M/s.Lunawat Bhor Constructions, V. ACIT Cen Cir 1(I) Pune,

ITA 491/PUN/2003

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7661 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 06-05-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C M NAIK
• Keywords: Period of limitation; Block assessment; Time period of passing order
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NO. 491 /PN/200 3 ( BLOCK PERIOD : 1.4.1989 TO 8.12.1999 ) M/S. LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. 1A CONTINENTAL CHAMBERS, KARVE ROAD, PUNE 411 004 PAN : NOT AVAILABLE .. APPELLANT V. A CIT, CENTRAL CIRCLE 1(1), PUNE . RESPONDENT ITA NO. 612 /PN/200 3 ( BLOCK PERIOD : 1.4.1989 TO 8.12.1999 ) A CIT, CENTRAL CIRCLE 1(1), PUNE . APPELLANT V. M/S. LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. . RESPONDENT 1A CONTINENTAL CHAMBERS, KARVE ROAD, PUNE 411 004 PAN : NOT AVAILABLE . A SSESSEE BY : SHRI SUNIL GANOO DEPARTMENT BY : SHRI C.M. NAIK ORDER PER I.C. SUDHIR JM THESE ARE THE APPEALS PREFERRED BY ASSESSEE AND THE REVENUE AGAINST THE FIRST APPELLATE ORDER BASED UPON THE ASSESSMENT FRAMED U/S. 158 BD OF THE ACT. THE ASSESSEE HAS MOVED APPLICATION SEEKING PERMISSION FOR RAISING THE ADDITIONAL GROUNDS. THE PROPOSED ADDITIONAL GROUNDS (BESIDES THE GROUNDS RAISED IN THE APPEAL PREFERRED BY THE ASSESSEE) ARE AS UNDER : 1. IN THE ABSENCE OF CONDITIONS PRECEDENT FOR ISSUANCE OF NOTICE U/S. 158BD OF THE I.T. ACT 1961, THE IMPUGNED BLOCK ASSESSMENT PROCEEDINGS ITA NO 491 & 612 /PN/200 3 M/S.LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. BLOCK PERIOD. 1.4.1989 TO 8.12.1999 PAGE OF 8 2 ARE NULL AND VOID AB INITIO AND THEREFORE THE IMPUGNED BLOCK ASSESSMENT ORDER MAY PLEASE BE VACATED AND ANNULLED. 2. SINCE THE NOTICE ISSUED U/S 158BD OF THE I.T. ACT 1961 IS SERVED ON THE APPELLANT ASSESSEE AFTER THE EXPIRY OF THE LIMITATION PERIOD, THE IMPUGNED BLOCK ASSESSMENT PROCEEDINGS ARE NULL AND VOID AB INITIO AND HENCE THE IMPUGNED BLOCK ASSESSMENT ORDER MAY PLEASE BE VACATED AND ANNULLED. 3. IT MAY PLEASE BE HELD THAT AN AMOUNT OF RS.35,00,000.00 AS UNDISCLOSED RECEIPTS EARNED BY THE APPELLANT FROM GROUP OF INVESTORS FOR SALE OF FLATS AND AS DISCLOSED BY THE APPELLANT AS UNDISCLOSED INCOME IN THE BLOCK RETURN IS AN INCOME EARNED BY THE APPELLANT AND HAS BEEN RIGHTLY OFFERED FOR TAXATION BY THE APPELLANT AND THE LEARNED C.I.T.[A] HAS RIGHTLY TAXED THE SAME ON SUBSTANTIVE BASIS IN THE HA NDS OF THE APELLANT FIRM. 2. DURING THE COURSE OF HEARING, THE LD. A.R. POINTED OUT THAT HE DOES NOT WISH TO PRESS THE PROPOSED ADDITIONAL GROUND NO. 3 AND THE TRIBUNAL HAS ALREADY PERMITTED FOR ITS ADJUDICATION, THE ADDITIONAL GROUND NOS. 1 & 2 ON EAR LIER DATES. 3. WE, HOWEVER, DID NOT FIND ANY SUPP O RT FROM THE ORDER SHEET TO ACCEPT THE ABOVE SUBMISSIONS OF THE LD. A.R. THAT THE PROPOSED ADDITIONAL GROUND NOS. 1 & 2 H AVE ALREADY BEEN PERMITTED BY THE TRIBUNAL FOR ITS ADJUDICATION. THE LD. A.R. WAS ACCORDINGLY DIRECTED TO JUSTIFY THE APPLICATION FOR THE SAME. HE SUBMITTED THAT THE ISSUE RAISED IN THE ADDITIONAL GROUND NOS. 1 & 2 ARE PURELY LEGAL IN NATURE WHICH GOES TO THE ROOT OF THE MATTER AND FOR ADJUDICATION OF WHICH, THERE IS NO NEED TO CON SIDER ANY MATERIAL OUTSIDE THE RECORD. HE SUBMITTED FURTHER ITA NO 491 & 612 /PN/200 3 M/S.LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. BLOCK PERIOD. 1.4.1989 TO 8.12.1999 PAGE OF 8 3 THAT IF THESE ADDITIONAL GROUNDS ARE ALLOWED FOR CONSIDERATION OF THE TRIBUNAL, NO PREJUDICE WILL BE CAUSED TO THE REVENUE. 4. THE LD. D.R., ON THE OTHER HAND, OPPOSED THE APPLICATION WITH THIS SUBMISSION THAT NO SUCH ISSUE WAS RAISED BEFORE THE AUTHORITIES BELOW AND ASSESSEE HAD ALL ALONG BEEN PARTICIPATING IN THE PROCEEDINGS BEFORE THE AUTHORITIES BELOW, SO ASSESSEE CANNOT BE ALLOWED TO RAISE THE ISSUE IN THE ADDITIONAL GROUND AT THIS BELA TED STAGE QUESTIONING THE VALIDITY OF NOTICE ISSUED U/S. 158BD OF THE ACT. 5. CONSIDERING THE ABOVE SUBMISSIONS, WE AGREE WITH THE LD. A.R. THAT THE ISSUE RAISED IN THE ADDITIONAL GROUND S (1) & (2) QUESTIONING THE VALIDITY OF THE NOTICE ISSUED U/S. 158 BD IS LEGAL IN NATURE , IT GOES TO THE VERY ROOT OF THE MATTER AND ADJUDICATION OF WHICH DOES NOT NEED CONSIDERATION OF ANY FRESH MATERIAL OUTSIDE THE RECORD. WE, THUS, ALLOW ED THESE ADDITIONAL GROUND NOS. 1 & 2 FOR OUR CONSIDERATION AND ADJUDICATION. PA RTIES WERE ACCORDINGLY DIRECTED TO ADVANCE THEIR ARGUMENTS ON THESE ISSUES RAISED IN THESE ADDITIONAL GROUNDS. 6. THE LD. A.R. SUBMITTED THAT SATISFACTION FOR ISSUANCE OF NOTICE U/S. 158BD OF THE ACT HAS BEEN RECORDED IN THE PRESENT CASE AFTER ISSUANCE OF NOTICE U/S. 158BD. HE SUBMITTED FURTHER THAT EVEN IN THE SATISFACTION RECORDED NOTHING HAS BEEN SHOWN ABOUT UNDISCLOSED INCOME RELATED TO THE ASSESSEE TO JUSTIFY ISSUANCE OF NOTICE U/S. 158BD OF THE ACT AGAINST THE ASSESSEE. IN THIS REGARD, HE PLACE D RELIANCE ON THE FOLLOWING DECISIONS : 1) ACIT V/S. KISHORLAL BALWANTRAI (2007), 17 SOT 380 (CHD.) 2) JANAKI EXPORTS INTERNATIONAL V/S. U.O.I., 193 CTR 730 (DEL.) 3) SUBHAS CHANDRA BHANIRAMKA V/S. ACIT, 320 ITR 349 (CALCUTTA ) 4) CIT V/S. RATILAL BACHARILAL AND SONS , 282 ITR 457 (BOMBAY ) ITA NO 491 & 612 /PN/200 3 M/S.LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. BLOCK PERIOD. 1.4.1989 TO 8.12.1999 PAGE OF 8 4 7. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT ASSESSMENT HAS BEEN FRAMED U/S. 158 BD OF THE ACT IN THE CASE OF THE ASSESSEE BASED ON SEIZED RECORD AND ADMITTED UNDISCLOSED INCOME BY THE ASSESSEE . THE A.O. WAS THUS HAVING SUFF ICIENT REASON TO ISSUE NOTICE U/S. 158BD AGAINST THE ASSESSEE. THE ASSESSEE ALSO FILED ITS RETURN OF INCOME ABOUT THE UNDISCLOSED INCOME. THE DECISIONS CITED BY THE LD. A.R ARE HAVING DISTINGUISHABLE FACTS AND THESE ARE NOT HELPFUL TO THE ASSESSEE. HE PLACED RELIANCE ON THE DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN THIS REGARD IN THE CASE OF SUBHAN JAVEED V/S. ACIT (2010), 33 DTR 234 (BANGALORE) HOLDING THAT IF SATISFACTION CAN BE INFERRED FROM THE ORDER OF THE A.O PASSED U/S. 158BC, IT IS SUFFICI ENT COMPLIANCE TO ASSUME JURISDICTION U/S. 158BD. 8. IN REJOINDER, THE LD. A.R. SUBMITTED THAT HERE IT IS NOT THE CASE OF THE REVENUE THAT THERE WAS NO NEED TO RECORD SATISFACTION BEFORE ISSUANCE OF NOTICE U/S. 158BD T O THE ASSESSEE , BUT IN THE PRESENT CASE ADMITTEDLY, SATISFACTION HAS BEEN RECORDED BY THE A.O TO INITIATE PROCEEDINGS U/S. 158 BD OF THE ACT AGAINST THE ASSESSEE. THE ONLY QUESTION IS AS TO WHETHER THE A.O WAS JUSTIFIED IN ISSUING NOTICE U/S. 158 BD OF THE ACT TO THE ASSESSEE BEFORE RECOR DING HIS SATISFACTION FOR THE SAME. IN THIS REGARD, HE PLACED FURTHER RELIANCE ON THE RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S. LATE SHRI RAJ PAL BHATIA AND OTHERS VIDE ORDER DT. NOVEMBER 29, 2010 IN ITA NO. 276 OF 2009 AND OTHER S ( COPY SUPPLIED ), HOLDING THAT REASONS MUST BE RECORDED BY THE A.O HAVING JURISDICTION OVER THE ASSESSEE WHO HAD BEEN SEARCHED BEFORE ISSUING THE NOTICE U/S. 158BD OF THE ACT. 9. IN VIEW OF ABOVE DISCUSSION, WE HAVE CONFINED OURSELVES ON THE ISSUE AS TO WHETHER A.O. WAS JUSTIFIED IN ISSUING NOTICE U/S. 158BD OF THE ACT TO THE ASSESSEE BEFORE RECORDING HIS SATISFACTION FOR THE SAME. THIS ISSUE HAS BEEN RAISED WHILE ADVANCING ARGUMENT BY LD. A.R. IN SUPPORT OF ADDITIONAL GROUND NO. 1 AND HAS CITED TH E ABOVE STATED DECISION OF HONBLE DELHI HIGH COURT IN THE CASE ITA NO 491 & 612 /PN/200 3 M/S.LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. BLOCK PERIOD. 1.4.1989 TO 8.12.1999 PAGE OF 8 5 OF CIT V/S. LATE SHRI RAJ PAL BHATIA & OTHERS (SUPRA). HE HAS ALSO PLACED RELIANCE ON THE DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S. KISHORLAL BALWANTRAI (SUPRA). IN THE CASE OF CIT V/S. LATE SHRI RAJ PAL BHATIA & OTHERS (SUPRA), BEFORE HONB;E DELHI HIGH COURT, ONE OF THE QUESTION WAS RAISED AS TO WHETHER RECORDING OF SATISFACTION IS MANDATORY BEFORE NOTICE U/S. 158BD IS ISSUED. IN THAT CASE, THE A.O BEFORE ISSUI NG NOTICE U/S. 158BD DID NOT RECORD ANY SATISFACTION WHICH IS A MANDATORY REQUIREMENT AS PER THE SAID PROVISION, HELD THE HONBLE HIGH COURT. THE HONBLE HIGH COURT OBSERVED THAT IT CANNOT BE DISPUTED THAT THE RECORDING OF SATISFACTION IS NECESSARY PR E - CONDITION, AND IS A MUST IN ORDER TO SAFEGUARD THE OTHER ABUSE OF POWER AND IT IS INBUILT UNDER THE PROVISIONS OF SECTION 158BD OF THE INCOME TAX ACT. SUCH SATISFACTION HAS TO BE IN WRITING. SINCE IN THE DISCHARGE OF OFFICIAL FUNCTION , WHERE A STATU T E REQUIRE THE SATISFACTION TO BE ARRIVED AT, THE SAME CAN BE ARRIVED AT ONLY WHEN THE SAME ARE RECORDED BY RECORDING SUCH REASONS ON WHICH SATISFACTION HAS BEEN ARRIVED AT. IN THIS REGARD, THE HONBLE DELHI HIGH COURT HAS ALSO REFERRED ITS EARLIER DECISIO NS IN THE CASE S OF AMITY HOTELS (P) LTD. 272 ITR 75(DELHI), CIT V/S. KARAN ENGG. P. LTD AND JANAKI EXPORTS INTERNATIONAL V/S. UNION OF INDIA, 193 CTR 730 (DEL.). THE HONBLE DELHI HIGH COURT HAS ALSO REFERRED THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF MANISH MAHESHWARI V. ACIT, 289 ITR 341 (S.C). THIS DECISION OF HONBLE DELHI HIGH COURT IS DATED NOVEMBER 29,2010. CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S. KISHORLAL BALWANTRAI (SUPRA) VIDE ITS ORDER DT. 29 TH JUNE 2007 HAS HELD TH AT REQUIREMENT OF RECORDING OF SATISACTION THAT UNDISCLOSED INCOME BELONGS TO A PERSON OTHER THAN PERSON PUT TO SEARCH OR REQUISITIONED IS A PRE - CONDITION FOR INVOKING SECTION 158BD. SUCH SATSIFACTION HAS TO BE RECORDED IN WRITING BY A.O OF PERSON WITH RE SPECT TO HIM SEARCH U/S. 132 OR A REQUISITION U/S. 132A HAS BEEN MADE. SATISFACTION SO CONTEMPLATED IS NOT MERELY A SUBJECTIVE SATISFACTION BUT IS REQUIRED TO BE BASED ON MATERIAL SEIZED U/S. 132 OR REQUISITIONED U/S. 132A AND SUCH MATERIAL MUST ENABLE A.O TO CONCLUDE THAT ANY UNDISCLOSED INCOME ITA NO 491 & 612 /PN/200 3 M/S.LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. BLOCK PERIOD. 1.4.1989 TO 8.12.1999 PAGE OF 8 6 BELONGS TO A PERSON OTHER THAN PERSON WITH RESPECT TO WHOM SEARCH OR REQUISITION WAS MADE. FURTHER, SATISFACTION U/S. 158BD IS REQUIRED TO BE RECORDED BY A.O, OF PERSONS SEARCHED AT ANY TIME BUT NOT LATER THAN FINALIZATION OF ASSESSMENT OF UNDISCLOSED INCOME OF SUCH SEARCHED PERSON FOR BLOCK PERIOD UNDER CHAPTER XIV - B. THE TRIBUNAL HELD THAT FURTHER NOTICE U/S. 158 BD IS REQUIRED TO BE ISSUED BY A.O OF PERSON OTHER THAN PERSON PUT TO SEARCH U/S. 132 OR REQUISI TIONED U/S. 132A THAT TOO, AFTER TRANSMISSION OF RELEVANT MATERIAL FROM FIRST MENTIONED A.O, I.E. A.O OF PERSON PUT ON SEARCH U/S. 132 OR REQUESITIONED U/S. 132A. THE TRIBUNAL HELD THAT THE PLEA THAT THE RECORDING OF COMMON A.O ALSO DID NOT DILUTE THE RE QUIREMENTS OF SECTION 158BD WITH RESPECT TO RECORDING SATISFACTION. NO DOUBT, THE PROVISIONS OF SECTION 158BD ARE SILENT IN A CASE WHERE THE A.O OF THE PERSONS PUT TO SEARCH U/S. 132 OR REQUISITIONED U/S. 132A IS THE SAME AS THAT OF A PERSON WHO HAS BEEN IDENTIFIED BY THE A.O OF THE FIRST MENTIONED PERSON AS A PERSON TO WHOM THE UNDISCLOSED INCOME BELONGED. EVEN IF IT WAS ACCEPTED THAT THE A.O WAS THE SAME IN THE INSTANT CASE, THEN THE SATISFACTION OUGHT TO HAVE BEEN RECORDED NOT LATER THAN THE DATE OF F INALIZATION OF ASSESSMENT U/S. 158BC IN THE CASE OF DALAL, I.E. 21 ST MAY 2001 AND ON THIS ACCOUNT, THE SATISFACTION RECORDED ON 15.3.2002 WAS BELATED , HELD THE TRIBUNAL . 10. IN THE PRESENT CASE BEFORE US, AS PER THE REPORT DATED 1.4.2010 GIVEN BY THE OFFICE OF DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE (1)(1), SWARGATE, PUNE, THE ASSESSMENT IN THE CASE OF SHRI MUKUND KRISHNAJI PURANDARE WAS COMPLETED U/S. 158BC OF THE ACT FOR THE BLOCK PERIOD ON 28.12.2001. THE NOTICE U/S. 158BD TO THE ASSESSEE HAS, HOWEVER, BEEN ISSUED ON 27.12.2001 I.E. BEFORE RECORDING OF THE SATISFACTION FOR ISSUANCE OF NOTICE U/S. 158BD. SINCE AS PER SUCH REPORT DATED 1.4.2010 THE SATISFACTION HAS BEEN RECORDED BY THE A.O IN PARA NO. 10 OF BLOCK ASSESSMENT FRAMED U/S. 158BC ON 28.12.2001. WE, THUS, RESPECTFULLY FOLLOWING THE RECENT DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S. LATE SHRI RAJ PAL BHATIA AND OTHERS (SUPRA), HOLD THAT THE ITA NO 491 & 612 /PN/200 3 M/S.LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. BLOCK PERIOD. 1.4.1989 TO 8.12.1999 PAGE OF 8 7 REASONS MUST BE RECORDED BY THE A.O HAVING JURISDICTION OVER THE ASSESS EE WHO HAD BEEN SEARCHED BEFORE ISSUING THE NOTICE U/S. 158BD OF THE ACT. THE NOTICE ISSUED U/S. 158BD IN THE PRESENT CASE IS, THUS, HELD AS INVALID AND THE BLOCK ASSESSMENT FRAMED U/S. 158BD OF THE ACT IN THE PRESENT CASE IN FURTHERANCE TO THE SAID INVA LID NOTICE U/S. 158BD IS ALSO HELD INVALID AND VOID - AB - INITIO AND IS QUASHED IN CONSEQUENCE THERETO. THE ISSUE RAISED IN ADDITIONAL GROUND NO. 1 IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. THE ADDITIONAL GROUND NO. 1 IS, ACCORDINGLY, ALLOWED. 11. IN V IEW OF THE ABOVE FIND ING , THE OTHER ADDITIONAL GROUNDS AND THE GROUNDS RAISED IN THE CROSS APPEAL BASED UPON THE VERY SAID ASSESSMENT ORDER, HAVE BECOME INFRUCTUOUS AND THESE GROUNDS ARE REJECTED AS SUCH. 12. THE DEPARTMENT IN ITS APPEAL HAS BASICALLY QU ESTIONED FIRST APPELLATE ORDER IN ALLOWING THE DEDUCTION OF RS.35,00,000/ - WITHOUT APPRECIATING THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND FURTHER THAT NO EVIDENCE WAS PRODUCED IN SUPPORT OF THE SAME. 13. IN RESULT, APPEAL PREFERRED BY THE ASS ESSEE IS ALLOWED IN VIEW OF THE FINDING ON ADDITIONAL GROUND NO. 1 AND IN CONSEQUENCE, APPEAL PREFERRED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2011 SD/ - SD/ - ( G.S.PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE , DATED THE 19 TH JANUARY , 20 1 1 US COPY OF THE ORDER IS FORWARDED TO : 1. THE A PPELLANT ITA NO 491 & 612 /PN/200 3 M/S.LUNAWAT BHOR CONSTRUCTIONS PVT. LTD. BLOCK PERIOD. 1.4.1989 TO 8.12.1999 PAGE OF 8 8 2. THE RESPONDENT 3. THE CIT (CENTRAL), PUNE 4. THE CIT(A) - I , PUNE 5. THE D.R. B BENCH, PUNE 6. GUAR D FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE