DCIT, New Delhi V. Uddhav properties Ltd., New Delhi

ITA 1961/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5755 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 18-03-2010
• Assessment Year: misc
• Appeal Filed On: 11-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K TIWARI
• Assessee Lawyers: SAJEVE DEORA
• Keywords: Accommodation entries; Block assessment
• Section: 132; 15

Judgement Text

ITA NO. 1961/DEL/2009 BP: 1.4.1990 TO 3.8.2000 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 1961/DEL/2009 BLOCK PERIOD : 1.4.1990 TO 3.8.2000 COMMISSIONER OF INCOME TAX, VS. M/S UDDHAV PROPERTIES LTD. CIRCLE 18(1), NEW DELHI S-9, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI (PAN: AAACU0283G) [APPELLANT] (RESPONDENT) ASSESSEE BY : SH. SAJEVE DEORA, CA DEPARTMENT BY : SH. V.K. TIWARI, CIT(DR) ORDER PER SHAMIM YAHYA, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A) DATED 22.12.2008 FOR THE BLOCK PERIOD 1.4.1990 TO 3 .8.2000. 2. THE FIRST ISSUE RAISED IS THAT THE LD. CIT(A) ER RED IN HOLDING THAT THE SATISFACTION NOTE DATED 1.2.2003 IS BELATED CONSEQ UENTLY HOLDING THAT THE SAID NOTE OF SATISFACTION IS NON-ESTABLISHED IN LAW. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINES S OF TRADING OF SYNTHETIC YARNS, TRANSPORTATION AND INVESTMENT IN SHARES AND SECURITIES. THE SEARCH U/S 132 OF THE ACT WAS CONDUCTED IN THE CASE OF SHRI MANOJ A GGARWAL WHO IS ALSO DIRECTOR OF M/S FRIENDS PORTFOLIO PVT. LTD. SHRI MANOJ AGGARW AL GAVE A STATEMENT U/S 132(4) OF THE ACT STATING THAT HE HAD OPENED A NUMB ER OF BANK ACCOUNTS AND ITA NO. 1961/DEL/2009 BP: 1.4.1990 TO 3.8.2000 2 THESE BANK ACCOUNTS WERE USED BY HIM FOR THE PURPOS E OF GIVING ACCOMMODATION ENTRIES. THE ASSESSEE COMPANY HAD TRANSACTIONS WI TH M/S FRIENDS PORTFOLIO PVT. LTD. FOR THE SALE AND PURCHASE OF SHARES DURING THE PERIOD UNDER CONSIDERATION. THE ASSESSEE COMPANY WAS SERVED WITH A NOTICE U/S 158BD READ WITH SECTION 158BC OF THE ACT. AFTER CONSIDERING THE VARIOUS SU BMISSIONS OF THE ASSESSEE THE SHARE TRANSACTIONS CONDUCTED BY THE ASSESSEE COMPA NY WERE CONSIDERED AS ACCOMMODATION ENTRIES. 4. THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) CHAL LENGING AT THE THRESHOLD THAT THE ASSESSMENT WAS WITHOUT JURISDICTION. LD. C IT(A) REFERRED TO A CATENA OF CASE LAWS INCLUDING THAT OF HONBLE APEX COURT IN THE CASE OF MANISH MAHESHWARI 289 ITR 341 AND THE DECISION OF THE SPECIAL BENCH O F THE ITAT IN THE CASE OF MANOJ AGGARWAL VS. DCIT 113 ITD 337. LD. CIT(A) CONCLUDED AS UNDER:- RESPECTFULLY FOLLOWING THE DECISION OF HONBLE IT AT IN THE ABOVE CITED CASES, I HAVE TO HOLD THAT THE SATISFACTION N OTE DATED 13.2.2003 IS BELATED AS THE BLOCK ASSESSMENT IN THE CASE OF M /S FRIENDS PORTFOLIO PVT. LTD. WAS COMPLETED ON 29.8.2002 AND IS NOT THE ONE CONTEMPLATED IN SECTION 158BD AND FURTHER THAT EVEN IF IT IS ASSUMED TO BE IN TERMS O F THE SAID SECTION IT DOES NOT EVE N REMOTELY SHOW THAT THERE IS UNDISCLOSED INCOME BELONGING TO THE A PPELLANT COMPANY CALLING FOR THE ASSUMPTION OF JURISDICTION UNDER SEC TION 158BD. IN THE CIRCUMSTANCES, I HOLD THAT THE SAID NOTE OF SATISFA CTION IS NON- ESTABLISHED IN LAW AND FURTHER THAT THE SECTION 158 BD PROCEEDINGS PURSUANT THERETO IS INVALID AND VOID AB INITIO ON T HIS GROUND. THE SAME IS ACCORDINGLY LIABLE TO BE CANCELLED. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. LD. DR SUBMITTED THAT LD. CIT(A)S ORDER IS NOT CORRECT IN LAW. IN THIS REGARD, HE PLACED RELIANCE UPON THE CASE OF KHANDUBHAI VASA NJI DESAI VS. DCIT 236 ITR 73 ITA NO. 1961/DEL/2009 BP: 1.4.1990 TO 3.8.2000 3 AND IN THE CASE OF VIJAY SEHGAL (HUF) VS. ACIT 100 ITD 560. LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND CLAIMED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF MANOJ AGGARWAL VS. DCIT 113 ITD 377. LD. COUNSEL FURTH ER RELIED UPON ANOTHER CASE OF THE ITAT IN IT(SS) APPEAL NO. 12 AND ANR. IN THE CA SE OF RADHEY SHYAM BANSAL VS. ACIT VIDE ORDER DATED 24.8.2007. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. AS PER THE UNDISPUTED FACTS OF THE PRESENT CASE FOLLOWING IS T HE CHRONOLOGY OF EVENTS :- S.NO. EVENT DATE OF EVENT 01. SEARCH WAS CONDUCTED IN THE CASE OF M/S FRIENDS PORTFOLIO PVT. LTD. 30.08.2000 02. ASSESSMENT ORDER PASSED IN THE CASE OF M/S FRIENDS PORTFOLIO PVT. LTD. UNDER SECTION 158 BC OF THE INCOME TAX ACT, 1961, BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, NEW DELHI 29.08.2002 03. SATISFACTION RECORDED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, NEW DELHI OF M/S FRIENDS PORTFOLIO PVT LTD. REGARDING ACCOMMODATION ENTRIES HAD RECEIVED BY THE ASSESSEE. 13.02.2003 04. NOTICE UNDER SECTION 158BD OF THE INCOME TAX ACT, 1961 RECEIVED BY THE ASSESSEE. 29.10.2003 ITA NO. 1961/DEL/2009 BP: 1.4.1990 TO 3.8.2000 4 7.1 IN THE LIGHT OF THE ABOVE WE HAVE TO EXAMINE TH E VALIDITY OF THE PROCEEDINGS U/S 158BD INITIATED AGAINST THE ASSESSEE. THE SPE CIAL BENCH OF THE ITAT IN 113 ITD 377 IN THE CASE OF MANOJ AGGARWAL VS. DCIT HAS H ELD AS UNDER:- THE ASSESSING OFFICER ASSESSING THE PERSON SEARCHED HAS TO GIVE A FINDING ON EACH AND EVERY MATERIAL AND EVIDENCE UNEARTHED AFTER A CAREFUL AND JUDICIOUS EVALUATION AND SUCH EXERCISE INVOLVES A FINDING THAT THE UNDISCLOSED INCOME BELONGS TO A SPECIFIED PERSON AS FOUND BY HIM ON SUCH EVALUATION. IT IS THIS FINDING THAT IS THE PIVOT A ROUND WHICH SECTION 158BD PROCEEDING REVOLVES. IF, THEREFORE, IN THE COURSE OF SECTION 158BC PROCEEDINGS THE ASSESSING OFFICER ASSESSING THE PER SON SEARCHED DOES NOT GIVE A FINDING THAT ANY PART OF THE UNDISCLOSED IN COME UNEARTHED BELONGS TO A PERSON OTHER THAN THE PERSON SEARCHED, SECTION 15 8BD CAN NEVER BE INVOKED. IT IS THIS FINDING THAT IS AN INTEGRAL PART OF BOTH THE PROCEEDINGS WHETHER UNDER SECTION 158BC OR 158BD, FOR, SUCH FIN DING DETERMINES IN WHOSE HANDS THE UNDISCLOSED INCOME UNEARTHED HAS T O BE TAXED. IF THE UNDISCLOSED INCOME BELONGS TO THE PERSON SEARCHED, HE IS SUBJECTED TO BLOCK ASSESSMENT ON SUCH INCOME UNDER SECTION 158BC BUT I F SUCH INCOME OR PART OF SUCH INCOME BELONGS TO A PERSON NOT SEARCHED, S ECTION 158BD TAKES OVER. THIS IS THE ESSENCE OF THE ENTIRE ENACTMENT RELATI NG TO SEARCH. SECTION 158BE PROVIDES FOR TIME-LIMIT FOR COMPLETIO N OF BLOCK ASSESSMENT. IT STIPULATES THAT THE ORDER UNDER SECTION 158BC SHA LL BE PASSED WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH THE LAST OF THE AUTHORIZATIONS UNDER SECTION 132A, AS THE CASE MAY BE, AND SO, THE ORDER ENVISAGED UNDER SECTION 151BC HAS NECESSARILY TO BE PASSED WITHIN THE TIME-FRAME SET IN LAW. IF THERE IS A TIME-LIMIT FOR PASSING SUCH ORD ER, THERE IS AN IMPLIED TIME- LIMIT FOR GIVING A FINDING AS TO THE PERSON TO WHOM THE UNDISCLOSED INCOME BELONGS WHICH UNDER NO CIRCUMSTANCE CAN BE BEYOND THE TIME-LIMIT SET IN SECTION 158BE. IF THERE IS NO SUCH FINDING GIVEN I N THE ORDER UNDER SECTION 158BE. IF THERE IS NO SUCH FINDING GIVEN IN THE OR DER UNDER SECTION 158BC, THE PROVISIONS OF SECTION 158BD STAND OUSTED AT THE EXPIRY OF THE SAID TIME- LIMIT FOR THE REASON THAT SUCH A FINDING IS THE VER Y BASIS FOR INVOKING SECTION 158BD. ITA NO. 1961/DEL/2009 BP: 1.4.1990 TO 3.8.2000 5 7.2 FROM THE ABOVE IT IS EVIDENT THAT THE SPECIAL B ENCH HAS EXPOUNDED THAT THE SATISFACTION OF THE AO SHOULD BE GIVEN IN THE COURS E OF SECTION 158BC PROCEEDINGS AND IF THE ASSESSING OFFICER ASSESSEE THE PRESENT S EARCH DOES NOT GIVE THE FINDING IN SUCH COURSE, ACTION UNDER SECTION 158BD CAN NEVE R BE INVOKED. NOW IN THE PRESENT CASE WE FIND THAT ASSESSMENT ORDER U/S 158B C WAS PASSED IN THE CASE OF M/S FRIENDS PORTFOLIO PVT LTD. ON 29.8.2002. BUT TH E SATISFACTION REGARDING ACCOMMODATION ENTRIES RECEIVED BY THE ASSESSEE WAS DATED 13.2.2003. IT IS CLEAR THAT THE SAID SATISFACTION NOTE WAS NOT GIVEN BY T HE AO IN THE COURSE OF SECTION 158BC PROCEEDINGS. HENCE, THE SAME WERE INITIATED MUCH AFTER THE COMPLETION OF THE ASSESSMENT PROCEEDINGS OF M/S FRIENDS PORTFO LIO LTD. IN SUCH A SITUATION AS PER THE RATIO OF THE SPECIAL BENCH DECISION ACTION U/S 158BD CANT BE INITIATED. LD. CIT(DR) HAD RELIED UPON THE HONBLE GUJRAT HIGH CO URT DECISION IN THE CASE OF KHANDUBHAI VASANJI DESAI VS. DCIT 236 ITR 73. WE FIN D THAT THIS CASE LAW DOES NOT HELP THE CASE OF THE ASSESSEE ON THE PRESENT POINT OF DISCUSSION. MOREOVER, THIS CASE WAS ALSO REFERRED BEFORE THE SPECIAL BENCH OF THE TRIBUNAL AND THE SPECIAL BENCH HAS DELIVERED ITS JUDGEMENT AFTER CONSIDERING ABOVE. THE OTHER TRIBUNAL DECISIONS REFERRED BY THE LD. CIT(DR) IS NOT BEING CONSIDERED AS IT IS A SETTLED LAW THAT THE DECISION OF THE SPECIAL BENCH TAKES PRECE DENCE OVER THE DIVISION BENCH DECISIONS. ITA NO. 1961/DEL/2009 BP: 1.4.1990 TO 3.8.2000 6 7.3 HENCE ADMITTEDLY ON THE TOUCHSTONE OF THE ABOV E SPECIAL BENCH DECISION THE PROCEEDINGS U/S 158BD ARE NOT VALID AS THE SATI SFACTION NOTE FOR INITIATING PROCEEDINGS AGAINST THE ASSESSEE IN THIS CASE WAS M ADE MUCH AFTER THE COMPLETION OF THE ASSESSMENT PROCEEDINGS 158BC. RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS POINT AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 7.4 SINCE THE PROCEEDINGS U/S 158BD HAVE BEEN HELD TO BE INVALID IN AS MUCH AS, SATISFACTION NOT IS BELATED, OTHER ISSUES RAIS ED IN THE APPEAL ARE ACADEMIC AND HENCE NOT BEING DEALT WITH. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/03/201 0. SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 26/03/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES