Subhash Gangadhar Kotasthane, Pune V. Dy.CIT, Cir. 10, Pune, Pune

ITA 402/PUN/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7464 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 14-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H C LEUVA
• Assessee Lawyers: DEPA KHARE
• Keywords: Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDIC IAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 402/PN/08 (BLOCK PERIOD 1.4.96 TO 27.6.2002) SHRI SUBHASH G KOTASTHANE, .. APPEL LANT 85/10, MEGHALI HOUSING SOCIETY, ERANDAVANE, PUNE VS. DY. COMMISSIONER OF INCOME-TAX CIR. 10, PUNE .. RESPONDENT APPELLANT BY: SMT DEPA KHARE RESPONDENT BY: SHRI H. C LEUVA ORDER PER G.S. PANNU, AM THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, PUNE DATE D 14.12.2007 WHICH, IN TURN, HAS ARISEN FROM AN ORDER OF THE ASSESSING OFF ICER DATED 30.3.2007 PASSED UNDER SECTION 158BC(C) READ WITH SECTION 158 BD OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE A SSESSMENT YEAR 2006-07. 2. THE SOLITARY ADDITION IN DISPUTE IN THIS APPEAL BY THE ASSESSEE RELATES TO A SUM OF RS 46,000/- REPRESENTING INTEREST ON THE A MOUNT ADVANCED BY THE ASSESSEE TO ONE SHRI KISHOR SHETTY. THE RELEVANT FA CTS ARE THAT DURING THE BLOCK ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD ADVANCED LOAN OF RS 7,00,000/- ON 11.2 .2002 AND RS 4,00,000/- ON 1.6.2002 TOTALLING TO RS 11,00,000/- TO SHRI KIS HOR SHETTY. IT WAS EXPLAINED BY THE ASSESSEE THAT UNDISCLOSED INCOME ON THIS COU NT WAS DECLARED IN THE ITA NO 402/PN/08 SUBHASH G. KOTASTHANE, PUNE 2 BLOCK RETURN. THE ASSESSING OFFICER WAS OF THE VIEW THAT INTEREST ACCRUED/RECEIVED ON THE AMOUNT OF LOAN AT THE RATE MENTIONED IN THE PAPERS FOUND, SHOULD ALSO BE ASSESSED AS UNDISCLOSED INCOM E OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE THAT THE INTEREST ON DEPOSITS WITH SHRI KISHOR SHETTY IS NOT INCLUDIBLE IN THE NET TAXABLE INCOME AS HE HAS NOT RECEIVED ANY INTEREST ON THE S AID DEPOSITS AND THAT THE ASSESSEE FOLLOWED RECEIPT BASIS FOR TAXABILITY OF H IS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE ASSESSING OFFICER WORKED OUT INTER EST ON DEPOSITS @ 12% PER ANNUM WHICH RESULTED INTO AN ADDITION OF RS 46,000/ - TO THE INCOME OF THE ASSESSEE. AGGRIEVED WITH THE SAID ORDER OF THE ASS ESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). 3. IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE ACTION OF THE ASSESSING OFFICER IN INCLUDING THE INTEREST INCOME ON ACCRUAL BASIS IN THE BLOCK PERIOD UNDER CONSIDERATION WAS JUSTIFIED AND ACCORD INGLY, HE UPHELD THE ADDITION. AGAINST THE SAME, THE ASSESSEE IS IN APPE AL BEFORE US. 4. BEFORE US, THE APPELLANT HAS RAISED FOLLOWING AD DITIONAL GROUND OF APPEAL: THE LEARNED AO ERRED ON FACTS AND IN LAW IN ISSUIN G NOTICE U/S 158BD AFTER 20 MONTHS AFTER THE COMPLETION OF THE ASSESSMENT O F THE SEARCHED PERSON WHICH BEYOND THE REASONABLE TIME. IN VIEW OF THE LEGAL POSITION AS LAID DOWN BY COURT S, THE IMPUGNED ASSESSMENT MADE U/S 158BD BEING MADE BEYOND THE REA SONABLE PERIOD IS BAD IN LAW. 5. ACCORDING TO THE ASSESSEE, THE ADDITIONAL GROUND DOES NOT REQUIRE ANY FRESH INVESTIGATION INTO FACTS AND THE SAME BEING P URELY A LEGAL ISSUE, THE GROUND BE ADMITTED. ON THE CONTRARY, THE LEARNED DE PARTMENTAL REPRESENTATIVE OPPOSED THE ADMISSION OF ADDITIONAL GROUND. ITA NO 402/PN/08 SUBHASH G. KOTASTHANE, PUNE 3 6. AFTER HEARING BOTH THE PARTIES, WE ADMIT THE ABO VE ADDITIONAL GROUND OF APPEAL, AS IT INVOLVES A PURE POINT OF LAW WITH THE ATTENDANT FACTS BEING ON RECORD AND DISCERNIBLE FROM THE ORDERS OF THE AUTHO RITIES BELOW. IN THIS CONNECTION, WE ARE ALSO FORTIFIED BY THE PARITY OF REASONING LAID DOWN IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT 229 ITR 383 (SC). 7. ON THE MERITS OF THE ADDITIONAL GROUND, IT WAS P OINTED OUT THAT THE NOTICE UNDER SECTION 158BD OF THE ACT WAS ISSUE D ON 21.3.2006 AND SERVED ON THE ASSESSEE ON 31.3.2006, WHICH WAS UNRE ASONABLY BELATED. IN SUPPORT OF THE UNREASONABLE DELAY IN ISSUANCE OF TH E NOTICE, IT WAS POINTED OUT THAT SEARCH UNDER SECTION 132 WAS CARRIED OUT IN TH E CASE OF SHRI KISHOR SHETTY ON 27.6.2002 AND IN TERMS THEREOF THE ASSESSMENT UN DER SECTION 158BC OF THE ACT WAS LIABLE TO BE FINALIZED BY 30.6.2004 AS PER SECTION 158BE(1)(B) OF THE ACT. THE ISSUANCE OF NOTICE UNDER SECTION 158BD ALM OST 20 MONTHS AFTER THE DATE OF COMPLETION OF THE ASSESSMENT OF THE SEARCHE D PERSON IS QUITE UNREASONABLE AND IN SUPPORT REFERENCE WAS MADE TO T HE DECISIONS OF THE DELHI BENCH OF THE TRIBUNAL IN THE FOLLOWING CASES: A. TAHIL RAM MOOLCHANDANI V ACIT 115 TTJ 692 (DEL) B. BHARAT BHUSHAN JAIN V ACIT 183 TAXMAN 151 (DEL). IT WAS, THEREFORE, SUBMITTED THAT THE ORDER OF BLOC K ASSESSMENT BE QUASHED. 8. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS SUBMITTED THAT THE PROVISIONS OF THE ACT AS CONTAIN ED IN CHAPTER XIV-B DOES NOT PRESCRIBE ANY SPECIFIC TIME-LIMIT FOR ISSUANCE OF NOTICE UNDER SECTION 158BD OF THE ACT AND THEREFORE THERE IS NO INFIRMIT Y IN THE ACTION OF THE ASSESSING OFFICER FOR ISSUANCE OF THE NOTICE UNDER SECTION 158BD OF THE ACT ON 28.3.2006. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. THE ISSUE RAISED BY THE APPELLANT IN THE ADDITIONAL GROUND IS, AS TO WHETHER THE ASSESSING OFFICER CAN ISSUE NOTICE UNDER SECTION 158BD OF THE ACT AT ANY TIME, I.E. WELL ITA NO 402/PN/08 SUBHASH G. KOTASTHANE, PUNE 4 BEYOND REASONABLE TIME FROM THE STIPULATED DATE OF COMPLETION OF ASSESSMENT IN THE CASE OF A PERSON WHO HAS BEEN SUBJECTED TO S EARCH UNDER SECTION 132(1) OF THE ACT. IN THE PRESENT CASE, IT IS NOT D ISPUTED THAT THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 158BD OF THE AC T ON 21.3.2006, WHICH WAS SERVED ON 31.3.2006, WHICH IS AFTER A PERIOD OF APP ROXIMATELY 20 MONTHS FROM THE TIME THE ASSESSING OFFICER OF THE SEARCHED PERS ON IS MANDATED TO COMPLETE THE ASSESSMENT UNDER SECTION 158BC OF THE ACT. THE AFORESAID ISSUE IS NO LONGER RES INTEGRA INASMUCH AS OUR CO-ORDINAT E BENCH IN THE CASE OF TAHIL RAM MOOLCHANDANI (SUPRA) FOLLOWING ITS EARLIE R DECISION IN THE CASE OF R S BANSAL V ACIT (IT (SS) A NO 12/DEL/07) HELD THAT ISSUES OF NOTICE UNDER SECTION 158BD AFTER AN INORDINATE DELAY FROM THE TI ME OF RECEIVING INTIMATION FROM THE ASSESSING OFFICER OF THE SEARCHED PERSON, IS UNREASONABLE AND THE CONSEQUENTIAL ASSESSMENT IS LIABLE TO BE ANNULLED. SIMILARLY, OUR CO-ORDINATE BENCH IN THE CASE OF BHARAT BUSHAN (SUPRA) FOLLOWIN G THE PRECEDENTS IN THE CASE OF R S BANSAL (SUPRA) AND MANOJ AGARWAL V DCIT 113 ITD 377 (DEL)(SB) HELD THAT A NOTICE UNDER SECTION 158BD ISSUED MORE THAN 19 MONTHS AFTER COMPLETION OF ASSESSMENT OF SEARCHED PERSON COULD N OT BE CONSIDERED TO HAVE BEEN ISSUED WITHIN A REASONABLE TIME AND ACCOR DINGLY, THE ASSESSMENT MADE IN PURSUANCE TO SUCH A NOTICE WAS QUASHED. 10. IN THE LIGHT OF THE AFORESAID LEGAL POSITION BR OUGHT OUT BY THE PRECEDENTS, THE FACTUAL POSITION IN THE INSTANT CASE CLEARLY SH OWS THAT THAT THE NOTICE ISSUED UNDER SECTION 158BD OF THE ACT ON 21.3.2006 WAS, INORDINATELY DELAYED AS IT WAS ISSUED AFTER ALMOST 20 MONTHS FROM THE ST IPULATED DATE OF COMPLETION OF THE ASSESSMENT OF THE SEARCHED PERSON UNDER CHAP TER XIV-B OF THE ACT. THUS ON THE BASIS OF SUCH NOTICE, NO VALID PROCEEDI NGS COULD BE FRUCTIFIED AND RESULTANTLY THE IMPUGNED ASSESSMENT FRAMED BY THE A SSESSING OFFICER ON 30.3.2007 IS LIABLE TO BE HELD AS BAD IN LAW. AS A RESULT THEREOF, THE ASSESSMENT DESERVES TO BE QUASHED. WE HOLD ACCORDIN GLY. IN VIEW OF THE ITA NO 402/PN/08 SUBHASH G. KOTASTHANE, PUNE 5 ABOVE, WE DEEM IT UNNECESSARY TO DEAL WITH THE OTHE R GROUNDS OF APPEAL ON MERITS, WHICH ARE RENDERED ACADEMIC. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MARCH, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 23 RD MARCH, 2011 B COPY OF THE ORDER FORWARDED TO : 1. SHRI SUBHASH G. KOTASTHANE, PUNE 2. THE DY. CIT CIR.10, PUNE 3. THE CIT(A)-III, PUNE 4. THE CIT-V, PUNE 5. THE D.R, B BENCH, PUNE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE