Smt. Kalpana, Hyderabad V. DCIT,Central Circle - 5, Hyderabad

ITA 975/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6667 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Keywords: Search and seizure; Period of limitation; Assessment record; Block assessment
• Section: 143(3); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NOS.974 & 975/HYD/2014 ASSESSMENT YEARS 2008-2009 & 2009-2010 SMT. S. KALPANA HYDERABAD. PAN CMJPS1761F VS. DCIT, CENTRAL CIRCLE - 5 HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A. SRINIVAS FOR REVENUE : MR. B. KURMI NAIDU DATE OF HEARING : 24.03.2016 DATE OF PRONOUNCEMENT : 07 .0 4 .2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THESE ARE THE ASSESSEES APPEALS FOR THE A.YS. 2008-2009 AND 2009-2010 RESPECTIVELY AGAINST THE ASSESSMENTS COMPLETED UNDER SECTION 143(3) READ WIT H SECTION 153C OF THE I.T. ACT, 1961. IN THIS APPEAL, THE ASSESSEE HAS RAISED SIX GROUNDS OF APPEAL. GROUND N OS. 1 AND 6 ARE GENERAL NATURE WHICH NEED NO ADJUDICATION WHILE THE GROUND NOS. 2 TO 5 ARE AGAINST THE ADDITI ONS MADE BY THE A.O. AND CONFIRMED BY THE CIT(A). 2. AT THE TIME OF HEARING I.E., ON 23.03.20 16, IN ADDITION TO THE ABOVE GROUNDS, THE ASSESSEE HAS FIL ED ADDITIONAL GROUNDS OF APPEAL CHALLENGING THE VALIDI TY OF 2 ITA.NOS. 974 & 975/HYD/2014 SMT. S. KALPANA, HYDERABAD. THE ASSESSMENT UNDER SECTION 153C OF THE I.T. ACT W ITHOUT THERE BEING THE SATISFACTION RECORDED FOR ASSUMING THE JURISDICTION. SINCE THE SAID GROUND OF APPEAL IS A LEGAL GROUND AND THE FACTS ARE ALSO ON RECORD, THESE GROU NDS ARE ADMITTED. 3. LD. D.R. WAS INSTRUCTED TO GET INFORMATION AS REGARDS THE ADDITIONAL GROUND OF APPEAL RAISED BY T HE ASSESSEE. TODAY I.E., ON 24.03.2016, THE LD. D.R. H AS FILED A LETTER OF THE A.O. IN THE CASE OF THE ASSESSEE DA TED 25.01.2016 STATING THAT THE SEARCH AND SEIZURE OPER ATION UNDER SECTION 132 OF THE ACT WAS UNDERTAKEN IN THE CASE OF MR. V. ANANDA PRASAD AND OTHERS WHEREIN CERTAIN DOCUMENTS, BOOKS OF ACCOUNT ETC., WERE FOUND WHICH RELATED TO THE ASSESSEE, SMT. S. KALPANA. IT WAS FU RTHER STATED THAT ON PERUSAL OF THE ASSESSMENT RECORDS OF THE ASSESSEE AVAILABLE WITH HIM, IT IS FOUND THAT THE SATISFACTION NOTE IS NOT AVAILABLE ON RECORD FOR IS SUANCE OF NOTICE UNDER SECTION 153C OF THE I.T. ACT, FOR BOTH THE A.YS.2008-09 AND 2009-10. THE COPY OF THE SAID LETT ER IS FILED BEFORE US. 4. TAKING THE SAME INTO CONSIDERATION AND ALSO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT-III VS. CALCUTTA KNITWEARS (2014) 362 ITR 673 ( SC), WE ALLOW THE ADDITIONAL GROUND OF APPEAL OF THE ASSESS EE AS IT IS WELL SETTLED THAT BEFORE INITIATING PROCEEDINGS UNDER SECTION 153C OF THE I.T. ACT, THE A.O. OF THE PERSO N SEARCHED HAS TO RECORD THE SATISFACTION THAT THE IN COME 3 ITA.NOS. 974 & 975/HYD/2014 SMT. S. KALPANA, HYDERABAD. RELATING TO THE MATERIAL FOUND IN POSSESSION OF THE PERSON SEARCHED BELONGS TO THE OTHER PERSON AND HAS TO TRA NSMIT THE RECORDS TO THE A.O. HAVING JURISDICTION OVER TH E OTHER PERSON I.E., THE ASSESSEE HEREIN IN THE CASE BEFORE US. THEREFORE, RECORDING OF THE SATISFACTION IS SINE-A-QUA-NON FOR INITIATING PROCEEDINGS UNDER SECTION 153C OF TH E ACT. THE HONBLE SUPREME