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TMI Blog2015 (7) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Departmental Representative. Therefore, we find merit in the submission of the Ld. Counsel for the assessee that when the order passed u/s.263 is in force in case of the searched person, there was no question of making addition in the hands of the assessee Since in the instant case the block assessment of the searched persons were completed on 24-12-2003 and since the notice u/s.158BD was issued on 10-02-2006, i.e. after a gap of 26 months, therefore, in view of the decision of the Hon’ble Delhi High Court in the case of Bharat Bhushan Jain [2015 (1) TMI 705 - DELHI HIGH COURT]) the notices issued u/s.158BD are not in conformity with the requirements of section 158BD which were unduly delayed. Therefore, the notice issued u/s.158BD has to be held as invalid and void. - Decided in favour of assessee. - ITA No.1745/PN/2013, ITA No.1746/PN/2013, ITA No.1787/PN/2013 - - - Dated:- 22-7-2015 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For the Appellant : Shri K. Srinivasan Shri Vikay Kumar D.Nibjiya For the Respondent : Shri Mazar Akram ORDER PER R.K. PANDA, AM : The above 3 appeals filed by the respective assessees are directed against the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bank accounts. Before the income-tax authorities Shri Ramanlal Shah had claimed that the 2 financial concerns were based at Adoni and some of the activities were carried out at Pune. The cash was withdrawn from the bank accounts of the financial concerns at Adoni and brought to Pune physically. However, on examination of the statements recorded of the Accountant of Shri Ramanlal Shah and his own statement and after further enquiries the AO of Shri Ramanlal Shah came to a finding that the entire modus operandi was operated by the persons receiving loan entries from these financial concerns. The assessee was one of the persons who allegedly received the fictitious loan amounts of ₹ 22 lakhs spread over 3 assessment years. 4. The AO observed that in the cash book of M/s. Maheshwari Financiers (SEA-12 seized on 11-10-2001) it was found that there are two figures of balance of cash in hand, drawn at the end of each date, from page No.21 dated 24-05-1999 to page 142 dated 30-03-2000. The first balance was drawn in the regular course. The second balance of cash in hand was drawn after certain cash expenses were debited at a later date in the cash book. Due to certain discrepanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic names and alleging that loans were obtained by these parties by cheque for which they have paid cash to M/s. Maheshwari Financiers. It was further argued that the notice issued u/s.158BD is bad in law being issued beyond a reasonable time of the date of completion of the assessment of the searched person. Without prejudice to the above the assessee further argued that the loan of ₹ 22 lakhs was accepted by crossed account payee cheques from M/s. Maheshwari Financiers and is from a person duly identified by the department. The AO of the searched person in the satisfaction note in para 8 thereof has clearly accepted that there is no direct evidence that the assessee had paid cash for obtaining this loan from M/s. Maheshwari Financier. The assessee has also paid interest on the loan to the lenders from time to time by crossed account payee cheques and has also repaid the entire loan amount by crossed account payee cheque. Relying on various decisions it was argued that the addition made u/s.68 as well as u/s.69C is unwarranted and illegal. 6. It was also stated that the satisfaction u/s.158BD of the Act of the searched person is suspect, not in good faith and un-creditwort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents, papers and other evidence have been actually handed over to his AO by the AO of the searched person is a frivolous ground. 8. As regards the argument of the assessee that the notice issued u/s.158BD is bad in law being issued beyond a reasonable time from the date of completion of the assessment of the searched person is concerned, the Ld.CIT(A) following various decisions held that there is no unreasonable delay in notice issued u/s.158BD. The delay of 18- 19 months in issuance of notice u/s.158BD from the date of satisfaction recorded by the AO of the searched person cannot be held to be unreasonable particularly when the section does not provide any time limit for issuance of such notice. 9. So far as the argument of the assessee on merit is concerned she also dismissed the same on the ground that the loan amount though advanced by way of cheque by M/s. Maheshwari Financiers has its origin in the cash and since the cash has been proved by the AO of the searched person as not belonging to him can be certainly inferred to be belonging to the assessee. She accordingly held that the AO is correct in law in assessing the loan of amount of ₹ 22 lakhs u/s.68 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the 263 order was in force in case of the searched person. The satisfaction note was received by the assessee on 07-12- 2007 along with the show cause notice. He submitted that the satisfaction note is undated and is much late after original assessment on 24-12-2003. Thus, there is a gap of about 4 years. He submitted that till today no details of materials transferred is shown and it is admitted that there is no seized material which are incriminating and disclose undisclosed income. Referring to the decision of the Bangalore Special Bench of the Tribunal in the case of Y. Subbaraju Co. Vs. ACIT reported in 91 ITD 118 and the decision of Hon ble Supreme Court in the case of Manish Maheshwari Vs. ACIT reported in 289 ITR 341 he submitted that the primary requirement for action u/s.158BD is not fulfilled. The observation of the CIT(A) in para 4.2 are contrary to legal requirements in view of the above 2 decisions. Referring to the decision of the Hon ble Supreme Court in the case of CIT Vs. Calcutta Knitwears reported in 362 ITR 673 he submitted that the Hon ble Supreme Court has held that though there is no time limit for recording satisfaction note, however, it can be done til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 24-12-2003. The satisfaction u/s.158BD has been recorded by the AO of the searched person on 06-04-2004 and the notices has been issued to the assessee u/s.158BD on 10- 02-2006, i.e. after a gap of over 23 months with reference to the date of recording of satisfaction. Further, the loan of ₹ 22 lakhs taken by the assessee from the searched person has been recorded in the books of account of the searched persons prior to the date of search. No other incriminating material was found except the said entries in the books of account prior to the date of search and the statement of one Mr. M. Srinivasulu, accountant of the searched persons. Under these circumstances the question that arises is as to whether the notice issued u/s.158BD to the assessee is valid and whether the addition made by the AO in the hands of the assessee u/s.68 and 69C is sustainable. 16. From the details furnished by the assessee in the paper book as well as the perusal of the orders of the authorities below, we find the assessee has received an amount of ₹ 22 lakhs, i.e. R.5 lakhs during A.Y. 1998-99, ₹ 2 lakhs in A.Y. 2000-01 and ₹ 15 lakhs in A.Y. 2001-02 from M/s. Maheshwari Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has further been held that initiation of proceedings u/s.158BD by the AO against the assessee without recording the requisite satisfaction was illegal. The relevant observations of the Hon ble High Court at para Nos. 11 to 13 are as under : 11. It clearly emerges from the reading of this provision that before invoking the provisions of s. 158BD of the Act, the AO of the person searched under s. 132(1) must satisfy himself that some undisclosed income belongs to a person other than the persons with respect to whom search was made under s. 132(1) of the Act. Such satisfaction must be based on the material found in the course of search. In the absence of any such satisfaction (which is to be recorded in writing) the concerned AO does not get any jurisdiction to assess that other person by invoking the s. 158BD of the Act. Further, the satisfaction of the AO has to be in respect of the following aspects : (i) there should be undisclosed income within the meaning of s. 158B(b) referable to the assets or books/documents found seized/ requisitioned; (ii) there should a finding by the AO that there was undisclosed income in such assets or books of account or documents of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the satisfaction note was recorded more than a year after completion of assessment of the searched person notices issued were rightly held to be not issued in conformity with requirement of section 158BD. The relevant 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. 22. Since in the instant case the block assessment of the searched persons were completed on 24-12-2003 and since the notice u/s.158BD was issued on 10-02-2006, i.e. after a gap of 26 months, therefore, in view of the decision of the Hon ble Delhi High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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