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TMI Blog2004 (10) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... en taken up for consideration upon due notice to the writ petitioner/respondent. As will appear from the facts disclosed during the course of the hearing and also set out in the stay application, after the search and seizure operation, the assessing authority initiated assessment proceedings against the writ petitioner/respondent, hereinafter referred to as "the assessee", by issuing notice under section 158BC of the Income-tax Act, 1961, hereinafter referred to as the "said Act". The assessment proceedings were initiated not only against the assessee but also in the names of several members of his family. Pursuant to the said notice, the assessee filed a block return showing nil undisclosed income on March 14, 2001. The block assessment against the assessee was completed on November 29, 2002, wherein the Assessing Officer assessed the undisclosed income of the assessee at Rs. 6,57,73,867 and additional demand of Rs. 4,70,96,716 was raised. The income assessed included addition of a sum of Rs. 5,99,00,000 on account of 9 per cent. RBI Relief Bonds held by the assessee as deemed dividend in accordance with the provisions of section 2(22)(e) of the said Act. The assessee filed an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated proceedings under section 263 of the aforesaid Act for inclusion of the deemed dividend income in the total income of the assessee. A second writ application was filed by the assessee challenging the initiation of the proceedings under section 263 of the Act. By an order dated January 21, 2004, the learned single judge gave liberty to the Commissioner of Income-tax to proceed with the notice issued under section 263 and to pass orders thereupon, but not to give effect to the same without the leave of the court. On behalf of the Revenue it was further urged that since the block assessment order which had been set aside by the appellate order of the Commissioner of Income-tax (Appeals) had not yet reached finality and was the subject-matter of the present appeal before the Income-tax Appellate Tribunal, the direction given by the learned single judge to release the seized bonds was erroneous since in case the Revenue succeeds in the appeal it will find it difficult to realize the assessed tax from the assessee. In support of his aforesaid submissions, Mr. Banerjee placed reliance on a Bench decision of the Allahabad High Court in the case of Bhagwat Prasad v. CIT reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets and could not be retained for the purposes of section 132B of the Income-tax Act, 1961. Mr. Poddar urged that the provisions of section 132B had no application as such in respect of the seized bonds, inasmuch as, there was no existing liability on account of which the said bonds could be retained for recovery of any dues. Referring to the provisions of clause (i) of section 132B(1) of the Income-tax Act, Mr. Poddar submitted that the said provision contemplates recovery in respect of the seized assets in relation to any existing liability either under the Income-tax Act, the Wealth-tax Act, the Expenditure-tax Act, the Gift-tax Act and/or the Interest-tax Act and the amount of liability determined on completion of the assessment under section 153A or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be, and in respect of which such person is in default or is deemed to be in default. Mr. Poddar submitted that there was no existing liability within the meaning of clause (i) of section 132B(1) of the Income-tax Act, as far as the appellant was concerned, inasmuch as, the block assessment which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to clause (i) of section 132B(1) contemplates release of any seized asset or portion thereof within one hundred and twenty days from the date on which the last of the authorisations for search under section 132 was executed. Mr. Poddar urged that, in any event, even if the seized articles were not disclosed assets, the income-tax authorities were under an obligation to release the same within the period specified under the second proviso. Mr. Poddar submitted that in the instant case even the said provision was not applicable, inasmuch as, the income-tax authorities were not entitled to retain the bonds under the provisions of section 132B since the same were not related to any undisclosed asset but formed part of the disclosed assets of the writ petitioner/respondent which could not be the subject-matter of seizure. Mr. Poddar submitted that with the setting aside of the block assessment by the Commissioner of Income-tax (Appeals), the retention of the seized bonds became legally incompetent, inasmuch as, the said bonds could no longer be related to any proceeding under section 132B of the Income-tax Act, 1961. In support of his aforesaid submissions, Mr. Poddar referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the points raised during the hearing of the appeal, Mr. Poddar submitted that the submission made on behalf of the Revenue that the rules did not provide for any stay application to be filed by the Department was incorrect and that the said question had been considered and settled by the hon'ble Supreme Court as far back as in 1968, in the case of ITO v. M.K. Mohammed Kunhi reported in [1969] 71 ITR 815. Mr. Poddar submitted that at the relevant point of time there was no provision at all in the Income-tax (Appellate Tribunal) Rules, 1963, for an application to be made to the Tribunal either by the assessee or the Department for stay pending the disposal of an appeal. Mr. Poddar submitted that it was in such background that the hon'ble Supreme Court observed that the statutory power under section 254 of the Income-tax Act, which conferred on the Appellate Tribunal powers of the widest amplitude in dealing with appeals before it, carried with it the duty in proper cases to make such orders for staying recovery proceedings pending appeal before the Tribunal so that the appeal, if successful, was not rendered nugatory. Mr. Poddar submitted that the hon'ble Supreme Court also observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue authorities to retain the seized bonds, which were disclosed assets for realisation of future dues, if any, Mr. Poddar submitted that such an interpretation of section 132B, would render clause (i) of section 132B completely otiose. Mr. Poddar submitted that the filing of the appeal by the Revenue before the Income-tax Appellate Tribunal could not operate as a stay on return of the seized bonds without any formal order of stay in the pending appeal merely on account of the pendency of the appeal. It was submitted that in the absence of any provision which empowered the Revenue to retain the disclosed assets of an assessee, the said authorities were under an obligation to return the seized bonds on the setting aside of the block assessment. In this regard, Mr. Poddar submitted that pursuant to the leave granted by the learned single judge in the other writ application in which the proceedings under section 263 of the aforesaid Act had been challenged a regular assessment had been made for the assessment year 2000-01, but the same had been kept in abeyance as per the orders in the said writ application. However, in the said order of assessment it had been observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in the regular assessment of the assessee made under section 143(3) of the Income-tax Act, 1961. In fact, the said observation of the Assessing Officer makes it quite clear that there is no nexus between the search and seizure for the purposes of block assessment and the seizure of the bonds. There can, therefore, be no justification for the Revenue to retain the said bonds in connection with future liability, if any, of the assessee on account of payment of tax. The submissions relating to the second proviso to clause (i) of section 132B(1) are not relevant to the outcome of the instant case since the seized bonds do not form part of the assessee's undisclosed assets which would have attracted the said provision, but is the assessee's disclosed assets in respect whereof the provisions of section 132B can have no application. In our view, once the block assessment in respect of the seized bonds was set aside by the Commissioner of Income-tax (Appeals) the right of the Revenue to retain the said bonds ceased, unless, of course, an appropriate order of stay had been obtained by the Revenue in the pending appeal before the Income-tax Appellate Tribunal. The judgment of the Allah ..... X X X X Extracts X X X X X X X X Extracts X X X X
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