CIT, CHANDIGARH V. SHAKUNTLA DEVI

ITA/694/2008

AI Insights

The case involves an appeal by the Commissioner of Income Tax against Smt. Shakuntla Devi concerning the assessment of undisclosed income for the block period from April 1, 1985, to July 17, 1995. The primary legal question was whether the satisfaction under section 158BD of the Income Tax Act had to be recorded before the completion of the assessment under section 158BC. The Tribunal had previously ruled that the jurisdiction assumed by the Assessing Officer was vitiated in law because the satisfaction was recorded after the completion of assessments in related cases. The High Court's decision to remit the case back to the Tribunal was influenced by recent judgments that clarified the timing and necessity of the satisfaction note under section 158BD.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 720539 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 03-09-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Faridabad vs. M/s Om Parkash and Sons, Commissioner of Income Tax III vs. M/s Calcutta Knitwears Ludhiana
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: M R SHARMA
• Assessee Lawyers: URVASHI DHUGGA
• Keywords: Assessment; Block period; Income Tax; Satisfaction note; Undisclosed income
• Section: 158BC; 158BD; 260A; 132(1)

Judgement Text

"ITA No.694 of 2008 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.694 of 2008 (O&M) Date of decision: 03.09.2014 The Commissioner of Income Tax- I, Chandigarh ……Appellant Vs. Smt. Shakuntla Devi …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms. Urvashi Dhugga, Advocate for the appellant. Mr. M.R.Sharma, Advocate for the respondent. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 27.11.2007, Annexure A.2 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B' (in short, “the Tribunal”) in ITA No.1227/Chandi/1996 for the block period 1.4.1985 to 17.7.1995, claiming following substantial question of law:- “Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in drawing a conclusion that the satisfaction under section 158BD of the IT Act has to be recorded before the completion of assessment under section 158BC of the I.T.Act?” 3. Briefly, the facts necessary for adjudication of the controversy GURBAX SINGH 2014.10.07 12:21 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.694 of 2008 (O&M) 2 involved as narrated in the appeal may be noticed. Search under section 132 (1) of the Act was conducted at the business premises of M/s Chandigarh Wires Pvt. Limited, the residence of its Director Shri Anil Gupta, business premises of M/s Chandigarh Steel Products and its proprietor Shri Sunil Gupta in July/August 1995. In the case of the assessee, the Assessing Officer issued notice under section 158BC read with section 158BD of the Act on 13.9.1996 calling upon the assessee to furnish a return of income for the block period 1.4.1985 to 17.7.1995. The Assessing officer thereafter determined the undisclosed income of the assessee for the block period at ` 1,39,96,007/- vide assessment order dated 28.10.1996, Annexure A.1. Aggrieved by the order,the assessee filed appeal before the Tribunal. Vide order dated 27.11.2007, Annexure A.2, the Tribunal allowed the appeal holding that the assumption of jurisdiction by the Assessing officer to make the impugned assessment under Chapter XIV B by issuance of notice under section 158BD read with Section 158BC dated 13.9.1996 was vitiated in law. The Tribunal observed that notice under section 158BC read with section 158BD of the Act was issued on 13.9.1996 and the satisfaction dated 10.9.1996 which referred to the assessments made under section 158BC of the Act in the case of M/s Chandigarh Steel Products and Shri Anil Gupta were dated 30.7.1996. It was also mentioned that the purported satisfaction under section 158BD of the Act had been recorded after the completion of assessments in the case of persons who were searched under section 132(1) of the Act. Hence the instant appeal by the revenue. 4. We have heard learned counsel for the parties and perused the record. GURBAX SINGH 2014.10.07 12:21 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.694 of 2008 (O&M) 3 5. Learned counsel for the appellant-revenue submitted that the judgment of the Tribunal is contrary to the decision of this Court in Commissioner of Income Tax, Faridabad vs. M/s Om Parkash and Sons, ITA No.147 of 2010 decided on 14.2.2011. It was also urged that the Apex Court recently while delving into identical issue, in Commissioner of Income Tax III vs. M/s Calcutta Knitwears Ludhiana, Civil Appeal No.3958 of 2014 (arising from Special Leave Petition (C) No.10542 of 2011) decided on 12.3.2014 observed as under:- “47. In the result, we hold that for the purpose of section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the 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 alongwith the initiation of proceedings against the searched person 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 searched person.” On the aforesaid premises,it was submitted that the matter be remanded to the Tribunal with a direction to decide the same afresh in the light of observations made in the aforesaid pronouncements. 6. Learned counsel for the respondent could not seriously dispute that the matter requires to be adjudicated in the light of the aforementioned judgments. 7. After hearing learned counsel for the parties, we find that the issue requires to be decided afresh in the light of the judgments of the Apex Court in M/s Calcutta Knitwears Ludhiana and this Court in M/s Om Parkash and sons's cases (supra). Accordingly, we set aside the impugned GURBAX SINGH 2014.10.07 12:21 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.694 of 2008 (O&M) 4 order dated 27.11.2007, Annexure A.2 passed by the Tribunal and remit the matter back to it to decide the same afresh in accordance with law after affording an opportunity of hearing to the parties. (Ajay Kumar Mittal) Judge September 03, 2014 (Fateh Deep Singh) Judge ‘gs' GURBAX SINGH 2014.10.07 12:21 I attest to the accuracy and integrity of this document High Court Chandigarh "