COURT, IN THE CASE OF CIT-III V S. CALCUTTA KNITWEARS (CITED SUPRA), HAS HELD AS UNDER : 41. WE WOULD CERTAINLY SAY THAT BEFORE INITIATING PROCEEDINGS UNDER SECTION 158BD OF THE ACT, THE ASS ESSING OFFICER WHO HAS INITIATED PROCEEDINGS FOR COMPLETIO N OF THE ASSESSMENTS UNDER SECTION 158BC OF THE ACT SHOULD B E SATISFIED THAT THERE IS AN UNDISCLOSED INCOME WHICH HAS BEEN TRACED OUT WHEN A PERSON WAS SEARCHED UNDER SECTION 132 OR THE BOOKS OF ACCOUNTS WERE REQUISITIONED UNDER SECT ION 132A OF THE ACT. THIS IS IN CONTRAST TO THE PROVISIONS OF S ECTION 148 OF THE ACT WHERE RECORDING OF REASONS IN WRITING ARE A SINE QUA NON. UNDER SECTION 158BD THE EXISTENCE OF COGENT AN D DEMONSTRATIVE MATERIAL IS GERMANE TO THE ASSESSING OFFICERS SATISFACTION IN CONCLUDING THAT THE SEIZED DOCUMENT S BELONG TO A PERSON OTHER THAN THE SEARCHED PERSON IS NECESSAR Y FOR INITIATION OF ACTION UNDER SECTION 158BD. THE BARE READING OF THE PROVISION INDICATES THAT THE SATISFACTION NOTE COULD BE PREPARED BY THE ASSESSING OFFICER EITHER AT THE TIM E OF INITIATING PROCEEDINGS FOR COMPLETION OF ASSESSMENT OF A SEARC HED PERSON UNDER SECTION 158BC OF THE ACT OR DURING THE STAGE OF THE ASSESSMENT PROCEEDINGS. IT DOES NOT MEAN THAT AFTER COMPLETION OF THE ASSESSMENT, THE ASSESSING OFFICER CANNOT PRE PARE THE SATISFACTION NOTE TO THE EFFECT THAT THERE EXISTS I NCOME TAX BELONGING TO ANY PERSON OTHER THAN THE SEARCHED PER SON IN RESPECT OF WHOM A SEARCH WAS MADE UNDER SECTION 132 OR REQUISITION OF BOOKS OF ACCOUNTS WERE MADE UNDER SE CTION 132A OF THE ACT. THE LANGUAGE OF THE PROVISION IS CLEAR AND UNAMBIGUOUS. THE LEGISLATURE HAS NOT IMPOSED ANY EM BARGO ON THE ASSESSING OFFICER IN RESPECT OF THE STAGE OF PR OCEEDINGS DURING WHICH THE SATISFACTION IS TO BE REACHED AND RECORDED IN RESPECT OF THE PERSON OTHER THAN THE SEARCHED PERSO N. 42. FURTHER, SECTION 158BE(2)(B) ONLY PROVIDES FOR THE PERIOD OF LIMITATION FOR COMPLETION OF BLOCK ASSESSMENT UN DER SECTION 158BD IN CASE OF THE PERSON OTHER THAN THE SEARCHED PERSON AS TWO YEARS FROM THE END OF THE MONTH IN WHICH THE NO TICE UNDER THIS CHAPTER WAS SERVED ON SUCH OTHER PERSON IN RES PECT OF 4 ITA.NOS. 974 & 975/HYD/2014 SMT. S. KALPANA, HYDERABAD. SEARCH CARRIED ON AFTER 01.01.1997. THE SAID SECTIO N DOES NEITHER PROVIDES FOR NOR IMPOSES ANY RESTRICTIONS O R CONDITIONS ON THE PERIOD OF LIMITATION FOR PREPARATION THE SAT ISFACTION NOTE UNDER SECTION 158BD AND CONSEQUENT ISSUANCE OF NOTI CE TO THE OTHER PERSON. 43. IN THE LEAD CASE, THE ASSESSING OFFICER HAD PR EPARED A SATISFACTION NOTE ON 15.07.2005 THOUGH THE ASSESSME NT PROCEEDINGS IN THE CASE OF A SEARCHED PERSON, NAMEL Y, S.K. BHATIA WERE COMPLETED ON 30.03.2005. AS WE HAVE ALR EADY NOTICED, THE TRIBUNAL AND THE HIGH COURT ARE OF THE OPINION THAT SINCE THE SATISFACTION NOTE WAS PREPARED AFTER THE PROCEEDINGS WERE COMPLETED BY THE ASSESSING OFFICER UNDER SECTI ON 158BC OF THE ACT WHICH IS CONTRARY TO THE PROVISIONS OF S ECTION 158BD READ WITH SECTION 158BE(2)(B) AND THEREFORE, HAVE D ISMISSED THE CASE OF THE REVENUE. IN OUR CONSIDERED OPINION, THE REASONING OF THE LEARNED JUDGES OF THE HIGH COURT I S CONTRARY TO THE PLAIN AND SIMPLE LANGUAGE EMPLOYED BY THE LEGIS LATURE UNDER SECTION 158BD OF THE ACT WHICH CLEARLY PROVID ES ADEQUATE FLEXIBILITY TO THE ASSESSING OFFICER FOR R ECORDING THE SATISFACTION NOTE AFTER THE COMPLETION OF PROCEEDIN GS IN RESPECT OF THE SEARCHED PERSON UNDER SECTION 158BC. FURTHER , THE INTERPRETATION PLACED BY THE COURTS BELOW BY READIN G INTO THE PLAIN LANGUAGE OF SECTION 158BE(2)(B) SUCH AS TO EX TEND THE PERIOD OF LIMITATION TO RECORDING OF SATISFACTION N OTE WOULD RUN COUNTER TO THE AVOWED OBJECT OF INTRODUCTION OF CHA PTER TO PROVIDE FOR COST-EFFECTIVE, EFFICIENT AND EXPEDITIO US COMPLETION OF SEARCH ASSESSMENTS AND AVOIDING OR REDUCING LONG DR AWN PROCEEDINGS. 44. IN THE RESULT, WE HOLD THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT A SATISFACTION NOTE IS SINE QUA NO N AND MUST BE PREPARED BY THE ASSESSING OFFICER BEFORE HE TRAN SMITS THE RECORDS TO THE OTHER ASSESSING OFFICER WHO HAS JURI SDICTION OVER SUCH OTHER PERSON. THE SATISFACTION NOTE COULD BE P REPARED AT EITHER OF THE FOLLOWING STAGES: (A) AT THE TIME OF OR ALONG WITH THE INITIATION OF PROCEEDINGS AGAINST THE SEARCHED PERS ON UNDER SECTION 158BC OF THE ACT; (B) ALONG WITH THE ASSESS MENT PROCEEDINGS UNDER SECTION 158BC OF THE ACT; AND (C) IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS ARE CO MPLETED UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERS ON. 45. WE ARE INFORMED BY SHRI SANTOSH KRISHAN, WHO I S APPEARING IN SEVEN OF THE APPEALS THAT THE ASSESSIN G OFFICER HAD NOT RECORDED THE SATISFACTION NOTE AS REQUIRED UNDER SECTION 158BD OF THE ACT, THEREFORE, THE TRIBUNAL A ND THE HIGH COURT WERE JUSTIFIED IN SETTING ASIDE THE ORDERS OF ASSESSMENT AND THE ORDERS PASSED BY THE FIRST APPELLATE AUTHOR ITY. WE DO NOT INTEND TO EXAMINE THE AFORESAID CONTENTION CANV ASSED BY THE LEARNED COUNSEL SINCE WE ARE REMANDING THE MATT ERS TO THE 5 ITA.NOS. 974 & 975/HYD/2014 SMT. S. KALPANA, HYDERABAD. HIGH COURT FOR CONSIDERATION OF THE INDIVIDUAL CASE S HEREIN IN LIGHT OF THE OBSERVATIONS MADE BY US ON THE SCOPE A ND POSSIBLE INTERPRETATION OF SECTION 158BD OF THE ACT. 46. WITH THESE OBSERVATIONS, THE APPEALS ARE DISPO SED OF. THE MATTERS ARE REMANDED TO THE RESPECTIVE HIGH COU RTS FOR DECIDING THE MATTERS AFRESH AFTER AFFORDING AN OPPO RTUNITY OF HEARING TO THE PARTIES. ORDERED ACCORDINGLY. 5. WE FIND THAT THE PROVISIONS OF SECTION 153C ARE PARI MATERIA SAME AS THE PROVISIONS OF SECTION 158B D OF THE ACT AND THEREFORE, THE JUDGMENT OF THE APEX COU RT IN THE ABOVE CASE IS APPLICABLE TO THE FACTS OF THE CA SE BEFORE US. IN VIEW OF THE SAME, THE ADDITIONAL GROUND OF A PPEAL IS ALLOWED AND THE OTHER GROUNDS OF APPEAL ON THE MERI TS OF THE ADDITIONS CONFIRMED BY THE CIT(A) ARE NOT ADJUD ICATED AT THIS STAGE. 6. IN THE RESULT, APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.04.2016. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 07 TH APRIL, 2016 VBP/- COPY TO : 1. SMT. S. KALPANA, 1-7-502/11, OPP. LAXMI TOWERS, JAMISTANPUR, HYDERABAD. 2. DCIT, CENTRAL CIRCLE-5, AAYAKAR BHAVAN, HYDERABA D. 3. CIT(A)-VII, 3 RD FLOOR, ANNEXE BLDG., AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 4. CIT (CENTRAL), HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD. 6. GUARD FILE