although the substantial difference in a small period does lead to a presumption of suppression of purchase consideration, but such a presumption is at best a rebutable presumption. In any case such a presumption can be drawn only in case of Smt. Jyoti Chadha as no evidence whatsoever has been found that the assessee invested any amount in this property. Therefore, we are of the view that the ld. CIT(A) was right in holding that no addition could have been made in the hands of the assessee. At the same time, he has granted liberty to the revenue to take any action feasible in law in the case of Smt. Jyoti Chadha and in this connection he has referred to the provisions contained in section 153-C. We do not find any error in this finding also. 7. Ground no. 1 is that the ld. CIT(A) erred in deleting the addition of ₹ 73,50,000/- made by the AO u/s 69 in respect of investment in plot of land on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntains a letter of allotment by HUDA to M/s Roopwell Converters dated 11.8.2003, showing the price at ₹ 73,50,000/-. It has been submitted that the property belongs to M/s Jyoti Chadha, HUF which is a regular tax-payer. The return of this HUF shows total income of ₹ 72,000/- only for assessment year 2001-02. The income for assessment years 2002-03, 2003-04 2004-05 are ₹ 72,000/-, ₹ 11,882/- and ₹ 64,633/-. Therefore, the HUF does not have capacity to invest even a sum of ₹ 7,35,000/- by way of earnest money. The assessee is the karta of M/s Jyoti Chadha, HUF, who has to explain the source of investment. In absence of satisfactory explanation the amount is added in the hands of the assessee. 7.3 It is a matter of fact on record that the property belongs to M/s Jyoti Chadha, HUF, a regular assessee, who has shown investment in its return of income. No doubt the incomes returned by the HUF in various years do not evoke confidence that it could invest the amount out of its own income, but the source of investment could be other than its own income. In any case, no evidence has been brought on record to show that the assessee invested any amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s 143(2) stands decided against the assessee as per order in C.O. No. 144(Del)/2009 (supra). 11. Coming to the addition of ₹ 10.00 lakh, it is mentioned in the impugned order that seized records reveal that a sum of ₹ 10.00 lakh was seized from Shri Dalbir Singh Rawat, an employee of the assessee, at Bhopal Railway Station. The explanation of the assessee is that this money belongs to Shri Sudhir Chadha, the nephew, who owns Chadha Seed Farm, Post Chaklava, Kaladhongi Road, Nanital. He has sent this money in connection with some property transaction through Shri Rawat. In order to support this claim, a recovery suit filed by him at Bhopal has been filed. The AO has drawn adverse inference against the assessee on the ground that the money was found in possession of the employee of the assessee. In spite of the claim of ownership by the nephew, the matter is still pending for adjudication before the Railway Magistrate, Bhopal. The assessee has not been able to explain as to why his employee was found in possession of the cash. Therefore, mere denial without supporting evidence cannot be accepted. Thus, the ld. CIT(A) upheld the finding of the AO. 11.1 Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim that the money belongs to him and it was sent through Shri Rawat for purchase of some land, the details of which have not been mentioned. Shri Sudhir Chadha has not been produced for examination before the AO. No proposal seems to have been made for his production before the ld. CIT(Appeals). No such suggestion has been made even before us. Therefore, evidence on record suggests that the claim is an afterthought made by the nephew to accommodate the assessee. If the money really belonged to the nephew, action to claim the money would have been taken soon after its seizure by the police. Therefore, the evidence arising very much belatedly lacks the ring of truth in it. Any person of normal prudence, while seeing such an evidence, will come to a conclusion that it is only an accommodating claim. Therefore, we agree with the ld. CIT(A) and hold that this amount has been rightly included in the total income of the assessee. 12. The revenue has taken two grounds in the appeal against addition of ₹ 10.00 lakh each made by the AO in respect of investment in plot of land at Narela and flat in Vikrant Tower. The third ground regarding applicability of provision u/s 153C is sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page nos. 32 to 36 of the paper book. Page 32 is the receipt of application from the company along with receipt of ₹ 1,20,000/- by way of pay order no. 075558 dated 26.12.1996, drawn on Union Bank of India, Connaught Place, New Delhi. Page no. 33 is the ledger account in the books of the company showing the balance of ₹ 1,20,000/-. Page nos. 34 and 35 constitute allotment letter from Deputy Manager, Delhi State Industrial Development Corporation Ltd., addressed to the company regarding the allotment of the land. Page no. 36 is a certificate by the Divisional Manager certifying that the company is engaged in manufacture of flexible packaging and printing. It has been allotted an industrial plot admeasuring 250 sq. meters at Narela Industrial Complex under relocation scheme of industries. Since the party has deposited the estimated full cost of the plot, it is authorized to arrange various facilities mentioned therein for issuance of no objection certificate. 15. We have considered the facts of the case and submissions made before us. The facts mentioned in the impugned order and the documents placed in the paper book lead to a clear inference that the plot was allott ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nos. 023258 and 023255 dated 12.4.2004, drawn on Uninon Bank of India, amounting to ₹ 5.00 lakh each. Page no. 42 is the receipt in respect of payments made by Smt. Jyoti Chadha and Smt. Asha Bhasin. Page no. 43 is the balance-sheet of Smt. Jyoti Chadha as on 31.3.2005 showing investment in the flat at ₹ 5.00 lakh. 17. We have considered the facts of the case and submissions made before us. From the evidence placed in the paper book, it is clear that the flat had been purchased by Smt. Jyoti Chadha and Smt. Asha Bhasin as joint owners. The other evidence shows that Smt. Jyoti Chadha paid only a sum of ₹ 5.00 lakh, which is reflected in her balance-sheet as on 31.3.2005. In view of these facts, we do not find any error in the order of the ld. CIT(A) which requires correction from us. 18. The revenue has taken three substantive grounds in the appeal regarding the deletion of the addition of ₹ 2,23,70,000/-, ₹ 32,88,000/- and ₹ 1,02,921/-, made by the AO in respect of investment and other transactions made in the firm of M/s Pragati Packaging. In the course of search, a letter dated 6.6.2005 addressed by this firm to the bank was found, in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk of India regarding unsecured loans. On these facts, the ld. CIT(A) mentioned that in stead of handing over the document to the AO of M/s Pragati Packaging, Foil Pack (India) Pvt. Ltd. and Shri Vaibhav Chadha, the AO proceeded to take action in the case of the assessee. The assessee filed additional evidence by way of annual accounts of M/s Pragati Packaging, which show investment of partners and copies of accounts of Foil Pack (India) Pvt. Ltd. and Shri Vaibhav Chadha in the books of M/s Pragati Packaging. Since the assessee had not made any investment in the firm, it was argued that no addition could have been made in the hands of the assessee either in respect of capital or loans. The additional documents were forwarded to the AO for the for the remand report, who did not dispute the authenticity of the documents. Thereafter, the ld. CIT(A) came to the conclusion that the assessee had not made any investment in M/s Pragati Packaging either as capital or loan. Therefore, no addition should be made in his hand in this regard. 18.2 The assessee also filed documents to explain the purchases in the hands of M/s Pragati Packaging. The AO could not contradict the documents contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with the firm. He has also not made any investment by way of capital or loan in the firm. The transactions of purchase also pertain to the firm. Therefore, any action in respect of these papers can be taken only in the hands of the firm and not in the hands of the assessee. Thus, we are in agreement with the ld. CIT(A) that no amount could be added to the income of the assessee on the basis of the documents found in the course of search of the premises of the assessee. 21. Coming to the appeal of the assessee, ground no. 1 is that the order of assessment is bad in law as no notice has been issued u/s 143(2) of the Act. This ground is contrary to the facts on record, which shows that a notice u/s 143(2) has been issued and served on the assessee for this year, which has also been discussed in the cross objection of the assessee for assessment year 2001-02. It appears that this ground was wrongly taken by the assessee, and that is why it has not been discussed by the ld. counsel before us. A copy of this notice exists on our record, which shows that notice dated 27.7.2007 was issued to the assessee. In view of these facts, this ground is dismissed. 22. Ground no. 2 is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. We have considered the facts of the case and submissions made before us. The primary case of the ld. counsel is that the jewellery belongs to the wife and not to the assessee. It has been acquired at the time of the marriage and subsequently over a period of time. It also includes a gift of ₹ 1.00 lakh from mother-in-law. The whole of the jewellery represents her streedhan. An alternate plea is also taken that the family consists of self, wife and a son. Looking to the size of the family, possession of jewellery to the extent of 906.9 grams is reasonable. On the other hand, the finding of the ld. CIT(A) is to the effect that since gift deed contains a mention of a round sum of ₹ 1.00 lakh, it is not be reliable. There is no other evidence regarding the streedhan being acquired by the assessee at the time of marriage and over a period of time. We find that there is some contradiction in the stand taken by the ld. counsel in as much as the jewellery is stated to be belonging to Smt. Jyoti Chadha and at the same time it is also being made out that there are three family members who can together possess jewellery weighing 906.9 grams. No evidence has been produced before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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