M/s. Bhagyashree Steel Center, Pune V. DCIT, Circle 5, Pune

ITA 1706/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88915 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-12-2014
• Assessment Year: misc
• Appeal Filed On: 06-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Unexplained expenditure; Principle of natural justice; Block assessment
• Section: 69C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1706/PN/2013 (BLOCK ASSESSMENT PERIOD : 1996-97 TO 2002-03) M/S BHAGYASHREE STEEL CENTER, 219, BHAVANI PETH, PUNE 411 042. PAN : AABFB3380R . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 5, PUNE. . RESPONDENT ASSESSEE BY : MR. M. K. KULKARNI DEPARTMENT BY : MR. B. C. MALAKAR DATE OF HEARING : 15-01-2015 DATE OF PRONOUNCEMENT : 21-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 29.07.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 26.02.2008 PASSED BY THE ASSESSING OFFICER U/S 158BD R.W.S. 158BC OF THE INCOME-TAX AC T, 1961 (IN SHORT THE ACT) PERTAINING TO THE BLOCK ASSESSMENT PERIOD 1996-97 T O 2002-03. 2. IN THIS APPEAL, THE PRIMARY DISPUTE RELATES TO A N ADDITION OF RS.5,17,956/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. APART FROM CHALLEN GING THE MERITS OF ADDITION SUSTAINED BY THE CIT(A), THE APPELLANT HAS RAISED A N ADDITIONAL GROUND OF APPEAL CLAIMING THAT THE PRINCIPLES OF NATURAL JUST ICE HAVE BEEN CONTRAVENED WHILE COMPLETING THE BLOCK ASSESSMENT. THE SAID AD DITIONAL GROUND OF APPEAL READS AS UNDER :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE PERUSAL OF THE ORDER OF THE LD. CIT(A) IT REVEALS T HAT IN THIS BLOCK ASSESSMENT ITA NO.1706/PN/2013 COMPLETED UNDER S.158BD R.W.S. 158BC OF THE ACT THE SATISFACTION NOTE AS PREPARED BY THE A.O. OF THE SEARCHED PARTY WAS NOT PROVIDED TO THE ASSESSEE WHICH AMOUNTS TO THE REASONABLE OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE TO RAISE OBJECTIONS FOR THE SAME. THE RELIANCE IS PLA CED ON THE HONBLE DELHI HIGH COURT JUDGEMENT IN THE CASE OF JANKI EXPORTS I NTERNATIONAL THROUGH S.P. GUPTA VS. UNION OF INDIA (2005) 278 ITR 296 (DEL) 1 45 (PB PAGE NO.62). SINCE THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN C ONTRAVENED THE BLOCK ASSESSMENT UNDER APPEAL BE QUASHED. 3. ACCORDING TO THE LD. REPRESENTATIVE FOR THE ASSE SSEE, IN THE PRESENT CASE THE ASSESSMENT HAS BEEN FINALIZED FOR THE BLOC K PERIOD COMPRISING OF 01.04.1995 TO 11.10.2002 BY INVOKING SECTION 158BD OF THE ACT. THE PROVISIONS OF SECTION 158BD OF THE ACT HAVE BEEN IN VOKED AS A CONSEQUENCE OF A SEARCH ACTION U/S 132(1) OF THE ACT CARRIED OU T ON 12.10.2001 IN THE CASE OF M/S RAJASHREE ENTERPRISES (PROP. SHRI RAMANLAL S HAH) AND M/S MAHESHWARI FINANCIERS (PROP. SHRI MAHENDRA SHAH) AT ADONI, ANDHRA PRADESH. THE LD. REPRESENTATIVE CONTENDED THAT ASS ESSMENTS IN TERMS OF SECTION 158BC OF THE ACT WERE FINALIZED IN THE CASE S OF SHRI RAMANLAL SHAH, AND SHRI MAHENDRA SHAH. THE CLAIM OF THE APPELLANT IS THAT THE PROVISIONS OF SECTION 158BD OF THE ACT COULD BE INVOKED IN THE HA NDS OF THE ASSESSEE ONLY AFTER RECORDING THE MANDATED SATISFACTION. IT IS P OINTED OUT THAT THE ASSESSEE HAS NOT BEEN PROVIDED WITH COPY OF THE SATISFACTION NOTE AND THEREFORE THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER SUFFE RS FROM A LEGAL DEFECT. THIS ASPECT OF THE MATTER IS SOUGHT TO BE CHALLENGE D BEFORE US BY WAY OF THE AFORESAID ADDITIONAL GROUND OF APPEAL AS THE SAME W AS NOT RAISED EARLIER BEFORE THE LOWER AUTHORITIES. JUSTIFYING THE ADMIS SION OF THE SAID ADDITIONAL GROUND OF APPEAL, THE LD. REPRESENTATIVE SUBMITTED THAT THE SAME IS A LEGAL ISSUE AND THE NECESSARY FACTS ARE EMERGING FROM REC ORD AND THEREFORE IT SHOULD BE ADMITTED FOR ADJUDICATION. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE HAS OPPOSED THE PLEA OF THE ASSESSEE FOR ADMISSION OF THE AFORE SAID ADDITIONAL GROUND OF ITA NO.1706/PN/2013 APPEAL ON THE PRETEXT THAT THE SAME WAS NOT RAISED BEFORE THE LOWER AUTHORITIES. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS, IN OUR VIEW, THE SAID ADDITIONAL GROUND OF APPEAL, WHICH INVOLVES A POINT OF LAW RELATING TO A JURISDICTIONAL ASPECT, DESERVES TO BE ADMITTED FOR ADJUDICATION. THE AFORESAID WAS PUT ACROSS TO BOTH THE PARTIES AT THE TIME OF H EARING AND ACCORDINGLY THE RIVAL COUNSELS HAVE ADVANCED THEIR ARGUMENTS ON MER ITS OF THE SAID ADDITIONAL GROUND OF APPEAL. 6. ON MERITS, THE LD. REPRESENTATIVE FOR THE ASSESS EE RELIED UPON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF JANKI EXPORTS INTERNATIONAL VS. UNION OF INDIA, 278 ITR 296 (DEL) TO SUBMIT THAT ANY PERSON WHO IS TO BE PROCEEDED WITH U/S 158BD OF THE ACT MU ST BE INFORMED ABOUT THE SATISFACTION OF THE ASSESSING OFFICER WHICH HAS BEE N RECORDED AND THAT SUCH PERSON MUST BE GIVEN A REASONABLE OPPORTUNITY TO PU T-FORTH HIS OBJECTION TO THE SAME. THE LD. REPRESENTATIVE POINTED OUT THAT IN T HE PRESENT CASE, THE SATISFACTION NOTE HAS NOT BEEN PUT ACROSS TO THE AS SESSEE WHICH IS CLEARLY EMERGING FROM THE DISCUSSION MADE BY THE CIT(A) IN PARA 4.1 OF THE IMPUGNED ORDER. IN THE ABOVE CONTEXT, WE HAVE PERUSED THE F OLLOWING DISCUSSION IN THE ORDER OF THE CIT(A) AT PARA 4.1 :- 4.1 I HAVE ALSO PERUSED THE SATISFACTION NOTE OF T HE ASSESSING OFFICER (ACIT, CENTRAL CIRCLE 2(3), PUNE) OF RAJASH REE ENTERPRISES/ MAHESHWARI FINANCIERS WHICH WAS ENCLOSED BY WAY OF A COVERING LETTER DATED 06.04.2004 ADDRESSED TO THE ASSESSING OFFICER OF TH E APPELLANT. THIS COVERING LETTER CLEARLY SHOWS THAT THE LOAN TRANSACTIONS AMO UNTING TO RS.3,96,830/- WERE SHOWN IN THE BOOKS OF ACCOUNTS OF RAJASHREE EN TERPRISES AND MAHESHWARI FINANCIERS AGAINST WHOM SEARCH AND SEIZ URE WAS CONDUCTED ON 12.10.2001. THE COVERING LETTER IS ACCOMPANIED BY A SATISFACTION NOTE RUNNING INTO 10 PAGES WHICH DETAILS THE BOOKS OF ACCOUNTS, DOCUMENTS, BANK PASS BOOKS ETC. THAT WAS SEIZED AND VERIFIED DURING THE COURSE OF SEARCH AND THE ENQUIRIES THAT WERE CONDUCTED POST-SEARCH. IT DETA ILS THE MODUS OPERANDI ADOPTED BY VARIOUS PARTIES INCLUDING THE APPELLANT, IN COLLUSION WITH RAJASHREE ENTERPRISES AND MAHESHWARI FINANCIERS TO ROUTE THEI R UNACCOUNTED MONEY THROUGH THAT CONCERN IN THE GARB OF LOAN. THEREFOR E, THE SATISFACTION OF THE ITA NO.1706/PN/2013 ASSESSING OFFICER WHO HAS JURISDICTION OVER THE SEA RCHED PERSONS VIZ. MAHESHWARI FINANCIERS AND RAJASHREE ENTERPRISES IS FOUND TO BE CLEARLY RECORDED THAT THE UNDISCLOSED INCOME FOUND IN THE B OOKS BELONGS TO THE APPELLANT. THE EXTRACT OF THE BOOKS OF ACCOUNTS INC LUDING THE LOAN AMOUNTS AND INTEREST THEREON HAVE BEEN DULY REPRODUCED IN T HE SATISFACTION NOTE AND THEREFORE, THE REQUIREMENT OF SEC. 158BD THAT THE B OOKS OF ACCOUNTS, OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL B E HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON, IS SEEN TO HAVE BEEN MET. THEREFORE, ALTHOUGH THE APPELLANT HAS NOT BEEN PROVIDED A COPY OF SATISFACTION NOTE, A PERUSAL OF THE SAME SHOWS THAT IT CONTAINS THE DETAILED WORKING OF THE LOAN ENTRIES AND THE INTEREST THEREO N AS FOUND IN THE BOOKS OF MAHESHWARI FINANCIERS AND THEREFORE, IT CAN BE CONC LUDED THAT THE SATISFACTION BY THE ASSESSING OFFICER OF THE SEARCHED PERSON IS DULY RECORDED, PRIOR TO INITIATION OF ACTION U/S 158BD R.W.S. SEC. 158BC. 7. THE AFORESAID DISCUSSION REVEALS THAT AFTER EXAM INING THE RECORD THE CIT(A) HAS COME TO A CONCLUSION THAT THOUGH SATISFA CTION NOTE WAS RECORDED BY THE ASSESSING OFFICER YET A COPY OF THE SAME HAS NOT BEEN PROVIDED TO THE ASSESSEE. THE HONBLE DELHI HIGH COURT IN THE CASE OF JANKI EXPORTS INTERNATIONAL (SUPRA) WAS CONSIDERING THE PLEA OF T HE ASSESSEE REGARDING ISSUANCE OF NOTICE U/S 158BD OF THE ACT. THOUGH TH E CHALLENGE TO THE NOTICE ISSUED U/S 158BD OF THE ACT BEFORE THE HONBLE HIGH COURT WAS BY WAY OF A WRIT PETITION BUT THE FOLLOWING DISCUSSION IN THE O RDER OF THE HONBLE HIGH COURT IS RELEVANT :- 6. WE FIND THAT SECTION 158BD IS SOMEWHAT ANALOGOU S TO SECTION 147 IN SO FAR AS THE PROCEDURE THAT IS REQUIRED TO BE FOLLOWED. SECTION 147 CONTEMPLATES THAT, IF THE ASSESSING OFFICER HAS REA SONS TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME, THEN NOTICE CAN BE ISSUED UND ER SECTION 148 OF THE ACT. SO FAR AS SECTION 158BD OF THE ACT IS CONCERNE D, THE ASSESSING OFFICER HAS TO BE SATISFIED THAT THERE IS UNDISCLOSED INCOM E. UPON SUCH SATISFACTION, THE ASSESSING OFFICER IS REQUIRED TO FORWARD THE RE LEVANT DOCUMENTS, PAPERS, ETC. TO THE ASSESSING OFFICER WHO IS REQUIRED TO AS SESS THE PERSON IN RESPECT OF WHOM THE UNDISCLOSED INCOME HAS BEEN DISCOVERED. ONCE THIS IS DONE, WE FEEL THAT THE PERSON WHO IS TO BE PROCEEDED AGAINST UNDER SECTION 158BD AND THEN SECTION 158BC, MUST BE INFORMED ABOUT THE SATI SFACTION OF THE ASSESSING OFFICER WHICH HAS BEEN RECORDED AND HE MUST BE GIVE N A REASONABLE OPPORTUNITY TO OBJECT TO THE SAME. SATISFACTION CAN BE ARRIVED ON SOME MATERIAL. THAT MATERIAL WOULD PROVIDE THE REASONABL E SATISFACTION. IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD V. ITO & ORS. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC), THE SUPREME COURT, WHILE CONSIDERI NG THE PROVISIONS OF SECTION 148, POINTED OUT AS UNDER : 'HOWEVER, WE CLARIFY THAT WHEN A NOTICE UNDER SECTI ON 148 OF THE INCOME-TAX ACT IS ISSUED, THE PROPER COURSE OF ACTI ON FOR THE NOTICEE IS TO FILE A RETURN AND IF HE SO DESIRES, TO SEEK REAS ONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS W ITHIN A REASONABLE ITA NO.1706/PN/2013 TIME. ON RECEIPT OF REASONS, THE NOTICEE IS ENTITLE D TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOU ND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER.' 7. USING THE SAME PARITY OF REASONING, WE DIRECT TH E ASSESSING OFFICER TO SUPPLY THE REASON RECORDED FOR ARRIVING AT A SATISFACTION TO THE PETITIONER WITHIN A REASONABLE TIME UPON THE PETITI ONER FILING A RETURN AS REQUIRED BY THE IMPUGNED NOTICE. ON RECEIPT OF THE SAME, THE PETITIONER WOULD BE ENTITLED TO FILE OBJECTIONS TO THE ISSUANCE OF T HE NOTICE AND THE ASSESSING OFFICER SHALL DISPOSE OF THE SAME BY PASSING A SPEA KING ORDER. IT WILL BE OPEN FOR THE PETITIONER TO TAKE THE OBJECTION WITH REGAR D TO LIMITATION AND IT WILL BE FOR THE ASSESSING OFFICER TO PASS A SPEAKING ORDER. AFT ER SUCH SPEAKING ORDER IS PASSED, THE ASSESSING OFFICER SHALL PROCEED FURTHER IN ACCORDANCE WITH LAW. 8. THE AFORESAID DISCUSSION BY THE HONBLE HIGH COU RT REVEALS THAT THE PROVISIONS OF SECTION 158BD OF THE ACT HAS BEEN FOU ND TO BE SOMEWHAT ANALOGOUS TO SECTION 147 OF THE ACT. ON THAT BASIS , IT HAS BEEN EXPLAINED BY THE HONBLE HIGH COURT THAT THE PERSON WHO IS TO BE PROCEEDED WITH U/S 158BD OF THE ACT AND THEN SECTION 158BC OF THE ACT, SUCH PERSON MUST BE INFORMED ABOUT THE SATISFACTION OF THE ASSESSING OFFICER WHI CH HAS BEEN RECORDED AND THAT SUCH PERSON MUST BE GIVEN A REASONABLE OPPORTU NITY TO OBJECT TO THE SAME. IN THIS BACKGROUND, THE HONBLE HIGH COURT D IRECTED THE ASSESSING OFFICER TO SUPPLY THE REASONS RECORDED FOR ARRIVING AT THE SATISFACTION CONTEMPLATED U/S 158BD OF THE ACT AND ONLY AFTER DI SPOSING OF THE OBJECTIONS TAKEN BY THE PETITIONER, THE ASSESSMENT WAS TO BE C OMPLETED THEREAFTER. 9. IN THE PRESENT CASE, IT IS CLEAR THAT THE SATISF ACTION NOTE HAS NOT BEEN SUPPLIED TO THE ASSESSEE, AS DEDUCED BY THE CIT(A). THEREFORE, FOLLOWING THE PARITY OF REASONING LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF JANKI EXPORTS INTERNATIONAL (SUPRA), WE SET-ASIDE T HE IMPUGNED ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE MATTER BACK TO TH E FILE OF THE ASSESSING OFFICER WHO SHALL SUPPLY THE REASONS RECORDED FOR A RRIVING AT THE SATISFACTION FOR INVOKING SECTION 158D OF THE ACT TO THE ASSESSEE. ON RECEIPT OF SUCH REASONS, ASSESSEE SHALL BE ENTITLED TO FILE OBJECTIONS WHICH SHALL BE DISPOSED-OFF BY THE ASSESSING OFFICER BY WAY OF A SPEAKING ORDER AND ON LY THEREAFTER HE SHALL PROCEED TO PASS A FRESH ASSESSMENT IN ACCORDANCE WI TH LAW. ITA NO.1706/PN/2013 10. THE LD. DEPARTMENTAL REPRESENTATIVE RAISED A PL EA THAT THE CIT(A) HAS ALREADY EXAMINED THE RECORD AND IS SATISFIED WITH T HE SATISFACTION RECORDED, THUS, THERE WAS NO JUSTIFICATION FOR REMANDING THE MATTER, ON THE BASIS OF THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF JANKI EXPORTS INTERNATIONAL (SUPRA). IN OUR CONSIDERED OPINION, THE AFORESAID PLEA OF THE REVENUE DOES NOT MEET WITH THE PROPOSITION OF LAW L AID DOWN BY THE HONBLE DELHI HIGH COURT, WHICH WE HAVE DISCUSSED ABOVE. W E FIND NO MERIT IN THE AFORESAID PLEA OF THE REVENUE. ACCORDINGLY, THE AP PEAL OF THE ASSESSEE IS DISPOSED-OFF WITHOUT EXAMINING THE MERITS OF THE IM PUGNED ADDITION OF RS.5,17,956/- WHICH HAS BEEN MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 69C OF THE ACT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 21 ST JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE