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TMI Blog2015 (8) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 158BD of the Act, cannot be brushed aside. In view of the said notice under section 158BD of the Act being not issued within reasonable time, though there is no time limit provided under the Act to issue the said notice under section 158BD of the Act, the said notice issued under section 158BD of the Act is invalid notice. Following the ratio laid down by the Hon’ble Delhi High Court in CIT Vs. Bharat Bhushan Jain (2015 (1) TMI 705 - DELHI HIGH COURT ) in line with the proposition laid down by the Hon’ble Supreme Court in CIT vs. Calcutta Knitwears (supra), we hold that the notice issued under section 158BD of the Act in the present case was unduly delayed and the same is held invalid and void. - Decided in favour of assessee. - ITA No .1782/PN/2013, C.O. No.87/PN/2014 ITA No.1783/PN/2013, C.O. No.88/PN/2014 ITA No.1784/PN/2013 C.O. No.89/PN/2014 - - - Dated:- 26-8-2015 - MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM Assessee by : Shri Nilesh Khandelwal Department by : Shri B.C. Malakar ORDER PER SUSHMA CHOWLA, JM : Out of this bunch of appeals and cross objections, the Revenue has filed appeals in the case of three different assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice issued u/s. 158BD granting less than 15 days time for compliance is in violation of the provisions of the Act notice issued in contradiction to the provisions of the law be held as not in tenable in law. It further be held that proceedings started completed on the basis of notice issued u/s. 158BD is without holding proper jurisdiction, illegal not tenable in law. The order passed by the Assessing Officer be held as null void be cancelled. 2. Without prejudice to ground no.1 in the alternative on facts and circumstances prevailing in the case and as per provisions scheme of the Act it be held that there is no undisclosed income assessable in the hands of the appellant as assessed by the AO and that confirmed by the 1st appellate authority. It further be held that undisclosed income in aggregate of ₹ 13,49,000/- assessed by the Assessing Officer and confirmed by the first appellate authority for the block period is unjustified, improper, contrary to the provisions of law facts prevailing in the case. The entire income so assessed by the AO and confirmed by the first appellate authority be deleted. The appellant be granted just and proper as per provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nanciers and Rajashree Enterprises, as loans, which were deposited in the bank accounts of these concerns in Adoni, from these bank accounts the cash was withdrawn and shown as cash in hand, in the cash book of these two concerns. Therefore whenever some party in Pune wanted a loan entry by cheque then in the books of accounts of these concerns, the cash account was credited and entry was passed that the cash was claimed to be physically carried and deposited to the bank accounts of these finance concerns in Pune. No cash was actually transferred to Pune, because in Pune the source of cash was the unaccounted money from the businessmen of Pune who required the loan. However the documentation had to be done in the books, to show that the cash was physically transferred from Adoni to Pune, therefore there was need to put traveling expenses, even when no actual expenses were incurred. The above facts are further corroborated by the following examinations, statements and enquiries. 4.3 It was found that the cash was deposited in the Bank accounts of these finance concerns in Pune, when the cheques were to be issued in favour of Pune businessmen. The plea was taken by the Ramanlal (d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was the issue of notice under section 158BD of the Act being without jurisdiction. Connected legal issues raised before the CIT(A) was the validity of initiation of proceedings under section 158BD of the Act after completion of block assessment under section 158BC of the Act and non-service of notice under section 143(2) of the Act, prior to completion of assessment under section 158BC of the Act. The CIT(A) noted that the assessment in the case of M/s. Maheshwari Financiers and M/s. Rajashree Enterprises was completed on 24.12.2003, but the notice under section 158BD of the Act was issued only on 10.02.2006 i.e. after delay of over 23 months with reference to the date of completion of assessment of search persons. The CIT(A) further observed that even if the date of satisfaction was considered to be the date of receipt of satisfaction note by the Assessing Officer of the assessee on 06.04.2004, the notice issued thereafter on 10.02.2006 was delayed by over 20 months. The CIT(A) relied upon the decision of Special Bench of Delhi Tribunal in Manoj Aggarwal Vs. DCIT reported in 113 ITD 377, wherein it was held that the satisfaction had to be recorded before the completion of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued under section 158BD of the Act. Regarding the issue of non-receipt of notice under section 143(2) of the Act, while undertaking the block assessment, the CIT(A) perused the record and noted that the Assessing Officer had not issued any notice under section 143(2) of the Act during assessment proceedings. Accordingly, on perusal of assessment records, the plea of the assessee was found to be correct by the CIT(A) and relying on the ratio laid down by the Hon ble Supreme Court in ACIT Vs. Hotel Blue Moon reported in 321 ITR 362 (SC), it was held that in the absence of any notice being issued and served upon the assessee under section 143(2) of the Act, the issue is to be allowed in favour of the assessee. With regard to the merits of the addition made under sections 68 and 69C of the Act, the CIT(A) noted that the original order in the case of Shri Ramanlal Shah i.e. proprietor of M/s. Maheshwari Enterprises and Shri Mahendra Shah, proprietor of M/s. Maheshwari Financiers passed under section 158BC of the Act had been set-aside by the CIT(Central), Pune and reassessment under section 158BC r.w.s. 263 of the Act has been completed by the Assessing Officer subsequently, vide o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was without proper jurisdiction. The grievance of the Revenue is that no reliance could be placed on the ratio laid down by the Hon ble Apex court in ACIT Vs. Hotel Blue Moon (supra) since the facts of the present case were not identical as the assessee had not furnished any return of income in response to notice under section 142(1) of the Act. Further, the assessee had not raised any objections during the assessment proceedings with regard to issue of notice, which was contradictory to the provisions of section 292BB of the Act. 12. On the other hand, the assessee has filed Cross Objections objecting to the assumption of jurisdiction by the Assessing Officer under section 158BD r.w.s. 158BC of the Act, wherein the notice issued by the Assessing Officer under section 158BD of the Act, granting less than 15 days time for compliance, was in violation of the provisions of the Act. Without prejudice to the issue raised against the jurisdiction assumed under section 158BD r.w.s. 158BC of the Act, the assessee has also challenged the addition made in its hands under section 68 and 69C of the Act totaling ₹ 13,49,000/-. 13. The learned Departmental Representative for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative for the assessee that the proceedings under section 158BD of the Act could be initiated immediately after conduct of search on searched persons, or during the course of assessment being carried out against the searched persons, and / or immediately after assessment having been completed in the case of searched persons. Reference was made to the definition as under Black s Law for the meaning of word immediate notice that is to be issued within reasonable time . 15. The learned Authorized Representative for the assessee further stressed that the Assessing Officer has failed to provide satisfaction note or copies of documents relied upon and has also not given any opportunity to cross-examine the person. The proceedings completed against the assessee were violation of principles of natural justice. Further, reliance was placed on the ratio laid down by Cochin Bench of Tribunal in N.C. Thomas Vs. DCIT (2013) 144 ITD 667 (Cochin- Trib). Another objection raised by the learned Authorized Representative for the assessee was against the order of CIT(A) in not following the judicial precedents i.e. the decisions of Pune Bench of Tribunal. It was pointed out by him that the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative for the Revenue was on G.K.N Drive Shafts (India) Ltd. Vs. ITO Others [2003] 259 ITR 19 (SC) for the proposition that no reasons for reopening the assessment under section 148 of the Act were to be provided till the return of income was filed. Since the assessee had failed to file the return of income, no documents were provided to the assessee. Another reliance placed upon by the learned Departmental Representative for the Revenue was on the ratio laid down by Agra Bench of Tribunal in ACIT Vs. Shri Uday Bhagwan Industries in ITA No.154/Agr/2011, relating to assessment year 2003-04, order dated 15.03.2013, for the proposition that after the issue of notice under section 148 of the Act, where no return of income was filed, the Tribunal held that there was no requirement to issue notice under section 143(2) of the Act. Our attention was drawn to the definition in section 158B(b) of the Act. 17. We have heard the rival contentions and perused the record. The first issue raised in the present appeal is jurisdictional issue in relation to the proceedings initiated against the assessee under section 158BD of the Act. Search and seizure operations were carried out und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued under section 158BC of the Act and in the absence of the same, the notice issued against the assessee was no notice under the Act. The said plea raised by the assessee for the first time before us and the same being legal plea, is admitted for adjudication. 19. Another aspect of jurisdictional issue is non-issue and non-service of notice under section 143(2) of the Act. The assessee is aggrieved that no such notice was issued under section 143(2) of the Act to the assessee. The Revenue on the other hand, pointed out that no return of income was filed by the assessee within 45 days from the date of notice under section 158BD of the Act and as such, there was no requirement for issuing any notice under section 143(2) of the Act. Reliance of the CIT(A) on the ratio laid down by the Hon ble apex court in ACIT Vs. Hotel Blue Moon (supra) was stated to be mis-placed as the facts of the assessee s case were at variance to the facts before the Hon ble apex court. The learned Departmental Representative for the Revenue pointed out that in the absence of any return of income being filed by the assessee, requirement of issue of notice under section 143(2) of the Act could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prepare the satisfaction note to the effect that there exists income belonging to any person other than the person in respect of whom search was conducted under section 132 or requisition of books of account was made under section 132A of the Act. The language of the provision is clear and unambiguous. The Legislature has not imposed any embargo on the Assessing Officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the person against whom search was conducted. For the purpose of section 158BD of the Act, a satisfaction note is a sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the person against whom search was conducted under section 158BC of the Act; (b) along with the assessment proceedings under section 158BC of the Act ; and (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 158BD of the Act, the preparation of the satisfaction note by the Assessing Officer of the searched persons, before he transmits the records to the other Assessing Officer, who has jurisdiction over such other person, is a sine qua non. It was further held by the Hon ble apex court that the satisfaction note could be prepared either at the time of or along with initiation of proceedings against the persons against whom search was conducted under section 158BC of the Act, or along with assessment proceedings under section 158BC of the Act and / or immediately after the assessment proceedings are completed under section 158BC of the Act of the searched persons. Reference was made to the provisions of section 158BE(2)(b) of the Act and it was observed that the said section only provides period of limitation for completion of block assessment under section 158BD of the Act, in the case of a person, other than the person against whom the search was conducted, as to two years from the end of the month, in which notice under Chapter was served on such other person, in respect of search carried out after first January, 1997. The Hon ble Supreme Court held that the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant observation of Hon ble High Court at para 6 of the order reads as under :- 6. Having regard to the intent of the Supreme Court in Para 44 of the Calcutta Knitwears (supra), where it was indicated that the Revenue has to be vigilant in issuing notice to the third party under Section 158 BD, immediately after the completion of assessment of the searched person, this Court is of the opinion that a delay ranging between 10 months of 1 years cannot be considered contemporaneous to assessment proceedings. We are of the opinion that notices were not issued in conformity with the requirements of Section 158BD, and were unduly delayed. The appeals of the Revenue accordingly fail and are dismissed. 24. The learned Departmental Representative for the Revenue on the other hand, had placed reliance on the ratio laid down in Venad Properties Pvt. Ltd. Vs. CIT (supra), wherein it was held that the procedural irregularities in service of notice which could be rectified, was not a illegality. The Hon ble High Court further held that in matters of due service of notice / summons, a practical and pragmatic approach, rather than mere compliance or non-compliance with the formality is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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