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TMI Blog2017 (2) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... n, is bad in law. Therefore, the issue no.2 is answered in favour of the assessee and against the department. Whether the Tribunal had material and was right in law in holding that the total income assessed in the hands of the society in the block return as well as regular return is to be assessed in the hands of Shri Khan and Shri Vijay at the ratio 51% and 49% respectively, since there was no notice served under section 158 BC, in that view of the matter also the assessee could not have been assessed under section 158BD of the Act. Decided in favour of the assessee and against the department. - D.B. Income Tax Appeal No. 46/2005, D.B.Income Tax Appeal No. 53/2005 - - - Dated:- 7-2-2017 - K. S. Jhaveri And Vinit Kumar Mathur, JJ. For the Appellant : Mr. N.M. Ranka, Senior Counsel with Mr. N.K. Jain For the Respondent : Mr. Sameer Jain and Mr. Anuroop Singhi JUDGMENT Per Hon ble Jhaveri, J. 1. By way of these appeals, the appellants assessees have challenged the judgment and order of the Tribunal whereby the Tribunal has reversed the order of the CIT (Appeals) and quashed the proceedings passed in favour of the society as well as both President and Secr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the counsel for the revenue contends that the question relating to addition of ₹ 60.00 lacs in the hands of the present appellant was a matter of remand and the present appellant agitated the issue concerning addition of ₹ 60.00 lacs before the Assessing Officer. The counsel for the revenue submitted that pursuant to the remand order, the Assessing Officer passed the order of assessment on 28th November, 2005. The said order came to be challenged in appeal and the Commissioner of Income Tax (Appeals) has also disposed of appeal on 29th January, 2007. The counsel for the revenue prays for time to place on record the order of Assessing Officer dated 28th November, 2005 and the order of Appellate Authority dated 29th January, 2007. As prayed stand over to 10th May, 2007. 4. After considering all the materials on record the same Bench admitted the appeal of the appellants vide order dated 28.05.2007 and following substantial questions of law were framed: i) Whether the Tribunal had material and was right in law in holding that the total income assessed in the hands of the society in the block return as well as regular return is to be assessed in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready held that no evidence was found during the course of search established that any amount over and above recorded in the books of accounts were taken by the society in transactions relating to dealing in immovable properties. On this ground, the addition in the case of Samiti has been deleted by a detailed order in appeal No.425/01-02. Therefore, in view of these facts and circumstances of the case, the addition in the present case is also deleted. 6. Mr. Ranka, senior counsel, has raised the issue-wise submissions as follows: Issue No.1. 6.1. The issue as to notice under Section 158 BD is invalid and bad having rendered against the Revenue and became final which was not challenged. This issue on merits is of academic interest and need not be decided. In support of his submission he has relied on the decision of this Court in the case of CIT Vs. G.B.H. Exporters (2004) 271 ITR 545 (Raj.), wherein it has been held as under: 11. The penalty imposed under Section 271(1)(c) of the Act, 1961, upon the assessee was set aside by the Tribunal on two grounds. On first ground, no doubt, the Tribunal has been pleased to refer two questions of law for opinion of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Ranka appearing for the assessee that it is not mandatory for this Court when once it is made that it may not proceed to answer the question or questions stated in the reference and to decide it though the same may be of purely academic interest and unnecessary to decide the real controversy. In view of the findings recorded by the Tribunal in para No. 25 of its judgment dt. 27th March, 1996, which have not been challenged by the Revenue the answer to question Nos. 1 and 2 will not change the result of the case. 6.2. Therefore, he has submitted that in the last alternate, it is apparent that the finding is in the case of Co-operative Society and not independently in the hands of the appellants. The addition on merits was deleted by CIT (Appeals) and, hence, no reasonable opportunity was given by the Tribunal to the appellants to explain their position on view points on merits and material found on search. The society and the appellants are different persons and, therefore, it is violative of principles of natural justice and such finding deserves to be reversed. Issue No.2: 7. It is contended that the search at society was made on 16.02.2000 wherein the appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n has to be found on reasonableness and not capricious and not product of imagination or speculation. The satisfaction must reflect the rational connection with or relevant bearing between the material available and undisclosed income of the third person. The rational connection postulates and requires satisfaction of the Assessing Officer that the third person has undisclosed income on the basis of evidence and material before him. The material itself should not be vague, indefinite, distinct or remote. In the instant case, there was no valid foundation for so called satisfaction . Assessing Officer itself gave up the stand and assessed income substantively in the hands of the society. 8. Mr. Ranka has further contended that the revenue preferred appeals before the Tribunal but not being aggrieved against the finding of notice under Section 158BD to be bad. It was neither challenged nor any grounds were raised. He has relied upon the decision of Delhi High Court in the case of CIT Vs. Anupam Sweets- (2010) 321 ITR 485 (Del.) wherein it has been observed as under: In this behalf the Tribunal vide the impugned order noted that it is a settled legal position that, recording ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it is quite clear that the Revenue should not exercise its powers in a mechanical power but should be circumspect while taking action under the provisions of Chapter XIVB of the Act. That has not happened in so far as the present case is concerned and, Therefore, we have not hesitation in giving a finding in favor of the assessee. Issue No.3 9. It is submitted that this issue is at the behest of revenue and hence is of no effect. 10. Counsel for the respondent-revenue Mr. Jain and Mr. Singhi have contended that by substantive and protective assessment, the society has also been benefited and, thus, it is a camouflage. In that view of the matter, in view of the fact that the Tribunal has made protective assessment in case of society and these are very substantive, therefore, the appeals deserve to be dismissed. He has relied upon the Constitutional Bench decision of the Supreme Court in the case of Lalji Haridas Vs. Income Tax officer another- (1961) 43 ITR 387, wherein the Constitution Bench of the Supreme Court, has held as under: 8. That takes us to the appeal preferred by Chhotalal. As we have already mentioned Chhotalal is a resident of Bombay and responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being taken against the appellant for taxation of income in his hands only as a precautionary measures against the eventuality of its being finally held that the income is not liable to be taxed in his brothers hands , and it was added that the appellants contention that such a procedure is not warranted under the Act is entirely untenable ; but in appreciating the effect of this statement it would be necessary to consider the other relevant statements made by the respondent in his statement of the case. In paragraph 4, for instance, it is added that until the question of liability to pay tax in respect of the income in question is finally determined it may not be possible to safely predicate that it is the income of one and not of the other, and the respondents case appears to be that in such circumstances protective assessment have to be made so that the income may not escape taxation altogether. In other words, the respondents case clearly is that the notices issued against the two brothers by their respective Income-tax Officers are intended to determine who is responsible to pay tax for the income in question; now though Mr. Nambiar wanted to argue that protective or precaut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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