CIT-I, LUDHIANA V. M/S PARVEEN FABRICS PVT. LTD.

ITA/379/2010

AI Insights

The case revolves around the procedural validity of actions taken under Section 158BD of the Income Tax Act, 1961, following a search operation. A search conducted on 5.2.2003 led to the seizure of documents from S.K. Bhatia, and subsequent assessments were made against him. The respondent, M/s Parveen Fabrics Pvt. Ltd., contested the notice issued under Section 158BD, arguing that the satisfaction note was recorded post the conclusion of the assessment proceedings, which was upheld by the CIT (A) and the Tribunal. The High Court, referencing a similar case, affirmed that the recording of satisfaction and subsequent actions under Section 158BD must occur within the timeframe of the block assessment under Section 158BC.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 720629 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 25-08-2010
• Assessment Year: misc
• Other Referred Cases: Manoj Aggarwal v. DCIT (2008) 113 KTD 377 (Del) (SB), Commissioner of Income-tax-I, Ludhiana v. Mridula, Prop. M/s Dhruv Fabrics, Ludhiana
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Block assessment; Income tax appellate tribunal; Notice issuance; Satisfaction recording
• Section: 158BC; 158BD; 260A; 158BE

Judgement Text

"ITA No. 379 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 379 of 2010 Date of Decision: 25.8.2010 Commissioner of Income Tax-I, Ludhiana ....Appellant. Versus M/s Parveen Fabrics Pvt. Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Advocate for the appellant. ADARSH KUMAR GOEL, 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 of the Income Tax Appellate Tribunal, Chandigarh Bench (B), Chandigarh (hereinafter referred to as “the Tribunal”) passed in I.T. (SS) A. No. 19/CHANDI/2009 dated 27.8.2009 for the block period 01.04.1996 to 05.02.2003, proposing to raise the following substantial question of law:- “Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in holding the recording of satisfaction u/s 158BD by the Assessing Officer of the person searched and consequence issuance and service of notice u/s 158BD on ITA No. 379 of 2010 -2- 2.12.2006 was belated and beyond the period prescribed by law when the section 158BD read with section 158BE does not specify that satisfaction has to be recorded by the Assessing Officer before completion of assessment u/s 158BC of the Income Tax Act, 1961?” 2. A search was conducted on 5.2.2003 at the residence of one S.K. Bhatia, and from the seized documents and after finalizing block assessment against the searched person on 28.2.2005, proceedings were also taken against the respondent after recording satisfaction on 31.3.2006. Notice under Section 158BD was issued on 2.12.2006 which was contested by the respondent on the ground that the satisfaction note itself was after conclusion of the proceedings and not during the course of assessment proceedings. This plea was upheld by the CIT (A) following earlier judgment of the Tribunal in Manoj Aggarwal v. DCIT (2008) 113 KTD 377 (Del) (SB). The Tribunal affirmed the said view. 3. We have heard learned counsel for the revenue. 4. An identical matter was considered by this Court in order dated 20.7.2010 in ITA No. 591 of 2009, Commissioner of Income- tax-I, Ludhiana v. Mridula, Prop. M/s Dhruv Fabrics, Ludhiana and it was observed: “The Act no where specifically prescribes any time limit or limitation for initiation of proceedings under Section 158BD of the Act or for recording of satisfaction before taking action under that provision. ITA No. 379 of 2010 -3- The plain and reasonable construction that can be placed on the aforesaid provision would be that the recording of satisfaction for taking action against any other person under Section 158BD of the Act has to be between initiation of proceedings under section 158BC and before completion of block assessment under Section 158BC of the Act in the case of the person searched. It would, thus, mean that the action contemplated under Section 158BD of the Act against a third party to a search, is necessarily to be during the course of block assessment proceedings under Section 158BC of the searched person. It cannot be after the conclusion of the same as there is no occasion for an assessing officer to examine the seized material or documents of the searched person when the block assessment proceedings have concluded and no other proceedings are pending before him. If any other time limit is read in the provisions/statute, it shall lead to anomaly and would be arbitrary and unreasonable. It could not be read in the provision that where block assessment under Section 158BC of the Act in the case of an assessee against whom action under Section 132 or 132A of the Act had been carried out is finalized, Revenue can take action at any time in the absence of any specific limitation prescribed in the statute. A ITA No. 379 of 2010 -4- construction which leads to such an anomaly should be avoided.” 5. The view taken by the Tribunal is, thus, in accordance with the view taken by this Court. No substantial question of law arises. 6. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 25, 2010 (AJAY KUMAR MITTAL) gbs JUDGE "