Dr. Ravindra Reddy V. Assistant Commissioner of Income Tax, Hyderabad

ITTA/35/2001

AI Insights

The case involves Dr. Ravindra Reddy, the appellant, contesting the block assessment orders issued by the Assistant Commissioner of Income Tax, Hyderabad, following a search operation in his residence. The primary legal contention was whether the assessment was barred by limitation under Section 158BE of the Income Tax Act, 1961, and whether the case fell under the purview of Section 158BD. The tribunal had sustained the assessment under Section 158BD, which the appellant challenged, arguing that the search in his house was independent and not a continuation of another person's search, thus not fitting within the scope of Section 158BD. The High Court agreed with the appellant, noting that the search was conducted under separate warrants and the materials collected were independently used for the block assessment.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 796395 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 03-07-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Block assessment; Gifts; Limitation; Search and seizure; Undisclosed income; House construction investment
• Section: 132; 158 BD; 260-A; 132-A; 158(BC); 158 BE

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A.No.35 of 2001 DATED: 3.7.2013 Between: Dr. Ravindra Reddy, Hyderabad. … Appellant And Assistant Commissioner of Income Tax, Hyderabad. … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A.No.35 OF 2001 Judgment: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is directed against the judgment and order of the learned Tribunal dated 23.5.2000. The appeal was admitted by this Court on 22.3.2001 without formulating any substantial question of law as contemplated under the provisions of Section 260-A of the Income Tax Act, 1961 (for short ‘the Act’). It is the duty of the Court to formulate the substantial questions of law. Therefore, the Court before proceeding to hear the appeal, formulated the following substantial questions of law. i) Whether on the facts and circumstances of the case, the Appellate Tribunal was right in sustaining the assessment made under Section 158 BD of the Act and holding that the same was not barred by limitation ? ii) Whether in the facts and circumstances of the case, the Hon’ble Tribunal was right in sustaining an addition of Rs.2,50,000/- to the extent of being alleged suppressed investment in house construction as undisclosed income in the face of the detailed explanation given by the appellant ? iii) Whether on the facts and circumstances of the case, the Hon’ble Tribunal was correct in holding that the sum of Rs.1,05,000/- being gifts received on the occasion of house warming ceremony during the assessment year 1994- 1995 appear to be mere “gifts of convenience” and disbelieve the explanation of the appellant ? Learned counsel for the appellant submits that at the first instance, as far as the third point is concerned, he is not pressing the same. He leaves the matter with the Court to decide. Learned counsel for the appellant submits that the learned Tribunal is totally wrong in law while treating the present case under Section 158BD in order to hold that this case is not barred by limitation under Section 158BE. He submits that the search admittedly was conducted in the assessee’s own house also, of course, it is in continuation of the search and seizure of another person, namely, Dr. S.S. Reddy. Nonetheless, the material relied on for the purpose of that assessment was found to be in consequence of search conducted in the assessee’s own house. Therefore, in all practical purposes, this case cannot come within the purview of Section 158BD and therefore, the assessment order was not made within the date of one year from the date of conducting the search. The search was conducted on 20.9.1995 and the search warrant was issued on 13.12.1995 and the assessment order was issued on 31.12.1996. According to him, Section 158BE provides that: “(1) The order under Section 158BC shall be passed _ (a) within one year from the end of the month in which the last of the authorization for search under Section 132 or for requisition under Section 132-A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997. (b) Within two years from the end of the month in which the last of the authorizations for search under Section 132 or for requisition under Section 132A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.” According to the learned counsel, in this case, the assessment order has to be passed within one year, but not within two years. He submits that the addition of Rs.2,50,000/- which was spent on account of the house construction was stated to be undisclosed income was totally incorrect and a detailed explanation was given by the appellant and such explanation could not have been disbelieved. Learned counsel for the respondent submits that the search was not conducted independently in the house of the assessee, but it was in continuation of the search and seizure conducted in the case of Dr. S.S. Reddy. Therefore, this case comes within the purview of Section 158BD. He also draws our attention to the findings of the learned Tribunal. We are of the view that if the appellant succeeds on the first point, then the other point need not be considered at all. From the records, we find that the search was admittedly conducted in the house of the appellant on 20.9.1995 and the search warrant was issued on 13.12.1995 and assessment order was made on 31.12.1996. We fail to understand how this case will come within the purview of Section 158BD. Section 158BD provides as follows: “Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, otherwise than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under Section 158BC against such other person and the provisions of this Chapter shall apply accordingly.” The learned counsel’s contention that it is a continuation of search conducted in the house of Dr. S.S. Reddy and it was not an independent one is not acceptable to the Court as we have found that two separate search warrants were issued. Therefore, whether it is a continuation or otherwise hardly matters. The fact remains that the search was conducted in the house of the appellant on the strength of the separate warrants and the material collected during the search and seizure was relied on during the block assessment. Therefore, it is incorrect that the search was conducted for the block assessment. Therefore, this case cannot come within the purview of Section 158BD. If this case does not come within the purview of Section 158BD, then obviously the one year period mandated under Section 158BE admittedly had ended as the assessment order was passed beyond one year from the date of search, i.e., from the end of the month in which the last of the authorization for search under Section 132 was executed. It appears, the search was conducted on 20.9.1995, warrant was issued on 13.12.1995 and the assessment order was passed on 31.12.1996 admittedly, beyond one year period. Therefore, the case is barred by limitation. Accordingly, we allow the appeal and set aside the orders of block assessment. There shall be no order as to costs. ________________________ K.J. SENGUPTA, CJ ______________________ G. ROHINI, J 03.07.2013 pnb "